Here is the transcript, as text, of day two of the Novell v. Microsoft antitrust trial over WordPerfect. That would make it October 18, 2011, and it was the official beginning of the trial, starting with opening statements from both Novell and then Microsoft, and then Novell began presenting its evidence. The opening statements are not evidence, but they are the attorneys letting the jury know what each hopes to present and why each thinks it is right in this dispute. For Novell, the opening statement was handled by Jeff Johnson of Dickstein Shapiro. For Microsoft, it was David Tulchin of Sullivan & Cromwell. Interestingly, this was a case about APIs, with Novell accusing Microsoft of promising to provide the necessary APIs for Novell to be ready with its WordPerfect products when Windows 95 shipped, providing them in beta and encouraging Novell to build its products around them, but that Microsoft then shifted gears, telling Novell that the APIs were no longer available after Novell was 80% finished with its coding, while Microsoft secretly continued to use the APIs themselves, leaving Novell high and dry, with no way to ship in a timely fashion, so as to benefit from the Windows 95 launch. If you think about the Oracle v. Google trial, which recently established the functional code like the 37 APIs Google used from Java can't be copyrighted, you can see as we go through the evidence in this trial what an advantage an established vendor has if it can control and monopolize APIs.
Groklaw's Chris Burns was at the courtroom that day, and if you'd like to compare the transcript with his report, it's here.
This day is represented by two PDFs, 398 and 399. All the trial transcripts, as PDFs, are here.
Our thanks to bugstomper, for coming up with the script that made it possible to do these PDFs as text, while also removing the line numbers.
*********************
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
CENTRAL DIVISION
In re:
NOVELL,
Plaintiff,
vs.
MICROSOFT,
Defendant.
_____________
Case No.
2:04-CV-01045JFM
_____________
BEFORE THE HONORABLE J. FREDERICK MOTZ
DATE: October 18, 2011
REPORTER'S TRANSCRIPT OF PROCEEDINGS
JURY TRIAL
VOLUME II
Reporter: REBECCA JANKE, CSR, RMR
KELLY BROWN HICKEN, CSR, RMR
20
A P P E A R A N C E S
FOR THE PLAINTIFF: DICKSTEIN SHAPIRO
BY: PAUL R. TASKIER, ESQ.
JEFFREY M. JOHNSON, ESQ.
MIRIAM R. VISHIO
[address]
WILLIAMS & CONNOLLY
BY: JOHN E. SCHMIDTLEIN, ESQ.
[address]
SNOW, CHRISTENSEN & MARTINEAU
BY: MAX D. WHEELER, ESQ.
[address]
NOVELL
BY: JIM LUNDBERG, ESQ.
FOR THE DEFENDANT:
SULLIVAN & CROMWELL
BY: DAVID B. TULCHIN, ESQ.
STEVEN L. HOLLEY
SHARON L. NELLES
[address]
MICROSOFT CORPORATION
BY: STEVE AESCHBACHER, ESQ.
[address]
RAY, QUINNEY & NEBEKER
BY: JAMES S. JARDINE, ESQ.
[address]
21
OCTOBER 18, 2011 SALT LAKE CITY, UTAH
PROCEEDINGS
* * *
THE COURT: Okay. The jurors are here. We are all
set to go. The first thing that I would do is to read the
instructions that from yesterday.
MR. TULCHIN: Thank you, Your Honor.
THE COURT: Yes, sir
MR. JOHNSON: Your Honor, just to give you an idea
of how I think we see things going today, obviously we are
going to do the openings. I don't know if Your Honor has a
preference of giving them -- given the length of the opening,
giving them a short break.
THE COURT: I'm glad you asked that, because I think
there is a schedule which the Court wants to follow of taking
a short break around 10:00 o'clock, and then I think they are
actually going to have a light lunch, so we will break around
12, so we will see how it goes. Whichever. And I also told
Theresa if the jurors feel uncomfortable, if they want a
bathroom break before 10:00 o'clock, to raise their hands.
MR. JOHNSON: Okay. And I think given the
advertised sort of lengths, that actually might work out
well, where we're going to be done to probably somewhere
around ten.
THE COURT: Actually, it sounds about right.
22
MR. JOHNSON: After that, I think the only thing we
anticipate doing, after, given the length of the day, is we
are going to have the collateral estoppel findings, we're
going to read those in.
THE COURT: Okay.
MR. JOHNSON: And I have -- if I can approach, we
have agreed upon -- we talked yesterday about the sentence
you're going to read about it and, as you may remember, there
was an issue on timing, given there's references to timing in
those facts currently, and so we have added in, "in 1999 to,"
I think it will solve that.
THE COURT: You all are making it too easy for me.
Although, I suspect that from now on --
MR. JOHNSON: The only other last housekeeping
thing, Your Honor, is I did confer that you can get the same
streaming transcript over the internet back in Baltimore, and
what we will do is we will e-mail to the clerk --
THE COURT: That's all right.
MR. JOHNSON: -- that information, and the parties
have agreed that -- you will still have to, you know, set up
a user name and a log in, but the cost of that comes to us,
and the parties are going to split that cost.
THE COURT: Well, if it's expensive, let me know,
and I will --
MR. JOHNSON: It's $75 a day or something like that,
23
so we will split that. So, they don't have to log in every
day, but any day they want to log in, we will handle it.
THE COURT: Okay. And then, Theresa, actually, I'll
come down and start and get this --
THE CLERK: Or Larry it is here.
THE COURT: Oh, there you are. We might as well do
it now and bring in the jury.
Are you still about two hours?
MR. JOHNSON: I think so, Your Honor. I'm going to
try to --
(Phone rings.)
SECRETARY: Judge Moffat's chambers.
THE COURT: Here we are, and we will have the
opening statements soon.
SECRETARY: Thank you, Judge. I'll hold on.
THE COURT: If she knew she was speaking to the
entire courtroom -- actually, she does know. I called her up
before and said, "Did you know you're speaking to the entire
courtroom?" And she was mortified.
(Jury brought into the courtroom.)
THE COURT: Good morning everybody. Please be
seated. Thank you all for being so prompt. We very much
appreciate it. I'm sure Theresa has told you -- (loud noise)
-- are being serviced. I apologize for that.
I'm sure Theresa has told you what the basic
24
schedule will be. We'll take a break around 10:00 o'clock.
Mr. Johnson is going to give an opening statement, and at the
end of his opening statement, we will have some food and a
bread and then Mr. Tulchin is going to give an opening
statement, and we'll take another short break, and then we
will have the trial go on. If, at any time, any of you feel
uncomfortable and you need a break before 10:00 o'clock, just
raise your hand. Don't be embarrassed. It happens
sometimes. It's much more important that you are comfortable
and listen to what's going on, so don't be embarrassed if you
want a short break.
One thing I forgot to tell you yesterday in my
preliminary instructions was that -- and I'll just read this
to you. In the process of producing documents in this case
during discovery, which I described yesterday, the lawyers
from Novell and Microsoft may have placed stamps or other
indications on documents for identification purposes. For
example, you may see the word, quote, confidential, unquote,
or the words, quote, highly confidential, unquote, on certain
documents. Those stamps may not have been made on the
documents when -- they may not have been made -- been on the
documents when they were originally created by Novell or
Microsoft but were added later by the lawyers when they
exchanged documents during discovery.
You may also see documents containing markings with
25
one or more letters followed by a series of numbers, often
near the bottom right corner of each page. For example, some
documents contain the marking, quote, MS, unquote, followed
by a number. Others contain, quote N-O-V, end quote,
followed by a number. These markings were also not on the
documents when they were created. Finally, some of the
Novell documents contain some dates in 2008. These dates are
incorrect and do not reflect when the documents were actually
created or edited but are on those documents because of the
way they were kept by the company. That happens once in a
while.
And I might add, I suspect you may hear the number
Bates number or something of that nature. Bates is simply a
way of numbering documents. So if they say Bates stamp or
Bates number during deposition testimony, they are just
referring to the number on the bottom right-hand of the page.
Mr. Johnson.
MR. JOHNSON: Thank you very much, Your Honor.
Ladies and gentlemen of the jury, good morning. My
name is Jeff Johnson. I am an attorney for Novell. Under
the rules of the Court, I get to talk to you about the
evidence you will hear and see in this case.
During the course of this trial, I will be assisted
by other attorneys from Novell. Let me first introduce
Mr. Max Wheeler, with the firm of Snow, Christensen &
26
Martineau here in Salt Lake City. John Schmidtline from the
firm of Williams & Connolly in Washington, D.C., and my
colleague, Paul Taskier and Marian Vishio, of the firm of
Dickstein Shapiro. I would also like to introduce to you
Mr. Jim Lundberg. Jim. Jim works for Novell here in Provo,
Utah, and he was also employed by WordPerfect for many years
prior to coming to Novell. He will try to be with us
throughout the trial, although he may be called away, from
time to time, on other business.
As you know, this is an antitrust case. Judge Motz
gave you some preliminary instructions about the case
yesterday. Before we get into all the evidence, I tried to
think of a way to simply summarize what this case is all
about. And the best way to do that is to tell you that this
is a case about fair play. This is not a case where Novell
is wanting some special treatment from Microsoft.
Novell wanted nothing more than to compete on the
merits of its products. Microsoft, however, had other plans.
Microsoft, as you were told yesterday, has a monopoly in
operating systems. The evidence will show that Microsoft was
threatened by Novell's applications and middleware products
and took anticompetitive actions against those products in
order to protect its operating systems monopoly.
Instead of competing with Novell on the merits,
Microsoft engaged in deception, a classic bait and switch,
27
where Microsoft offered Novell and other application
developers some very exciting and important technology and
then pulled the rug out from under them. Microsoft did this
in order to tilt from the playing field in Microsoft's
direction.
Now, you may ask, how could Novell, who owned the
popular word processing application, WordPerfect, and the
spreadsheet, Quattro Pro, threaten Microsoft's monopoly in
operating systems? Here's the answer. In the mid-1990's
word processing applications and spreadsheets were the
primary reason people would go by computer software. People
don't go out looking to by an operating system. You go
shopping for the applications that will do something for you.
You simply need the operating system to run the applications.
WordPerfect was historically one of the most popular
word processing applications available. It worked on a
number of different operating systems. The fact that an
application as popular as WordPerfect worked on a number of
different operating systems was a threat to Microsoft's
operating systems monopoly. The evidence will show that
Microsoft took anticompetitive actions against Novell so that
Microsoft could control these key franchise applications and
ensure that Microsoft Windows remained the dominant operating
system.
Microsoft's monopoly was further threatened because
28
Novell -- threatened by Novell because WordPerfect was a form
of middleware. Later today I will explain in detail to you
what middleware is, but, generally, it's technology that
allows application developers to write their applications to
the middleware instead of to the operating system. This has
the effect of making the operating system a lot less
important. Moreover, if the middleware works on multiple
operating systems, like WordPerfect did, then the application
developers really don't care what operating system is
underneath.
From the consumer perspective, your perspective,
this would mean that your favorite applications would work
with any operating system, whether it was Microsoft's or a
competitors. To combat the threat that Novell's applications
and middleware products posed to Microsoft's operating system
monopoly, the evidence will show that Microsoft engaged in a
number of anticompetitive acts that injured Novell.
Today I'm going to primarily focus on the most
important anticompetitive act, the bait and switch I have
alluded to earlier, but you will hear about other
anticompetitive acts throughout the course of this trial.
As you will see today, most of the evidence of
Microsoft's conduct comes out of the mouths of Microsoft's
own executives, including Mr. Bill Gates, as recorded in
their e-mails and other documents at the time of the events
29
in question. One of the things that you're going to have to
do in this case is to look at what the Microsoft executives
said at the time and compare that with what some of them will
tell you today. As Judge Motz told you, you are the sole
judge of the facts.
Today, I'm going to share with you pertinent parts
of some of those contemporaneous documents. And don't worry
that I'm only showing you parts of those documents today. At
the end of the case, you will get complete copies of all the
documents I am going to show you. Let's get started.
WordPerfect Corporation and Novell are both Utah
companies. Many of you have probably heard of them. Back in
the 1980's and early 1990's WordPerfect was the leading word
processing application in the world. The original
application was written by the leader of the marching band at
B.Y.U. Novell was also a leading software company back then,
best known for its server operating system called Netware.
Novell continues to exist today and is headquartered in
Provo, Utah.
In June of 1994, Novell acquired WordPerfect, the
maker of the WordPerfect word processing application. It
also acquired a spreadsheet application called Quattro Pro.
As you will learn, Novell was not the only bidder for
WordPerfect. Another applications developer called Lotus
also wanted to buy WordPerfect. I mention Lotus not only for
30
their interest in WordPerfect, but also because you will see
Lotus' name come up quite a bit in the documents.
Lotus was also an applications company. Their suite
of office productivity applications was called Lotus Smart
Suite. And they also sold a document and e-mail
collaboration application called Lotus Notes. Some of you
may have heard of those applications. As the evidence will
show, Microsoft executives often spoke of Novell WordPerfect
and Lotus together.
You will learn why as we go along. Novell's vision
was to combine WordPerfect and Quattro Pro with other Novell
applications and technology to produce a suite of
network-aware applications called PerfectOffice, shown on the
screen on the right.
Bob Frankenberg, the former CEO of Novell, will be a
witness in this case, and he will talk to you about Novell's
vision of network-aware applications. Now, everyone across
the country and across the world knows Microsoft. Some of
you may remember the Microsoft operating systems, Windows
3.1, Windows 95 and Windows 98. We will be talking primarily
about Windows 95 in this case. During this time period,
Microsoft also produced a server operating system called
Windows NT. It competed with Novell's Netware operating
system.
During this mid-'90's period, Windows NT had a very
31
small market share. It wasn't very popular, but I mention it
because we will hear about Windows NT again this case. Now,
Microsoft also produces a suite of office productivity
applications calls Microsoft Office, which contains the word
processor Word and the spreadsheet Excell. So that's three
suites of office productivity applications that you will hear
about in this case, Novell's PerfectOffice, Microsoft's
Office, and Lotus' SmartSuite.
It's hard to avoid Microsoft products today. Most
people use Microsoft's operating system Windows and its
application products that run on top of it, including
Microsoft Office. The evidence will show Microsoft
understood early on that, in order to strengthen its position
in operating systems, it was important to control the office
productivity applications that ran on top of the operating
system Windows.
Here we see an internal Microsoft e-mail. It is
from Bill Gates to other Microsoft executives. The subject
is Microsoft's operating system strategy. Here, going all
the way back to 1989, Mr. Gates recognized that a strong
applications business would be extremely helpful to
Microsoft's system strength and operating systems, and the
applications discussed in this e-mail by Mr. Gates include
the word processing and spreadsheet applications that are
contained in the office productivity application suites that
32
we will be talking about.
So, why is a strong applications business extremely
helpful to Microsoft's strength in operating systems? That
question is answered by Jeff Raikes. Mr. Raikes was a top
Microsoft executive in the 1990's. Mr. Raikes is sending an
e-mail to Warren Buffett here, one of the richest men in the
world. Mr. Raikes is trying to get Mr. Buffett to understand
Microsoft's business and why it was a good investment.
Mr. Raikes states: "If we own the key franchises
built on top of the operating system we dramatically widen
the moat that protects the operating system business."
Now, you will get to see portions of Mr. Raikes'
deposition where he explains that the key franchises he is
talking about here are the office productivity applications
that run on top of Windows. So, if Microsoft owns all these
key franchises, it dramatically widens the moat protecting
Microsoft's operating systems monopoly. It is Novell's
contention in this case that Microsoft took anticompetitive
actions against Novell WordPerfect in order to advantage
Microsoft's Office, its key franchise suite of office
productivity applications and that it took those actions
for the reasons stated here by Mr. Raikes, to widen the moat
protecting Microsoft's operating systems monopoly.
Now, in the software industry, which we are going to
be talking about throughout this case, it is absolutely
33
critical that your new applications be on the shelf and
available to consumers at or near the time of a new operating
system release. Here we see a Microsoft document talking
about the importance of time to market and their desire to
exploit system releases to advantage their own office
productivity applications.
Microsoft wants to time its applications releases
with its operating systems releases.
Time to market is so important that here we see
Steve Ballmer -- he's Microsoft's current CEO, indicating
that he was prepared to delay the release of Windows 95 if
Office 95 was not available in quantity in the stores
at that time. He says: "Let me be clear, though. If we can
not get office in the stores, we will need to move the
Windows 95 street date. I will not want to move forward with
Windows street if we can not have office in quantity in
stores. That is an absolute requirement for me."
Now, time to market is equally important for
independent software vendors. That's one of those terms
that's going to be an acronym throughout this case.
Independent software vendors are called ISV's in the
industry. Novell, WordPerfect and Lotus are all ISV's. The
evidence will show that one of Novell's primary objectives
was to have PerfectOffice for Windows 95 on the store shelves
within 30 to 60 days of the release of Windows 95. The
34
evidence will show that Novell's office productivity
applications did not meet this goal because of the
anticompetitive conduct of Microsoft.
Now, Judge Motz told you, in his preliminary
instructions yesterday, that during the time period relevant
to this case, Microsoft had a monopoly in the market for PC
operating systems. Microsoft can not dispute that fact in
this case. That's important because that's one of Novell's
burdens in this case, to show that Microsoft had a monopoly.
That burden is satisfied.
The conclusion that Microsoft had a monopoly in PC
operating systems was the result of a case against Microsoft
in Washington, D.C. that was filed in 1998. This case
against Microsoft also resulted in a large number of
additional factual findings that Microsoft cannot dispute in
this case.
At the conclusion of Microsoft's opening statement
later today, Mr. Taskier, who I have introduced to you
earlier, will read to you some of those undisputed facts.
And I apologize right now for their length and their
complexity, but they are important for you to hear. We will
talk about some of those undisputed facts this morning. You
should also keep in mind that those undisputed facts were
written in 1999. So, when you hear a finding that says
currently or talks about today, it is talking about the world
35
in 1999.
Now, as Judge Motz also told you, a monopoly, in and
of itself, is not illegal. But the law imposes an obligation
on a monopolist not to engage in anticompetitive or predatory
conduct in order to maintain that monopoly because the law
favors competition. Competition is good for consumers like
you and me. It leads to more choices. It leads to lower
prices. In this case, the evidence will show that
Microsoft's conduct was predatory. It did not encourage
competition. It stifled it.
One of the facts found in the case against Microsoft
was that its Windows monopoly in operating systems was
protected by what is called the applications barrier to
entry, shown on your screen. Some of the findings which we
will read to you later talk about this applications barrier
to entry that protects Microsoft's operating systems
monopoly. This barrier exists because of two characteristics
of the software market.
Number 1. Most consumers prefer operating systems for which
a large number of applications have already been written.
That sounds complex, but it really isn't. As I mentioned at
the beginning. People don't generally go shopping for
operating systems. They shop for applications to do
something, to create a document, to play a game, to run a
spread sheet. So consumers naturally favor an operating
36
system that has many applications available.
Number 2. Most developers prefer to write for
operating systems that already have a substantial consumer
base. That one is pretty obvious. If I'm an applications
software developer, the larger the consumer base, the more
money I can make there.
This application barrier to entry makes it very
difficult for another operating system vendor to have any
success against Microsoft. Now, as found in the case against
Microsoft in Washington, D.C., two of the products that
Microsoft targeted were Netscape's Navigator internet browser
and Sun Microsystems' Java computer languages. Now neither
Navigator nor Java are operating systems, so why did the
Court, in a case against Microsoft in Washington, D.C.
conclude that Microsoft targeted these companies?
That brings us to middleware, a subject I mentioned
at the start of my remarks. To understand middleware
requires a bit of knowledge about computer software,
knowledge that some of you may already have. For those that
don't, I will explain. The structure of a computer is like a
layer cake. At the bottom is the microprocessor, the
computer chip made by Intel.
Next up is the operating system. The applications
are on top. These application programming interfaces --
here's another acronym for you if you're taking notes, API's.
37
That's what they are called in the industry, application
programming interfaces, API's.
The operating system provides API's to application
developers for certain functions and routines. Let's take a
simple one. Say, for an example, an application developer
wants to print a document. Well, rather than write all the
thousands of lines of code to print a document, the
application merely calls on the printer API in the operating
system to print a document. An operating system has
thousands of such API's.
Now we're going put a new layer between the
operating system and the applications. This layer is called
middleware. Middleware also provides API's for applications
to use. With middleware, applications may start to become
less reliant on the API's in the operating system. They can,
instead, use the API's being offered by the middleware.
If enough API's are provided by the middleware and
the middleware will run on many different operating systems,
the application developers no longer care which operating
system is at the bottom of the layer cake.
This is one of those long findings which Microsoft
cannot dispute in this case. I'm going to see if I can break
this down for you a little bit. I apologize again for its
length. Let's take the top part. Middleware technologies
have the potential to weaken the applications barrier to
38
entry. Microsoft was apprehensive that the API's exposed by
middleware technologies would attract so much developer
interest and would become so numerous and varied that there
would arise a substantial, growing number of full-featured
applications that relied largely or even wholly on middleware
API's.
So, what have we established here? Middleware has
the potential to weaken the applications barrier to entry.
Microsoft was apprehensive that middleware would attract a
lot of developer interest.
Next part. The applications relying largely on
middleware API's would potentially be relatively easy to port
from one operating system to another. The applications
relying exclusively on middleware API's would run as written
on any operating system hosting the requisite middleware, so
the more popular middleware became and the more API's it
exposed, the more the positive feedback loop that sustains
the applications barrier to entry would dissipate.
So, what have we established here? Applications
relying on middleware could potentially be used on many
systems, and the more middleware became popular, the weaker
the applications barrier to entry protecting Microsoft's
operating systems monopoly becomes. The last part.
Microsoft was concerned with middleware as a category of
software. Each type of middleware contributed to the threat
39
posed by the entire category. At the same time, Microsoft
focused its antipathy on two incarnations of middleware that,
working together, had the potential to weaken the
applications barrier severely, without have the assistance of
any other middleware. These were Netscape's web browser and
Sun's implementation of the Java technologies.
So, what is the takeaway here? Microsoft was
concerned by the threat to their operating system monopoly
posed by middleware. Each type of middleware contributed to
the threat posed by the entire category. These are
undisputed facts in this case. Both Netscape Navigator and
Sun's Java computer languages were forms of middleware. They
both exposed API's that application developers could use in
their products.
The evidence will show that WordPerfect and other
technologies owned by Novell also contained API's that
application developers could use in their products. The
evidence will show that WordPerfect contained middleware
called PerfectFit that was shared by all the applications
within PerfectOffice. PerfectFit, within WordPerfect,
provided tool bars, menus, dialogs, spell checkers and many
other functionalities. These functionalities could be used
by other application developers to build new applications.
Thus, the PerfectFit technology within WordPerfect
served as a middleware platform to third-party developers by
40
exposing its API's and allowing these third-party developers
to use over 2,000 WordPerfect controls. PerfectOffice also
contained AppWare. AppWare was a Novell technology. AppWare
also served as a middleware platform to third-party
developers by providing easy to use API's to create
applications that were completely independent of the
underlying operating system.
This allowed third-party developers to create
applications on top of the PerfectOffice suite. Thus the
combination of WordPerfect and AppWare constituted another
category of middleware which posed a threat to Microsoft's
operating systems monopoly and, as we just discussed, it is
established in this case that each type of middleware
contributed to the threat posed by the entire category.
Using the language of Microsoft's Mr. Raikes,
WordPerfect and AppWare could help bridge the moat protecting
Microsoft's operating systems monopoly.
Now, even before Novell purchased WordPerfect,
internal communications between top Microsoft executives
revealed their fear of the middleware threat presented by
Novell. Here Jim Allchin, the vice-president of Advanced
Windows Systems Group writes to Bill Gates and others, quote,
they, meaning Novell, want to control the API's, middleware,
and as many desktops as they can in addition to the server
market they already own. We need to start thinking about
41
Novell as the competitor to fight against.
This is Mr. Paul Maritz, during the relevant time
period. He was the man in charge of the development of
Microsoft's server operating systems, like Windows NT.
Mr. Maritz was deposed in 1994, in connection with that case
against Microsoft in Washington, D.C. What's really
important about this is he was deposed at the time of the
relevant events in this case. And he was asked about
Microsoft's views on Novell's AppWare:
Question: Could you tell us what AppWare is.
Answer: Yes. That's an explicit attempt by Novell
to develop a layer that will provide all of the services
required by applications.
Question: Do you regard AppWare as a competitive
threat?
Answer. Very much so. Probably one of our, in the
long-term point of view, most serious competitors.
You will get to see this part of Mr. Maritz's
deposition in this case. I will show it to you on video
later. Here's another Microsoft executive, John Ludwig,
describing the threat of Novell Lotus middleware as
Microsoft's worst nightmare. I mentioned before we would see
Lotus in the documents.
Microsoft was also fearful of the middleware threat
presented by Lotus, particularly the Lotus Notes product,
42
which was a form of middleware. These e-mails we are looking
at, of course, are all internal to Microsoft. We got them in
discovery in this case.
The public face that Microsoft presented to the
independent software vendors, the ISV's, like WordPerfect and
Lotus was quite different. Interaction with ISV's wanting to
build software products to run a Microsoft's operating system
was handled by the Microsoft's developer relations group.
Here's another acronym for you, the DRG, Microsoft's
development relations group.
The developer relations group's mission was to drive
the success of Microsoft's operating systems by encouraging
ISV's to write products for that system. Microsoft wants to
attract a large number of applications to its new operating
system, and ISV's want their products to run on the new
operating system. This has the effect, of course, of making
the applications barrier to entry even stronger.
Now, I have to tell you that Microsoft uses the word
evangelism to describe the mission of the DRG. We usually
think of that word as something more than pushing an
operating system, but I bring it to your attention because
you will hear that word used to describe the activities of
the DRG.
Microsoft had various ways of encouraging ISV's to
write software for the new operating systems. They held
43
these gigantic developer conferences where WordPerfect and
hundreds of other ISV's were invited to learn of the new
features and benefits of the upcoming operating system.
There were Alpha and Beta releases of the operating
system's software before the final release. These were given
to the ISV's so that they could create applications for the
new operating system in advance of its public release. There
were software developer kits, another acronym, SDK's as they
are called in the industry. They came with the Alpha and
Beta releases which provided the documentation of the API's
that the software developers were being urged to support.
There were first wave agreements with top ISV's,
providing extra levels of support for those targeted on
getting their applications to market within that critical
time in the market window of 30 to 90 days of the new system
release.
There were online developer forms. I don't know if
any of you remember Compuserve -- that goes back a ways --
where ISV's could pose questions over the internet to
Microsoft developers about the new operating system. There
was the premier support line. This one cost a little money,
but here you could actually call Microsoft and get to speak
with Microsoft developers about the new API's in the planned
operating system. The evidence will show that WordPerfect
was a first wave participant and had access to the premier
44
support line.
Now, the development of Windows 95 went back to
1993. Wasn't called Windows 95 then. Its code name was
Chicago. Chicago was designed to be a huge advance in
the (loud noise ). Excuse me.
I might get rid of this, my voice is loud enough
without it. That's annoying.
Chicago was designed to be a huge advance in the
user interface or shell of the operating system.
THE COURT: Is that on?
MR. JOHNSON: As I was saying, Chicago was designed
to be a huge advance in the user interface or shell. That's
what you see when you turn on the computer. The old user
interface of Windows 3.1, the predecessor to Windows 95, was
a series of manager screens like the one shown here. This
one was the program manager. It was pretty simplistic. The
planned user interface for Windows 95 was much more
sophisticated. It's shown here on the right. Some of this
will appear familiar to us today.
At the heart of the new user interface was the
Chicago explorer shown here on the screen. The explorer is
fairly familiar to us now, but it was a big deal back then.
As described by Microsoft, it was the eyes of Chicago,
enabling a user to view all of the computer's resources,
whether local or remote, in one place, from 10 thousand feet
45
down to ten inches. Now, the explorer, as you can see has
two panes, one on the left and one on the right.
The left pane is often called the tree view because
you start with the trunk, which, in this case, is my
computer, and work downward with the limbs and branches of my
computer. You will also see this left pane referred to as
hierarchical view or the scope pane. The right-hand pane is
a little easier to understand. It is usually called the
contents pane. It displays the contents of what you have
clicked on from the tree view. Each of the items within the
tree view of the Chicago explorer are called name spaces.
Three name spaces, which were new to Windows 95, are
shown here, network neighborhood, recycle bin and my
briefcase. Network neighborhood brought the resources of all
the documents and information sitting on remote servers
directly to your desktop. That was a big deal. Back in the
old days, you had to map to a server and it was a very
complicated procedure to get to the network. What enabled
Microsoft to extend the explorer to include these additional
stores of information were some very special API's called
name space extensions.
In the documents we see today, you will sometimes
see these name space extension API's called shell extensions.
Now we are in June of 1993 in the documents, about
the same time period as those e-mails we looked at earlier
46
about the middleware threat presented by Novell and Lotus.
Microsoft held an executive retreat at Hood Canal. And
that's the name of Mr. Gates' personal residence compound.
This was attended by Microsoft operating systems executives
and executives that built applications for Microsoft to
address the crucial issue of leveraging system and
applications from a functionality and features point of view.
By the way, when you see Bill G in these e-mails, like you do
in the first highlighted line there in discussing this with
Bill G, it says, that's Bill Gates. And you'll see that
acronym used for him -- or alias used for him in a lot of the
documents that you will be looking at.
At the Hood Canal Retreat, the group 1 team,
composed of executives within systems and applications,
devised a strategy to gain access to the operating system
API's in order to shut out competing applications, entitled
the radical extreme. The group proposed the creation of an
Office shell containing extensibility features that would be
for the sole benefit of Microsoft Office, it's application of
office productivity applications cutting out WordPerfect and
other competing ISV's.
As we had earlier discussed, Office was the suite
that Microsoft had of office productivity applications. The
extensibility features being discussed include the name space
extensions. The basic approach proposed was to hold the
47
extensible shell for Office, to make the Chicago shell --
that's Windows 95 -- non-extensible and to provide, as an
excuse for this action, quote, we couldn't get it done in
time. Dot. Dot. Dot.
As we will see, this proposed excuse is pure spin.
Microsoft was already using the name space extensions in
Chicago in June of 1993. Notes from that retreat reflect
Bill Gates' personal adoption of the radical extreme plan.
As Mr. Adler states here: "Shift extensible shell in Office.
Bill G says do it."
Now, other Microsoft executives offered support
for the idea of denying ISV's the extensible shell within
Chicago. Here we see an e-mail from Bob Muglia. He was the
director of program management for Windows NT. Remember what
I said earlier, we would be hearing about Windows NT again.
He believes allowing ISV's the extensibility afforded by
Chicago is a bad option no matter how you view it, he says.
Mr. Muglia writes that providing the extensibility to ISV's
would mean that, quote, Word and Excel are forced to battle
against their competitors on even turf --
What a horrible thought, battling against your
competitors on even turf.
-- given that Lotus and WordPerfect have largely
caught up, they, meaning Microsoft Word and Excel, almost
certainly lose ground if not market share and margins.
48
The evidence will show that's all Novell wanted to
do, to battle against Microsoft on even turf. The evidence
will also show that Microsoft was not willing to allow
competition on even turf. Note here, too, a top Microsoft
executive is reflecting that, by July of 1993, WordPerfect
and Lotus had largely caught up. You will see other
statements from Microsoft executives like this, that
WordPerfect and Lotus both had good products on Windows that
had caught up with Microsoft's applications by 1993 and 1994.
You should compare those statements made at the time
with what Microsoft will tell you today, that WordPerfect was
late to Windows and was doomed to failure. You will have to
decide what is more credible, what Microsoft's executives
said at the time of the events in question or what they say
now in defending this lawsuit.
Now, not everybody within Microsoft was happy about
Mr. Gates' plan, particularly those responsible for Chicago.
Here, Tandy Trower, the executive responsible for
architecting the user interface in Chicago, told Mr. Gates
directly that the proposal to withhold the functionality from
the ISV's was a bad idea. Mr. Trower goes on. Quote: This
stinks of proprietaryness, something that we have been
critical of others for embracing. In the 12 years I have
been here, I have always taken pride in the fact that we
excelled by doing things better than our competition, not by
49
withholding some functionality that we might uniquely
leverage."
As you will see later that is exactly what Bill
Gates did. He withheld functionality from the ISV's so that
Microsoft could uniquely leverage it.
Let's return now to the public face of Microsoft as
presented to ISV's like WordPerfect. As a part of
Microsoft's evangelization of Chicago, this Novell trip
report memorializes a Chicago user interface design for
preview held in early July of 1993. Brad Silverberg,
Microsoft's head of the Chicago development, attended part of
this session. Mr. Silverberg reports the results of that
session to Jim Allchin.
They, meaning the ISV's, quote, really want
extensibility. They continue to press for that in every way.
What's more, they were afraid and angry that Microsoft would
use the hooks for its own purposes, apps, meaning
applications, mail, etc., but not provide the hooks to ISV's.
This was a very hot button.
As Mr. Silverberg acknowledged in his deposition,
the hooks he's talking about here are the API's used for
extensibility. The ISV's had good reason to be angry.
Microsoft was already planning on using the name space
extensions to help Microsoft's e-mail application achieve
dominance over other e-mail applications in Chicago.
50
Capone is the code name, another code name for an
e-mail application created by Microsoft. Someone from
Microsoft was obviously from Chicago. Gates planned to
bundle the Capone application within Windows 95 in order to
dominate the e-mail applications market. That's not my
allegation, it comes right out of the mouth of Microsoft.
As shown in this April 22, 1993 e-mail from
Microsoft executive John Ludwig, quote: The only reason mail
is in Chicago is to help WGA -- that's Microsoft's work group
applications, achieve dominance in the mail market. Bill's
words, not mine.
The evidence will show that Capone, Microsoft's
e-mail application, was using the name space extensions
provided by Chicago to integrate directly into the Chicago
shell. Now that raised a flag for some at Microsoft. Here
we see Tom Evslin. He was in charge of Microsoft's work
group applications division, asked if there was anything
being done in integrating Capone with Chicago that a third
party, Lotus, for example, won't be able to do. Joe
Belfiore, Microsoft's program manager for Chicago, responded
that it was unclear whether these API's would be published
ISV's, like Lotus, but that Bill, meaning Bill Gates, was
very aware of this issue.
As you will see during the course of this case,
there were executives in Microsoft that wanted to be fair to
51
the ISV's. Here John Lazarus, the vice-president of systems
strategy in Microsoft, expressed his view that if Microsoft
used the extensions they had to be published. This concept
of publishing is important for you to understand.
Application developers are totally dependent on Microsoft to
provide the technical details needed to use the API's in the
operating system.
When Microsoft publishes an API, it is providing the
documentation needed by the ISV's to actually code their
applications to those API's. Such documentation usually
comes in those software developer kits that we talked about
earlier.
Here Doug Henrich, the head of Microsoft's DRG,
developer relations group, felt that withholding the name
space extensions being used by Capone was problematic from a
PR and an ISV perspective. As he states, "This will play
out as an unfair advantage issue with the press."
Mr. Lazarus was more want.
Again, WordPerfect and the other ISV's knew nothing
about this internal debate going on within Microsoft, but
what is important to remember from this series of e-mails is
that Bill Gates is very aware of this issue. The evidence
reflects that, by -- that in mid-September of 1993, agreement
was reached within Microsoft to publish the name space
extension API's.
52
This e-mail summarizes a meeting between Brad
Silverberg, David Cole, Bob Muglia and Jim Allchin. This
lineup is important. Mr. Silverberg was the head of Chicago
development. David Cole was the program manager for Chicago.
Jim Allchin was the head of Microsoft's NT development, which
included Cairo, the planned future Windows NT, and Bob Muglia
was the program manager for NT in Cairo.
So, what we have here is the top executives within
Microsoft responsible for all operating systems development
within Microsoft. According to this e-mail these four top
Microsoft executives have agreed to document the name space
extension API's being used by Capone within Chicago. As
spelled out by this e-mail, those API's would be on the
A-list, documented and published to the ISV's.
About a month later -- we're now in November of
1993 -- WordPerfect got the good news about the name space
extension API's from Microsoft's DRG. This occurred in a
meeting between WordPerfect developers and some top Microsoft
executives who had come to WordPerfect to talk to them about
producing a good Chicago application.
Here David Cole, the group manager of Chicago, the
same David Cole who decided to document the name space
extensions, reported on their visit to WordPerfect, stating
these guys at WordPerfect, quote, will bet on Chicago. They
never had any doubts about that.
53
At the bottom, Mr. Cole notes how enthusiastic
WordPerfect was about Chicago, much in contrast to the ho-hum
attitude of Microsoft's own applications group. We are going
to meet and hear from Adam Harral, one of the WordPerfect
developers who attended this meeting on November 15, 1993.
We will come back to Mr. Harral in just a little bit.
This is another e-mail to remember. Microsoft is
going to present evidence to you, from years earlier, back to
the early days of Windows. That evidence will show that
WordPerfect was slow to develop for Windows in the late
1980's and early 1990's. Microsoft will point to that
ancient history as a cause of WordPerfect's downfall. Now
there is evidence that deception from Microsoft was part of
the reason that WordPerfect didn't initially develop for
Windows, which we may have to get into in this case, but the
point to remember here is, by 1993, WordPerfect was totally
sold on Windows, and Microsoft knew it, as Mr. Gates --
Mr. Cole states, these guys will bet on Chicago. They have
never had any doubts about that.
The e-mail from Mr. Cole goes on: "They," meaning
WordPerfect, "were very happy about us deciding to document
the shell extensions. I explained conceptually how the
extensibility would work and what controls they would have.
Since they just acquired a document management system, I
forgot from whom, I assume they will want to plug that in,
54
plus WP mail," which is WordPerfect mail, "and the other
parts of WordPerfect Office." That's WP Office is WordPerfect
Office.
In other words, Mr. Harral and the other WordPerfect
developers at this meeting were told that they were getting
the API's that would enable WordPerfect to integrate their
own mail application into the Windows shell, just like
Microsoft was doing with Capone.
We took the depositions of Mr. Cole and
Mr. Silverberg in this case. We asked them about this
e-mail. David Cole wrote the e-mail. It was first addressed
to Mr. Silverberg. Neither of them admit or acknowledge
remembering anything about the decision to tell WordPerfect
and other ISV's that Microsoft had decided to document the
shell extensions.
In his deposition, Mr. Gates even claimed that such
a decision had never been made. As you can see from the last
two e-mails, the decision to document and A-list these
extensions was plainly made at the highest levels within
Microsoft.
One month after Microsoft's visit with WordPerfect,
in December of 1993 -- we're moving month-by-month --
Microsoft held a professional developers conference where
Mr. Joe Belfiore gave this presentation to WordPerfect and
hundreds of other ISV's. Greg Richardson is another one of
55
the Novell developers that you will hear from in this case,
attended this professional developers conference.
As the slide states, Mr. Belfiore was the program
manager for the Chicago shell/UI. UI means user interface.
Microsoft told WordPerfect and the other ISV's about the new
controls that they not only can use but that they should use,
as stated in the third bullet point here.
The controls included the ability for the ISV's to
extend the shell. That capability includes the name space
extension API's that we have been talking about here. As
Mr. Belfiore went on to explain at the conference, Microsoft
was giving the ISV's the ability to create custom container
implementations within the left-hand pane of the explorer.
Here shown on the left, which we previously discussed, is
called the tree view within the explorer.
The shell extensibility being evangelized to the
ISV's included the ability to integrate directly into the
Windows Explorer. As stated here in the last bullet point.
If you have an application that displays a collection of
file-like objects, you can create your own custom container
displayed in the folder explorer hierarchy.
Here we see the complete explorer -- this was also
Mr. Belfiore's presentation -- containing a hypothetical your
custom folder, which is highlighted in blue right there on
the tree view. That would be created by a third-party ISV
56
which has been integrated directly into the tree view of the
explorer.
Note that this says at the top, not for most
applications and that it, quote, only should be used if your
application displays a pseudo folder, electronic mail,
document management, etc.
Electronic mail and document management were exactly
the type of features that office productivity applications
needed. In fact, let's go back a couple of slides. Mr. Cole
had previously stated that WordPerfect would use the
extensions for WordPerfect mail and a document management
system that it had recently acquired, exactly as being
evangelized by Mr. Belfiore.
Let's go back now to Mr. Belfiore's presentation to
WordPerfect and the other ISV's. As I have mentioned, we are
going to play for you certain videos of depositions of
Microsoft executives. Just parts of them. I don't want to
bore you to death.
One of those will be a portion of the deposition of
Bill Gates taken in 2009. Mr. Gates is going to say in that
deposition that the technology that allowed applications to
do what Mr. Belfiore is talking about here was trivial and
unimportant. He repeats, several times in his deposition
that it was trivial.
The evidence will show that that is not what Bill
57
Gates said back in 1994. Here we see an e-mail from
Mr. Gates to Brad Silverberg and other top Microsoft
executives. Mr. Gates states that in many meetings he has
said that the hierarchical view, also called the tree view,
is critical. The ability to see the real name space of the
system, where we are putting everything, only exists there.
What are these real name spaces he's talking about?
Let's go back a slide. The real name spaces are those
folders shown on the tree view on the left-hand side of the
explorer. Mr. Gates goes on to say: The tree view is
central to our whole strategy. E-mail, document library,
applications, file system. E-mail, document library. That
should be familiar to you by now. That was exactly the items
that Microsoft assumed WordPerfect would use the name space
extension API's for. E-mail and a document management
system.
So what Mr. Gates said in many meetings, many
meetings, was critical and central to Microsoft's full
strategy becomes trivial and unimportant in this case.
WordPerfect documents written after the Belfiore
presentation showed that WordPerfect understood the
importance of Chicago representing both a challenge and an
opportunity for WordPerfect to demonstrate its leadership in
the Windows arena. WordPerfect understood the importance of
integrating into the Chicago shell and the need to extend
58
Microsoft's common dialogs to provide the added functionality
historically present in WordPerfect or to use the name space
extension API's to extend WordPerfect's own dialogs.
Let me break that down for you a little bit. As the
WordPerfect developers that you will hear from in this case
will explain, WordPerfect had traditionally had a very
powerful file open dialogue containing features and
functionality well beyond that offered by Microsoft's Word.
Within this new operating system, Windows 95, application
developers had a choice to make. They could rely on the
common open file dialogs provided within Windows 95, or they
could create their own more powerful file open dialogue.
In either case, whichever choice they made, the name
space extension API's in Windows would allow application
developers to add real name spaces to whichever file open
dialog was chosen.
Let's look at that in a little more detail. This is
the Windows 95 common file open dialogue shown on the screen.
It was pretty basic compared to what WordPerfect had done in
the past. You couldn't search across different drives or
folders. You could only search within a given location.
WordPerfect developers had identified a long list of
deficiencies with Microsoft's common file open dialogue.
Here's a prototype of WordPerfect's file open dialogue.
Unlike Microsoft's file open, here you could search across
59
all the folders and drives shown on the left-hand pane or
tree view. This capability was provided by WordPerfect's
quick finder technology, which was light years ahead of
anything in Microsoft's Word
You could search by file name. You could search by
content. You could search by the attributes of the document.
Here we see the tree view as displayed by WordPerfect's file
open dialogue. As Mr. Harral and the other Novell developers
will explain to you, with the name space extensions being
evangelized by Microsoft, Novell would have been able to add
its own name space objects, including its own applications,
network drives or internet browsers into the hierarchy.
WordPerfect's advanced searching technology would
have provided easy access to all this information by text,
file name or the attributes of the document. For example,
information located in WordPerfect's document management
system SoftSolutions, it's Netware file systems, it's mail
servers and other work spaces where people could exchange
information.
In addition, the name space extension API's would
have allowed WordPerfect to add Microsoft's real name space
objects, like recycle bin, shown at the bottom, and network
neighborhood to its file open. This ability to add your own
name spaces and the ability to include Microsoft's new name
spaces in your application was absolutely critical to
60
WordPerfect. Anything less would have been a step backward
from what WordPerfect had historically offered to the
consumer.
A search across the unified shell view could result
in a broad array of information from websites stored locally
or on a network. In 1994, this was a potential huge advance
in personal computing. In June of 1994, Microsoft issued
Chicago Beta 1 to approximately 20 thousand sites worldwide,
including to Novell WordPerfect, so by that time, they had
joined forces. Novell had bought WordPerfect.
The reference here to M6 means milestone 6 in the
development of Chicago. There were 8 such milestones in the
Chicago development process.
There had been a number of earlier milestone
releases of Chicago to many ISV's, but none of them contained
information on the name space extensions. Now, the issuance
of a Beta release is a significant event in the development
process. A Beta provides ISV's with a nearly complete
pre-release version of the operating system, which allows
ISV's to start developing compatible products for the
forthcoming new operating system.
The M6 Beta included partial documentation for the
name space extensions in an SDK, software development kit.
We talked about it. This is just a list of the API's. The
actual exhibit is a much bigger document written in language
61
that only a software developer could love or understand.
This documentation gave the ISV's like Novell the
details of the name space extension API's that Microsoft had
been encouraging the ISV's to use to become a great Chicago
application. As I mentioned earlier to you, documentation is
very important for ISV's work and has great significance in
the software industry. Here we have Mr. Raikes, again. You
remember the Microsoft executive who admitted that Microsoft
widens the moat protecting its operating systems monopoly if
Microsoft owns the key franchises running atop Windows.
Here Mr. Raikes is testifying about the significance
of documenting an API in the computer software industry.
Question: You testified at your prior deposition
that, quote, the purpose of documenting an API is, in effect,
to put a stake in the ground and say this is something that
you, as an applications developer, can count on being
available to you as an operating systems service today and in
the future in order to ensure compatibility, close quote.
And the quote goes on, but I'll stop there and ask
you, do you recall giving that testimony?
Answer: I don't recall the specific testimony.
Question: You have continued to agree with that
statement?
Answer: I would say, from what I recall from what
you just read, I would say yes and that, you know, when
62
you're an application developer, again, back to principles
about how the industry worked, you encourage application
developers to bet on your operating system if they know
clearly which application programming interface you have and
what you're intending to support now and in the future.
You will get to see portions of Mr. Raikes'
deposition testimony in this case, including this exchange
about the purpose of documenting an API, that purpose being
to put a stake in the ground.
This is Greg Richardson on the left, Adam Harral on
the right. Both Mr. Harral and Mr. Richardson are software
developers. They write the code that makes the software
function. There are literally millions of lines of code
in an office productivity application like WordPerfect.
Mr. Richardson actually worked for Microsoft before coming to
WordPerfect and later to Novell. Mr. Harral was also a
WordPerfect developer before coming to Novell.
Mr. Harral and Mr. Richardson are part of the shared
code team at Novell. That fact is important. The shared
code team was responsible for many things, but, most
importantly, it was responsible for the file open dialogue
for all the constitute parts of the PerfectOffice suite.
What do I mean when I say that? This is the box that
contained the PerfectOffice suite for Windows 3.1. That was
the predecessor operating system to Windows 95.
63
Each of these applications, WordPerfect, Quattro
Pro, Presentation, Info Central, Envoy, Groupwise, each of
these applications has to have a file open dialogue. You
have to be able to open the files within the application.
Pretty basic.
The shared code team is responsible for creating a
commonly shared file open dialogue for each of these
applications, or, to put it another way, each of these
applications depends on the shared code team to produce the
file open dialogue. Mr. Harral and Mr. Richardson will
explain that process to you in detail.
As you may recall, the developers at WordPerfect,
later Novell, back in November of 1993, were very happy about
Microsoft's decision to document the name space extensions.
They liked the technology, and they determined to use it
for the file open dialogs for all the parts of the
PerfectOffice suite. The shared code team immediately
started coding, with the expectation of receiving those
extensions, and later they were coding directly to the name
space extensions, as documented in the M6 Beta for Windows 95
in June of 1994.
By October of 1994, they were 80 percent complete
with that process. That's important. I'm going to repeat
it. By October of 1994, Novell was 80 percent complete with
that process.
64
Mr. Richardson and Mr. Harral will testify that
Microsoft was well aware that Novell was using these
extensions in the development process. As you will see in
this case, Microsoft's documents are mixed on the issue of
whether Novell was using these extensions. Fortunately, you
won't have to rely on conflicting second and third-hand
reports from Microsoft. You will get to hear from the Novell
developers actually involved in the process.
The evidence will also show that many other
substantial and important ISV's were also using these
extensions. These extensions were not just important to
Novell.
On September 20, 1994, Mr. Gates attended an annual
event where top software executives display their latest
technologies. It is called the Agenda Conference. This
e-mail contains Mr. Gates' later report to other top
Microsoft executives on Novell's demonstration at that
conference. Mr. Gates saw Bob Frankenberg, the CEO of
Novell, demonstrating Novell's new technology.
He saw Mr. Frankenberg demonstrate Corsair, which
was WordPerfect's new shell, which was cross platform
middleware that integrated with WordPerfect to provide
unified views and simplified access across networks.
Mr. Gates saw how WordPerfect had created a direct hyperlink
to the internet through their new web browser Ferret.
65
This was a big deal in 1994. I don't recall seeing
another document in this case where Bill Gates used three
exclamation points at the end of a sentence.
THE COURT: Mr. Johnson, I'm sorry to interrupt you,
but I have to take a break. And I don't think we'll finish
up with you're statement, and I have to take a break.
MR. JOHNSON: Thank you, Your Honor.
(Short break.)
I'm sorry for the interruption, Mr. Johnson, but I
suspect I was doing you a favor, which I think has been
confirmed by what occurred as I saw a bunch of you running
for the door.
MR. JOHNSON: Your Honor, there is no doubt you were
doing us a favor. Thank you.
THE COURT: Thanks. Let's get the jury.
MR. JOHNSON: In fact, your timing was impeccable,
as you will soon see.
(Jury brought into the courtroom.)
THE COURT: Mr. Johnson.
MR. JOHNSON: Thank you, Your Honor, very much.
Welcome back. I needed this break, too.
Picking up the story where we left off, September
20, 1994, Mr. Gates attended this demonstration of Novell's
new technology as presented by Mr. Frankenberg, the CEO of
Novell. Mr. Gates not only is extremely impressed, he
66
states: "This emphasizes the importance of our shell
integration. Novell is a lot more aware of how the world is
changing than I thought they were."
Now let's move just two weeks after that September
20 Agenda Conference. On October 3, 1994, in an e-mail
widely distributed to Microsoft's top executives, Bill Gates
addressed the name space extension API's. What he refers
to here is IShellBrowser, which happens to be one of the
names for one of the name space extension API's. At the
start it is interesting to observe that Mr. Gates says,
quote: "It's time for a decision on IShellBrowser," as
though that decision had not already been made over a year
ago, in September of 1993, by Microsoft's top systems
executives. Mr. Gates decided that Microsoft should not
publish these extensions, even though his top executives had
decided to publish these extensions over a year before and
even though the extensions had already been published to the
ISV's in the M6 Beta five months earlier.
Instead, Mr. Gates states that Microsoft should wait
until they had a way to do a high level of integration that
will be harder for the likes of Notes, WordPerfect to achieve
and which would give Office a real advantage.
Now, Mr. Gates' reference to Notes is to the
middleware product built by Lotus, called Lotus Notes.
Mr. Gates wants to wait, in order to allow Office,
67
Microsoft's suite of office productivity applications, to
gain a real advantage over Lotus Notes and WordPerfect. It
is Novell's contention in this case that Mr. Gates' decision
is purely predatory, without a hint of pro-competitive
justification.
Continuing in the same e-mail. Mr. Gates notes that
it was already very late in the day to be making these
changes to Chicago and Capone. At this point, we're less
than a year away from the launch of Windows 95. It is also
important to note that his decision not to publish the name
space extensions had nothing to do with the quality of the
extensions themselves.
To the contrary, Mr. Gates states, in the same
e-mail, that the shell group did a good job of defining the
extensibility interfaces and that they were a very nice piece
of work.
Indeed, the evidence will show that these extensions
continued to be used in Windows 95 and in various versions of
Windows since that time. So, when you hear the later excuses
proffered by Microsoft for Mr. Gates' decision to not publish
the name space extensions, I want you to return to this
Plaintiff's Exhibit 1 to see for yourself if Mr. Gates gave
that excuse for making that decision. Remember that the
reason given by Mr. Gates was to advantage Office over Lotus
Notes and WordPerfect.
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The e-mail goes on. By not publishing the name
space extensions Mr. Gates was trying to ensure that only
Microsoft would benefit. Here he states again, in the same
e-mail, that Microsoft can't compete with Lotus and
WordPerfect Novell without this. The goal was to have Office
96 take advantage of the new shell integration work and to
delay introduction of that technology to Windows until 1997,
thus advantaging Microsoft's applications at the expense of
competitors' applications.
So, when Microsoft tells you, as they will in this
case, that Office 95 didn't use the name space extensions,
turn again to PX-1, where Mr. Gates states that the goal is
to have Office 96 sell better because of the shell
integration work. By disadvantaging WordPerfect, Novell and
Lotus, the key competitors to Microsoft's office productivity
application, Mr. Gates was seeking to widen the moat
protecting the operating systems monopoly.
Later in this case, you will be hearing from
Professor Roger Noll of Stanford University. Dr. Noll is a
well-known authority in antitrust economics. He has served
as the senior economist at the United States President's
Council of Economic Advisors as a consultant for Congress and
federal agencies such as the Federal Trade Commission and the
Department of Justice.
Dr. Noll will discuss with you in detail how
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Microsoft's conduct, both against Novell and against other
software companies, led to harm the competition in the
operating systems market and resulted in a further widening
of the moat protecting Microsoft's Windows operating systems
monopoly.
Let's get back to the facts. Mr. Gates' decision to
not publish the name space extensions was immediately carried
into effect. Satoshi Nakajima, the principal inventor of the
name space extension API's, spoke of hiding one of the shell
extension mechanisms. What he was doing, of course, was
undocumenting the extensions from the SDK that had gone out
with the M6 Beta. Microsoft was next faced with the problem
of explaining Mr. Gates' decision to the ISV's that were
using the extensions in their planned Windows 95
applications. Note the instructions at the end of the
highlighted portion, not to use the words undocumented or
private API's, which is exactly the status that Mr. Gates'
decision created for the name space extensions.
Microsoft's internal instructions acknowledged that
the name space extensions were being used by Microsoft's info
center and Marvel. Persons charged with contacting the ISV's
were repeatedly cautioned not to mention Marvel in any of
their conversations. Why? Because the evidence will show
that Marvel, now known as Microsoft network, or MSN, was and
continued to use the name space extensions.
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The Microsoft employees that were charged with
contacting the ISV's were given a script to follow. ISV's
were told to stop using these API's. If ISV's asked why this
is being done, the Microsoft employees were told to say,
because the API's were very difficult to support long-term.
We don't want to send ISV's down a dead-end path.
The evidence will show that this reason was pure
spin, just wasn't true. Mr. Gates had said nothing about
these API's being difficult to support long-term. To the
contrary, he had said that they were a very nice piece of
work. The document went on with a question and answer,
sample question and answer for the DRG folks to respond to
the a ISV's. The number 1 reason underlined in the original,
as you see it here on the screen, was compatibility.
Quote: "We have determined that it will be very
difficult to support these API's for applications as we move
forward with our operating systems. We did not want to
encourage ISV's to support interfaces that would go away in
the future."
These API's never went away. In fact, the evidence
shows that the extensions were not only used in Windows 95,
they were also added to Windows NT, Microsoft's advanced
server operating system, even before Mr. Gates made his
decision not to publish them. A week prior to Mr. Gates'
decision to not publish the name space extensions, Microsoft
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had already decided that the entire Chicago shell code base,
including these name space API extensions, would be used on
Windows NT. Note the date here on this e-mail, September 27,
1994, a week prior to Mr. Gates' decision to deny ISV's the
name space extensions.
Mr. Allchin, he's the head of the Windows NT in
Cairo development, reports that the decision had been made to
use the Chicago shell code base for the NT work station.
Notice Mr. Allchin talking about the positive benefit from
this decision. The shell in NT will now be the same as
Chicago, and this will give ISV's one set of API's to target.
Other Microsoft executives noted specifically that
the shell extensions would run fine on Windows NT. This
e-mail is from Brad Silverberg, the head of Chicago
development. He states that the Windows 955 shell will be on
Windows NT and that the shell extensions will run fine there.
There is no issue about supporting on NT. So, the alleged
lack of future compatibility with future operating systems
was just pure spin.
Now, Microsoft will advance other excuses for
Mr. Gates' decision. They will say that the API's lacked
robustness, that a badly written extension could bring down
the shell. We will rebut all those additional excuses but,
again, look back at PX-1. Does Mr. Gates say anything about
a lack of robustness? Does he say anything about a badly
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written extension could bring down the shell? You won't find
that in Mr. Gates' e-mail. To the contrary, Mr. Gates says
they were a very fine piece of work and there was nothing
wrong with the extensions.
The Microsoft employees charged with contacting the
ISV's were told to inform the ISV's that Microsoft's own
applications had been required to stop using these
interfaces. This also was not true. Marvel was the code
name for the Microsoft application I referred to earlier
called MSN or Microsoft Network. It planned to ship with
Chicago. The Marvel team called Gates' decision a bombshell
and poignantly noted a redesign of their shell was not a
realistic solution given the time constraints.
Now, keep in mind that Marvel is a Microsoft
application. They had direct access to the source code
implementing these name space extensions. They could talk
directly to the inventor of the name space extensions,
Mr. Nakajima, and all the other Microsoft developers of
Windows 95. Yet, here, Marvel is acknowledging that a
redesign of the Marvel shell was not a realistic solution,
given the time constraints. It was even less of a realistic
solution for Novell WordPerfect who has no access to the
source code, no access to Mr. Nakajima, and no access to the
Microsoft developers of this technology.
The bottom line for Marvel, was that there was only
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one solution that didn't cause a huge risk to the project,
using the de-documented extensions. Any other option meant
that Marvel would not make Chicago. Note here on this e-mail
that Bill G. -- that's Bill Gates -- is being advised
directly, two days after his decision, that there is only one
solution that doesn't cause huge risk to Marvel, using the
name space extension API's.
Microsoft, in general, and Bill Gates, in
particular, knew that WordPerfect was using these extensions.
Here, Brad Silverberg, the head of Chicago development, urges
Bill Gates and other Microsoft executives to make the
extensions public. He states that other ISV's using the
extensions are WordPerfect, Lotus, Semantic, Oracle.
Mr. Silverberg points out that the action may lead to calls
for the Department of Justice to investigate. The evidence
will show that Mr. Silverberg's pleas fell on deaf ears.
The API's remained undocumented at the direction of
Mr. Gates, and the reason for de-documenting the name space
extensions remained the same, to advantage Office at the
expense of WordPerfect and Lotus.
Even after the decision had been made, Novell
developers continued to try and get more information about
the use of the name space extensions from Microsoft. Here,
Kelly Sonderigger writes -- Kelly Sonderigger of Novell,
writes to Brad Struss at Microsoft requesting an article on
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the name space extension API's. Mr. Struss finally responds
to him that, quote: "This functionality, as described, is no
longer available."
Now, as Novell's developers and our technical expert
Mr. Alepin, whom you will be hearing from, will explain to
you, no ISV can use API's which the operating systems'
vendors says it will not support, which may be removed in the
future, and having been told here that the functionality is
no longer available. Novell and many other ISV's had no
choice than but to find another way. Microsoft had laid down
a road for the ISV's to use, and Novell had gone a long way
down that road. You remember me telling you, 80 percent down
that road.
And then, suddenly, Microsoft blocked the road.
Microsoft, in essence, forced them to build their own road
from scratch. And it wasn't just the withdrawal of the name
space extensions. The evidence will show that, after Mr.
Gates' decision, Microsoft developers refused to provide any
help to Novell about the operation of the entire Windows 95
shell. That information window that Microsoft had provided
to WordPerfect and to the other ISV's was suddenly slammed
closed.
Mr. Harral and Mr. Richardson will describe in
detail to you the struggle of the shared code team to build a
new road after Microsoft undocumented the name space
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extension API's. This was functionality Novell had to have
in order to create a competitive suite of office productivity
applications in a timely manner. The evidence will show that
Novell had seven full-time developers working on the file
management system night and day for over a year and nine
other developers from the various dependent applications in
the suite spending half their time on this as well.
Microsoft's decision severely crippled Novell's
ability to produce a competitive product in a timely fashion.
You will also get the opportunity to hear from Gary Gibb.
Mr. Gibb was the director of the PerfectOffice suite for
Windows 95. He was in charge of the entire suite
development. It was his responsibility to bring all the
pieces together to create the finished product.
We will learn about the concept of critical path.
That concept looks at the development process of all the
pieces that need to come together to finish the suite and
tells you -- excuse me -- and tells you which piece is
critical path; in other words, which piece is taking the
longest to get done in driving the issue of time to
completion. Mr. Gibb will explain that the file open
dialogue was critical path throughout this project. The
evidence will show that Mr. Gates' decision resulted in a
delay in Novell's efforts to produce a timely suite for
Windows 95.
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By late July, 1995, in a document entitled Panic
Mode Modification Recommendations, Novell knew that there was
no conceivable way to have the name space browser code
complete by August 22, which was close to the scheduled
release date for Windows 95. At the same time, eliminating
the feature altogether was not a reasonable option. The
evidence will show that, as a result of Microsoft's gaming
the interfaces, PerfectOffice did not release until May of
1996, long after the release of Windows 95, and Office 95, in
August of 1995.
Now, Microsoft's use of the name space extensions
within Chicago continued unabated. Athena was another code
name, this time for a personal information manager, sometimes
called a PIM in the industry. The evidence related to Athena
will demonstrate for you the hypocrisy of Microsoft's claimed
excuses for denying ISV's the name space extensions and the
concern within Microsoft itself for the impact on ISV's like
Novell and WordPerfect.
Here we have Scott Henson. He was the head of the
developer relations group at Microsoft, the public face of
Microsoft. He writes, in August of 1995, about his strong
concern for the ISV's. As you can see, the subject of this
e-mail is shell extensibility and ISV's. Mr. Henson has just
installed Athena, this MS PIM application on his computer and
found, to his dismay, that not only was it using the name
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space extensions but that it was also displayed in both the
left and right-hand panes of the Windows Explorer. As
Mr. Henson states, this is the exact thing we told ISV's they
could and should not do.
Here's what Mr. Henson saw. This is a screen shot
of Athena being used to display internet mail and news which
we highlighted with those red boxes at the bottom, fully
integrated into the shell and showing its contents in the
right-hand pane. When we click on internet news, the program
runs in the right-hand pane. This is the exact functionality
that Mr. Gates stated over and over again, in his deposition,
never happened. It is also the functionality that he
claimed, at his deposition, was trivial and unimportant.
As Mr. Henson further explains, Microsoft had a
product that was to be sold in the very near future
implementing interfaces that Microsoft told ISV's they should
not use because they would not be able to support them moving
forward. That was the excuse, you remember, given to the
ISV's. That was the excuse advanced in October of 1994.
Mr. Henson can't even express how bad this is. We lose
everything when we do this, credibility, trust, leverage, the
works. Mr. Henson also found it strange that Athena worked
just as well on windows NT, because he had been telling the
ISV's all a long that incompatibility with Windows NT was the
reason why the extensions had been de-documented.
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We know differently from the e-mails we saw this
morning. Microsoft had made the decision to use the Chicago
shell API's in Windows NT ten months earlier, in September of
1994, just before Mr. Gates' decision to de-document the name
space extensions. There was no compatibility issue with
Windows NT. It was all a facade. Mr. Henson went on to note
that Athena was just the tip of the iceberg. There was
internal development within Microsoft where various groups
were implementing these interfaces.
Let's look at a little of that work going on at
Microsoft. This document is an Office 96 specification. You
may remember that Mr. Gates said that the reason to
de-document the name space extensions was to advantage
Microsoft Office. You will also remember that the target was
not Office 95, but, rather, Office 96. The plan was to use
the technology in Office 96, the version of Office to come
out a year after Windows 95. Here the Microsoft developer
writing the specification for Office 96 states that the
Office Explorer implementation strategy is to, quote,
leverage the Chicago shell's teamwork as much as possible and
that Chicago provided some of the crucial interfaces that
would simplify their work, including IShell Folder and IShell
View, IShell folder and IShell view are two of the name space
extension API's.
The evidence will also show that Microsoft used the
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name space extension API's to integrate Microsoft's Internet
Explorer directly into the Windows 95 Explorer. This
article, written by the inventor of the name space extension,
Mr. Nakajima, shows exactly how it was to be done. Windows
95 shell name space extension, he writes, although we haven't
clearly defined how we present documents on WWW -- that's the
worldwide web, for those that remember -- to the end user on
the Explorer left pane, i.e., the hierarchy, we know that
they don't belong to any of the existing folders, shells,
name space. It is quite natural to use the name space
extension mechanism -- see picture below -- to plug the URL
name space into the Explorer's name space.
Now, as Mr. Richardson of Novell will explain to
you, this is precisely what Novell wanted to do in
WordPerfect for Windows 1995. They wanted to add the
internet browser right into the file open dialogue in
WordPerfect, using the name space extensions.
Let's return now to Mr. Henson's e-mail over Athena.
He recommended that Microsoft document the API's quick. Our
ISV's are already months behind. Novell couldn't have said
it better. Novell and other ISV's were already months
behind. Of course we are now in August of 1995. It's too
late. Windows 95 is coming out that month. On August 24,
1995, Windows 95 was launched to great fanfare. Office 95
was launched at the same time. People lined up in the stores
80
hours before opening to buy the new products. Jay Leno was
the MC for the launch ceremony at Microsoft's headquarters.
Microsoft reportedly paid the Rolling Stones
millions of dollars to use the song Start Me Up in their
launch campaign. The Empire State Building was lit up in
Microsoft's orange, yellow and green logo colors. No other
office productivity application suite built for Windows 95
was available at the launch. Neither Lotus' Smart Suite nor
Novell's PerfectOffice. The PerfectOffice Suite was finally
released by Corel, it's new owner, and I mentioned this
before, in May of 1996. In other words, Microsoft's suite of
office productivity applications was the only choice if an
individual or business wanted office productivity
applications built for Windows 95.
Microsoft was left as the virtual undisputed owner
of the key franchises sitting atop the operating system, just
as Mr. Raikes had told Mr. Warren Buffet. Microsoft had
succeeded in widening the moat protecting Microsoft's
operating systems monopoly.
By the way, you are going to hear a lot of evidence
from Microsoft that, after the merger of Novell and
WordPerfect, that Novell let go a lot of the WordPerfect
salespeople and that Novell allegedly decimated the sales
force. This is another effort by Microsoft at misdirection.
When you hear this evidence, I ask you to reflect on this.
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Even if it was true that Novell had decimated the sales
force -- and I think we will show you that that's not true --
but let's assume it is true. What difference would that have
made? Because of Microsoft's conduct, Novell didn't have a
product to sell. You can have the greatest sales force in
the world, and it wouldn't have mattered, if you have nothing
to sell.
As I mentioned earlier, Microsoft is also going to
try and tell you that WordPerfect was doomed, that the die
was cast by decisions made years before by WordPerfect, and
later by the alleged mismanagement of Novell. The evidence,
however, will suggest otherwise. Here's a chart of
WordPerfect revenues from 1989 to 1998. The yellow shown on
the chart is revenue from the DOS operating system, the
predecessor of Windows, which was on its way out. The
important color for you to look at here is blue, WordPerfect
revenues on Windows operating systems.
Once WordPerfect started writing for Windows, in
1991, their Windows revenues grew and grew, through 1994,
when WordPerfect revenues exceeded $300 million. Even in
1995, with most of the world waiting for the release of
Windows 95 in August of that year, WordPerfect's Windows
based revenue exceeded $250 million. When Microsoft
destroyed Novell's chance to have a timely suite for Windows
95, WordPerfect revenues plummished (as spoken).
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Microsoft is also going to pull out a lot of old
product reviews to try and suggest to you that consumers were
choosing not to buy WordPerfect because of these poor
reviews. As this graph shows, WordPerfect was doing quite
well on Windows in 1992, 1993 and 1994. And if product
reviews drive sales, as Microsoft will argue, let me share
with you a few of the reviews of PerfectOffice 3.0, which
came out in 1994.
I show these product reviews excerpts not for the
truth of the statements made, but rather to show you that if
the reviews drive sales, as Microsoft will argue, then
WordPerfect was doing quite well, thank you very much.
PerfectOffice has leapfrogged Microsoft Office
Professional and Lotus Smart Suite to become the mostly
highly integrated office suite on the market. PerfectOffice
does a better job of sharing information across applications
for a work group and has a more consistent user interface.
PerfectOffice 3.0 runs nose to nose with Microsoft Office,
but the cross application integration is better. Overall,
PerfectOffice is a stunner. No other suite can match the
consistency of PerfectOffice applications. The opportunities
for integration, including extensive Olay 2.0 implementation
and the QuickCast micros, the end user hand-holder link and
the work group support, for now this is the best all
arounder. PerfectOffice sales have finally taken a bite out
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of Microsoft Office. The latest figures show Novell has 25
percent of the office suite market, up from next to nothing.
Lotus is still in the toilet with 5 percent market share,
while Microsoft has all the rest.
So we ask you to draw your own conclusions when
Microsoft says that WordPerfect failed in the marketplace
because of poor product reviews.
I skipped one, didn't I? I won't even read this
one. Here's another one in the same document, Plaintiff's
Exhibit 390.
Damages. It would be great if we could turn back
the hands of time and give Novell WordPerfect a more level
playing field in creating a world class suite of office
productivity applications for Windows 95. We can't. All the
law can do now is to compensate Novell with money for
Microsoft's anticompetitive actions. You will hear from
Dr. Frederick Warren-Boulton, who is the damages expert for
Novell. Dr. Warren-Boulton has an extensive background in
economics. He served for six years as the chief economist
for the antitrust division for the United States Department
of Justice. I'm not going to get into the issue of damages
here in any detail. I'm going to leave that to the experts.
What I will say, however, is that the evidence will
show that, by late 1995, after Windows 95 and Office 95 had
been launched to great fanfare, Novell had come to understand
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that Microsoft would not allow fair competition in the office
productivity applications market and made the decision to
sell these applications to the highest bidder. That bidder
was Corel, who purchased the applications in March of 1996,
for $146 million. In a period of 22 months, Novell lost more
than a billion dollars.
A couple of items as I finish up here. As I
mentioned at the beginning, name space extensions API's is
not the only issue we have with Microsoft in this litigation,
although it's plainly the most important. You will hear
about other acts taken by Microsoft against Novell that were
also anticompetitive, but none of those had the impact of
these name space extensions. You will also hear in this case
about other anticompetitive conduct engaged in by Microsoft
that didn't impact Novell directly. Now Novell, obviously,
is not claiming damages for conduct that hurt others, like
Lotus or Netscape or Sun Microsystems.
You will learn about the anticompetitive conduct
engaged in by Microsoft against Netscape and Sun Microsystems
from the findings which will be read to you at the beginning
of the case, and we address what Microsoft did to these other
companies in this case because it's relevant to your
understanding of Microsoft's intent with what they did to us.
And some of it will also be relevant to the issue of harm to
competition in the operating system market.
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As I mentioned earlier Dr. Noll will be addressing
the question of harm to competition in the operating systems
market with you in great detail later in the case.
Now, one thing I want to do before I sit down is to
thank you for acting as jurors in this case. It's an
imposition. We know that, and we thank you for your service.
And we will do everything in our power to get the evidence to
you as quickly and directly as possible. That's the least we
can do. So that's it for now. I won't have the opportunity
to talk with you like this until the very end of the case. I
look forward to that day.
Your Honor, that concludes Novell's opening
statement.
THE COURT: Thank you very much, Mr. Johnson.
We've gone a little longer than we expected, so
Mr. Tulchin, you can start, but we may have to have you
finish up after the lunch break.
MR. TULCHIN: Thank you, Your Honor. Appreciate it.
Opposing counsel, Judge Motz, and, of course, ladies
and gentlemen of the jury, my name is David Tulchin. I'm
from the law firm of Sullivan and Cromwell. I'm very pleased
to be here today on behalf of Microsoft Corporation, and
before I begin, I wonder if I can introduce my colleagues who
will be trying the case here. Steve Holley, who is with
Sullivan and Cromwell, my firm; Jim Jardine, from Ray,
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Quinney & Nebeker; Steve Aeschbacher, who is from Microsoft
Corporation in the state of Washington; and Sharon Nelles,
also from my firm, Sullivan and Cromwell.
It is indeed a privilege to be here to represent
Microsoft and to address all of you. It's also a pleasure to
be in this beautiful old courthouse, which I'm told was built
in the 1930's, and I mention that because I remarked on that
earlier, and one of my colleagues asked if I had seen it
being constructed. Not quite. But it really is a great old
courthouse.
THE COURT: Give me a break, Mr. Tulchin.
MR. TULCHIN: Almost, Your Honor.
I have a favor to ask of you at the beginning. As
you know, the case will go on for some period of time, and I
ask that you be patient, and as the Court said yesterday,
wait for the evidence to come in before making any decisions
about anything. Novell gets to go first. They put their
witnesses and evidence on first. We have to wait until they
are finished before we call our witnesses, so I ask you to
withhold judgment about the important issues in this case
until you've had the chance to hear all the evidence.
A couple of opening remarks, if I may. Novell's
lawyer pretty much said -- and I think this is the burden of
what he said to you -- that, during the short period of time
that Novell owned WordPerfect, the word processing, Novell
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failed. The product was unsuccessful. That period, of
course, was from June of 1994 to March 1, 1996, and in my
opening statement to you today, I'm going to try to put some
of these pieces together chronologically because I don't want
there to be confusion about when things occurred.
It's very important in this story. In 2011, here
today, Novell's lawyer stood up and blamed Microsoft for the
failure of WordPerfect when it was in Novell's hands. He
even said that there was deception -- he used that word
several times -- hypocrisy, that it was spin, Microsoft's
reasons for taking certain things were spin. He said that it
was all a facade.
The truth is that the evidence will show that the
blame cannot be placed at Microsoft's feet for what happened
to WordPerfect and also to another product that Novell bought
also in '94 called Quattro Pro, a spreadsheet. The blame
really lies at Novell's feet and at the feet of WordPerfect
Corporation, the company that Novell acquired in '94. And if
Novell's products failed because of bad choices by Novell and
WordPerfect, as they did, it was also a function of the great
products that Microsoft made.
You remember, just a few minutes ago, Novell's
lawyer telling you about the huge success of Windows 95. He
showed you a picture of the launch date, August 24, 1995, and
I think he said that millions of people around this country
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and around the world waited on line to get Windows 95. And
we'll come to that this morning. Microsoft made great
products that people wanted to use. And that helps explain
what happened to WordPerfect as well. It's easy to make
allegations about spin and hypocrisy. It's easy to say there
was deception. Again, we ask that you wait to hear the
evidence of whether there was any deception at all. I'll
come to just a little bit of this evidence as we talk this
morning.
Novell's lawyer did not tell you that these events
about the name space extension API's -- and that's the only
thing that he says Microsoft did wrong -- something to do
with the name space extension API's. And he points to a
decision on October 3, '94, by Mr. Gates, to withdraw support
for the name space extension API's. I'm going to get into
this in more detail, but it's important to say right at the
very beginning. At that time, October, '94, Windows 95 was
not a released product on the market. We're talking about a
Beta version of the product, a pre-released version. So,
when Novell's lawyer talks about a road that had been built,
the road had not been built.
Microsoft was working on Windows 95. This is a
pre-release version that it had provided to Novell, under a
contract, and you'll see some of this later, and, of course,
in the development of a very complicated operating system
89
like Windows 95, things change. The product is not final.
That's the very nature of a Beta. And that's what the
evidence will show. The beta is a pre-release version sent
out to ISV's like Novell to be tested, and as Microsoft gets
feedback about -- from ISV's about this pre-release version,
there are many, many decisions for Mr. Gates and others at
the company to make about exactly what the final product will
look like.
That's the decision in October '94. There was
nothing provided to Novell, that was Novell's property, that
was suddenly seized away. Indeed, Novell's lawyer, I noted,
said three times that Mr. Nakajima, who was a Microsoft
engineer -- he worked for Microsoft. He was paid by
Microsoft -- and the lawyer said that Mr. Nakajima was the
inventor of the name space extension API's. Yes, he was.
That invention belonged to Microsoft.
No one promised Novell that it could use that
invention as it chose, if Microsoft decided that Windows 95
would be a better product without it. And I'll come to that
in just a little while. And, interestingly, well, today you
hear that Novell is asking for -- I think the only number put
up on the screen was a billion dollars in damages. And the
lawyer said, well, you will hear from experts about that.
At the time, Novell never complained about
Mr. Gates' decision to withdraw the name space extension
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API's. That's October of 1994. Novell didn't even file this
lawsuit until November of 2004, more than ten years later.
So, when you hear there was deception and hypocrisy and spin,
when the lawyer says it was all a facade, this conduct that
allegedly is so bad -- and it's easy to toss around those
words. That's what the courtroom is for, for the evidence.
This conduct that was supposedly so bad, Novell said nothing
about at the time and waited more than ten years before it
even brought this case, filed the lawsuit.
The evidence will show that Novell, itself, made
misjudgments and bad choices, and the demise of WordPerfect,
the decline of the product, was a function of that and a few
other things that we will come to. And, of course, one other
preliminary thing. It's easy to say deception and to use the
word, and it's easy to show little snippets of e-mails on the
screen, just a little word or two or a fragment of a
sentence, and to construct an argument about what that
sentence means or what you should think it means.
Again, I ask you to wait for the evidence.
Mr. Gates will be here in this courtroom. He will come in
and tell you about the decision to withdraw support for the
name space extension API's. That will be the evidence, not
what a lawyer tells you you should think, but how you
evaluate the testimony and the evidence in front of you.
I also noted, and I hope I got this right -- I think
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I did -- that through this opening statement that you just
heard from the Novell side, I don't think you were shown a
single Novell document about what really happened. I'll show
you some of those as we go through this this morning. You
were also told several times about findings of fact in
another case. And you were told that one of the lawyers for
Novell will read you those findings of fact.
I ask just this. I ask you, when you listen to
them, to try to figure out if there's any mention, in any of
those findings in this other case in Washington, in 1999, any
mention of Novell or WordPerfect or any Novell products, any
of them. I think you'll find that there is none.
So, we're very happy to have you listen to the
findings that will be read to you. They have to do with a
case that was filed in 1998, as Novell's lawyer said, and the
findings were made in '99.
One other preliminary thing, if I may. I don't
think you were ever told what the name space extensions
really are, what they were, and I will show you if I can.
It's technological and a little complicated. There will be
witnesses here who will explain it much better than I can.
But there is an implication that, when you see something
about extending the shell or shell extensibility, that that's
a reference to the name space extension API's. And that's
not right. The name space extensions were just a very small
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piece of the shell and the Microsoft technology to extend of
the shell, just a tiny piece of them. The name space
extension API's were not the reason that WordPerfect failed
in the marketplace.
Let's start, if we can have the first slide, just
with some basics here. And, as I think you know by now,
there are three sorts of products that are principally
involved in the case, PC operating systems, which we often
just call operating systems. Included are DOS and the
Microsoft version of DOS called MS DOS, and then Windows;
word processing software. Microsoft had something called
Word. Novell had WordPerfect; and then spreadsheet software,
Microsoft Excel, and Novell had a product called Quattro Pro
during that short period of the time, from June of '94 to
March 1 of '96.
It's also worth noting, and I think we should do it
right here, that, as the Judge instructed you yesterday, it
is not unlawful, in and of itself, to have monopoly. Judge
Motz said these words to you yesterday as part of his
preliminary instructions to you. Mere possession of monopoly
power, if lawfully acquired, does not, itself, violate the
antitrust laws. And, yes, Microsoft, during the relevant
period, had a monopoly in operating systems thanks to the
popularity of MS DOS and Windows.
Novell's lawyer mentioned an expert that they will
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call, that Novell has hired, named Roger Noll, who will
testify in this case. Dr. Noll, who is a professor, has
testified previously that Microsoft's monopoly was lawfully
acquired. Nothing illegally done by Microsoft to obtain that
monopoly.
And the Court will give you full instructions at the
end of the case about what constitutes anticompetitive
conduct. I think Judge Motz said yesterday that you'd hear
that in his final instructions. A harsh sounding e-mail, in
and of itself, is not anticompetitive conduct. And you will
hear the final instructions. Whatever they say, they will
say, but that's certainly my prediction you will hear that.
And I think you will also hear --
2C
-- that conduct is not anticompetitive if it was
undertaken for a legitimate business purpose.
Novell's lawyer said something similar to that in
his opening statement, and we will come to the name space
API's and the reasons, plural, reasons, that Microsoft
decided, during the period it was working on Windows 95,
developing the product, to make that small change.
Now, let me tell you a little bit about Microsoft.
Many of you know a piece of the story. Bill Gates was 19 and
at Harvard College in Massachusetts in 1974, I believe, when
he became very interested in actually a -- what was then
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called a mini computer that he saw in a magazine, dropped out
of college, and with his boyhood friend, Paul Allen, went to
work in writing a computer programming language called Basic.
Some of you may even have heard of Basic. A few years later,
Bill Gates and Paul Allen, who had started Microsoft, bought
a software program from a company in Seattle, modified it,
and developed what was called Microsoft DOS or MS DOS.
Of all things, IBM, which was then the 300 pound
gorilla in the world of technology and computing literally
knocked on Mr. Gates' door, in the suburbs of Seattle,
inquiring about whether Microsoft could write or provide an
operating system for the first IBM PC, which came out on the
market in 1981.
And, Judge Motz, that one I do remember.
And Mr. Gates made a deal with IBM and, pretty soon,
MS DOS was on the majority of all PC's that were being sold
anywhere around the world.
Now, that, of course, was in the 1980's. Bill Gates
could have stopped right there. Microsoft was very
successful selling MS DOS to IBM and all these other
companies that were making what were then called IBM clone
PC's. But Mr. Gates saw the future of computing as something
a little different.
And let me just show you what MS DOS looked like.
It was a character based system. Some of you may have seen
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it. In a character based system, this is what the screen
would look like when you get your computer booted up.
And let's look at the next one.
In order to get to anything useful in your computer,
you had to type in a command, and if you typed in the command
correctly, the computer would respond by displaying the
contents of the file that you were interested in. If you
didn't type the command in exactly right, the computer, of
course, would give you nothing.
And let's look in a minute at what are called
graphical user interface operating systems. And I know there
are a lot of are acronyms in this case. It's going to be
hard to keep them all straight. This one I think you will
hear from time to time. GUI, G-U-I, which stands for
graphical user interface. And what you're looking at now, is
a screen shot of a GUI operating system. This one is
Windows. The picture depicts the Windows 95 desktop, and, as
I think all of you probably know, the user can interact
with a GUI operating system by just clicking on icons and
buttons on the screen.
Now, in the 1980's, this was something very new.
Mr. Gates, early in the '80's, made a commitment to the GUI
platform, graphical user interface platform. He saw it as
the future of computing. He saw it as the way that, as he
had predicted in the 1970's -- something that seemed
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implausible then -- there would be a computer in every home
and in every office. And, in effect, Mr. Gates bet the
company, bet Microsoft's future on the GUI platform.
Apple -- and you've all recently read about the
unfortunate death of Mr. Jobs, one of the co-founders. But
Apple came out with the Macintosh in 1984. It was a GUI
platform. Bill Gates recognized the potential of GUI's right
then, in 1984. It was a whole different, much easier way for
most people to get the benefits of using a computer. And,
right away, Microsoft went to work on making operating
systems that were graphical and applications, like word
processors and spreadsheets, that would run on a GUI
platform.
In 1985, Microsoft came out with the first version
of Windows. That's -- it's not on this chart, but that's
1985, Windows 1.0. Windows 2.0 came out in 1987, at the end,
and what we show you on this graph is all the work that
Microsoft did writing applications for GUI platforms, for
these graphical user interface operating systems, Word and
Excel for the Macintosh. That's 1985. 1987. And you see
the progression here of Microsoft applications for the GUI
platform. This is an important point because of the contrast
with what WordPerfect, itself, did.
Now, you see Windows 3.0. That was released in May
of 1990. The evidence at the trial will show you that
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Windows 3.0 was a game changer. And we'll come to that in
just a minute. The first two versions of Windows were not
hugely popular. They were not huge sellers. The world
continued using mostly DOS operating systems, and
particularly Microsoft DOS.
Now, while Microsoft was working on these graphical
user applications, Word and Excel, WordPerfect Corporation --
this is long before it was bought by Novell -- was much, much
slower at recognizing the future, where computing might go in
the next several years. WordPerfect first came out with a
word processor for the Apple Mackintosh system in the middle
of 1988, and, in fact, came out with nothing for Windows, no
word processor for Windows, until the end of 1991. And we're
going to come back to that in just a minute.
The evidence will show that the reason Novell was
having so much trouble getting its applications out in a
timely way in 1995 is because WordPerfect was always late.
We'll see this as we go along. At that time -- and I want to
stop here and talk a little bit about Novell, which did not
own WordPerfect then. At that time, Novell --
I'm sorry. Would you turn that off. My apologies.
Novell, in the early '90's, was principally a
company whose product was called Netware. And I think you
remember Novell's lawyers saying Novell's business was
network operating systems. The evidence will show that
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Novell, in the early '90's was very successful in network
operating systems. They had something like 65 or 70 percent
of that market. These are operating systems for servers.
And Novell and Microsoft competed at that point.
Microsoft had Windows NT, and Novell had Netware. Many of
the e-mails that Novell's lawyer showed you from 1992 and
1993, written in Microsoft, are clearly about competition
between Windows NT and Netware, Novell's Netware. They have
nothing to do with WordPerfect or Quattro Pro. They have
nothing to do with the issues in this case. Those e-mails
from '93 were before Novell ever bought WordPerfect. Those
e-mails are about this competition in this other area where
Novell was then dominant, network operating systems, and
Microsoft was sort of the new boy on the block.
The idea of diversifying for Novell, to diversify
into word processing and spreadsheets, was an idea that Ray
Noorda had. Mr. Noorda was the founder of Novell. He ran
Novell up until the spring of 1994. Just about the time that
he left Novell is when Novell announced that it was buying
WordPerfect and Quattro Pro. Quattro Pro, at the time, was
owned by company called Borland in California, Scotts Valley,
California.
And, as I've noted, the current lawsuit is Novell's
effort to blame Microsoft for what happened to those
products. In order to understand what happened to them, we
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really need to understand where they were, where those
products were in the marketplace at the time Novell bought
them. And let's go through just some of that.
Slide 15.
First, it is quite correct that, on DOS, WordPerfect
was king. It was true in the '80's. And here we show you
the period in the early '90's. The WordPerfect word
processing product, owned by WordPerfect Corporation, was
very successful on the DOS platform.
The evidence will show you that, if you have a piece
of software like WordPerfect that's running on one platform,
like DOS, you cannot usually automatically make it available
on a different platform, like Windows or Mackintosh, some GUI
platform. That's a big job. You have to rewrite your code
so that it fits with the other operating system. WordPerfect
had done a great job on DOS. Their market share was very
high. Microsoft Word's market share -- this was the
Microsoft product Word, on the DOS platform, was much lower.
And you can see it here. Even when Microsoft Word
was written to run on the Microsoft operating system, MS DOS,
WordPerfect was far more successful. Microsoft, meanwhile,
was hugely successful on the Mackintosh, on the GUI operating
system from Apple. And Microsoft was getting all these years
of experience working on a GUI system. Microsoft was also
way, way ahead of WordPerfect in writing Word for Windows.
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Again, you have to rewrite your software to make it work on a
different platform.
Let's look at 18, please.
I showed you on one of the charts, and just
mentioned it briefly that, in May of 1990, Microsoft released
Windows 3.0. And I mentioned to you that the evidence will
show that Windows 1 and Windows 2, released years earlier,
had not been huge hits in the market, but Windows 3.0 was.
Even Novell's expert in this case, Roger Noll, has said
Windows 3.0 was a revolutionary technological leap. It was a
huge event for Microsoft.
And Charles Middleton, who will come testify, who
was a Novell employee, has said something very similar, that
Windows 3.0 was a big leap forward from the previous versions
of Windows. When that product came out in May of 1990 -- and
this will be the evidence at trial -- droves of consumers
moved from the DOS platform, that character-based system
where you had to type in commands, to Windows 3.0.
The evidence will show that WordPerfect Corporation
was nowhere at that time. They weren't ready for this
change, this shift in the marketplace.
Let's look at slide 19.
Again, I know this is a lot of information. We're
just getting started at the trial. You will hear this over
weeks and weeks. We don't expect you to memorize all these
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dates and things and for people who are new to all this, it
may sound a little intimidating. But what we show here on
this slide is that when Windows 3.0 came out in May of '90,
this operating system that Microsoft created, that was a
revolutionary technological leap, Microsoft had Word out to
run on Windows; one version in 1989, a second one later.
WordPerfect had nothing, and you will hear at this
trial, from a man named Willard Peterson -- he goes by Pete,
as you might think -- Pete Peterson who, at the time, worked
for WordPerfect. He left WordPerfect in 1992. Mr. Peterson
basically ran the business. His title, I believe, was
executive vice-president. But he was running the WordPerfect
business. And he will testify right hear from the witness
chair, I believe, that WordPerfect Corporation was late to
come out with a product that ran on Windows because it was
late to see this huge shift that was taking place in the
market, or maybe because it deliberately decided to stick
with DOS, where it was very successful and making lots of
profit. He'll explain to you these reasons.
So, first, WordPerfect is a year and a half behind
in coming out with a product that will run on Windows. The
first one it comes out with is November, '91. I don't think
you will hear any evidence at trial that Microsoft did
anything about name space extension API's or anything like
that that caused WordPerfect to be late. Mr. Peterson will
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tell you why.
And, not surprisingly, what happens in a high tech
field when you're late? Let's say you're the second or third
company to get to the market? In a fast changing
technological field, very often the first product turns out
to be the big winner. There are many examples of this. You
can think of an iPod to play music. Apple came out with that
in 2001. There were other competitors, including Microsoft
that came out with something called the Zune a few years
later. If you're first, very often, you win.
And the first product that WordPerfect ever had for
any Windows platform was late. November, '91. It took a
bump up in market share because, the evidence will show,
consumers were waiting for WordPerfect. It had a great
reputation on the other platform, DOS. And people were
excited to see if WordPerfect would do well on Windows. The
evidence will show it did not. It was not a good product.
And you can see where the market share lines go for
WordPerfect on the Windows platform thereafter. And just so
that we can keep this in mind, this is the date on which
Novell bought WordPerfect. You can see where that line is
going. And making a misjudgment about the value of a
business you buy, that can happen. We don't blame anyone or
say it's anyone's fault. But making a misjudgment about a
business that you buy and then, ten years later, blaming
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someone else for your mistake, that, with all respect, I
think is wrong
Now, let's look at 25, please, David.
I told you that the WordPerfect products that were
written for Windows weren't that good, that the evidence will
show that they weren't of high quality, and I just want to
look at a couple of documents with you. This is Defendant's
Exhibit 259, second page. And I want you to note that this
is a document that was a Novell document. It was written at
WordPerfect in 1993, and Novell later produced it to
Microsoft in discovery. That's why it has those funny little
numbers in the lower right-hand column, N-O-V, dash, and then
a number.
This was a document prepared by WordPerfect, and
even in Oct -- sorry. Even in December, 1993, you'll see
that WordPerfect, itself, evaluates its own product.
WordPerfect (Win) 6.0, which came out in October, 1993, very
late, is too slow, as compared to the competition, and
containing too many bugs to be considered sufficiently
stable.
Now, the evidence will show that those two things
will make it difficult for you to sell your software. If
it's too slow for the hardware, and if it's not stable
because it's crashing, you have a problem with quality.
And let's look at 25-A.
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Even in 1995, this is in the middle of the period
when Novell owns WordPerfect. Even in 1995, Novell, itself,
is saying, still recovering from that slow and buggy product,
WordPerfect 6.0 for Windows. This was eight months after
Mr. Gates made the decision not to support the name space
extension API's. June of 1995. And Novell, in its business
plan, Exhibit 341, is noting they are still recovering from a
product that is not high quality. So the question of who to
blame for the lack of success is one we'll come back to.
Let's look at Exhibit 26.
In contrast to some of the problems that WordPerfect
and Novell were having with its own products, again, they did
great on the DOS platform, but the products written for
Windows? Another Novell document. This is DX 7, Defendant's
Exhibit 7. It was written in 1994. This is just a month,
less than a month after Novell purchased WordPerfect. So,
Novell was brand new. They now owned this WordPerfect
business. And what do they do? They recognize that
Microsoft's suite, Microsoft's suite is called Office, as you
may know, is the industry leading suite, that it's 1, 2 punch
Word and Excel, is the strongest combination in the industry.
There will be lots of evidence at the trial. But,
as you can see -- and I'm coming to some more as we go
through this -- even Novell recognized quality, of course, is
hugely important. If you have a product and its quality is
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not high, and the competition has the best 1, 2 punch, well,
you don't have to speculate about why a product fails.
And let's look at slide 29.
Again, this is after Novell purchased WordPerfect.
I'm going to get a little bit of this in my opening, but
because of constraints of time, it may be less than I'd like.
WordPerfect had no suite. WordPerfect had the word
processing program called WordPerfect. Quattro Pro was being
made by Borland in California. So, when WordPerfect and
later Novell got into the suite business, they partnered with
Borland. First WordPerfect Corporation did that, and they
came out with a suite called Borland Office. And here in
1994 what do they say? This has not been received very well.
Nothing about the name space extensions in this document.
In fact, what they say -- and this was the reality
in the marketplace. The evidence will show you this at
trial. As an incomplete suite, the Borland Office has not
been met with great enthusiasm. It has been labeled by some
as a sort of suite because it didn't take into account some
of the factors which persuade people to buy suites,
integration and consistency. Now, if you're selling a
product that doesn't take into account the factors that
convince people to buy that product, well, we all know what
happens.
So, let's look at slide 30.
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We talked earlier, briefly, about the shift that
went on from the DOS platform to the GUI platforms. There
was also a shift that took place a little bit later, in the
early '90's and into the mid-'90's from stand-alone products,
like a word processor by itself, either WordPerfect or Word
or some competing product, to buying office suites. And
Microsoft Office contained everything that you could get in
word and Excel and also several other products.
And you can see what was happening in the
marketplace during this period. 1993. You can see it in
green. That shows you the quantity of spreadsheets being
purchased. The purple or blue color is word processors, and
it looks like they are about double the number of suites
being sold in terms of dollar amount of the revenue. In 1994
suites are in first place. They have made up that whole
deficit by a fair amount. By 1995, you can see that revenues
for suites are triple those for word processors and
spreadsheets alone. And then you see what happens in 1996.
Again, the period that Novell owned WordPerfect and
Quattro Pro was this period, June of '94, from the middle of
'94, to March 1, '96. So the evidence at trial will show you
that, at the time Novell purchased these products --
Sorry, David. My fault. We want slide 34.
-- there had been two major changes in the market.
WordPerfect Corporation was slow getting to the Windows
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platform. It was not only slow when it came out with
products, those products were not of high quality. And it
was very slow coming out with products that could compete in
the suite market. Those two major changes in the market, in
effect, meant that Novell was buying products that were
already in decline.
When Novell purchased WordPerfect and Quattro Pro in
June of '94, those products were on that sharp line downward.
Instead of blaming Microsoft, the evidence will show that
Novell, and the companies before it, had not adapted to
technology, to changes in technology.
And now let's do 31.
I use this just as an example. The Eastman Kodak
company was once dominant when it came to film for cameras.
And here's a picture on the left. Some of the younger people
here may not even remember the old-fashioned film that was
used in cameras. Many of you will. And now look what you
get in the memory card. You can actually store 5 thousand
photographs in one tiny little card instead of a clumsy piece
of film that you have to feed properly into your
old-fashioned camera.
Changes in technology can happen fast, and companies
that don't recognize them, of course, go by the wayside. It
may sound harsh. It's the nature of competition,
particularly when it comes to high tech.
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Okay. Let's look at exactly what happened when
Novell announced that it was going to buy WordPerfect and
Quattro Pro because the marketplace itself recognized the
shifts that were going on that I've described to you, the
shift to the GUI platform, to Windows, where WordPerfect was
weak, the shift to suites, where WordPerfect, if anything,
was even weaker. And this is March 21. This is the reaction
in the stock market, shareholders of Novell, to the
announcement that Novell is going to purchase WordPerfect and
Quattro Pro for roughly $1.5 billion.
The announcement was made on March 21, after trading
had closed. I should say Novell's stock -- Novell was a
public company. Its stock was traded on the NASDAQ stock
exchange, and these prices are the closing prices on the days
in question, on NASDAQ. Novell's stock is going along
nicely. It closes at 23.75. The announcement is made at the
close of trading that day. The next day the price drops to
$20, and the day after that, the 23rd, to 19. That drop,
from 23.75 to 19, is a fall in the stock price of Novell of
20 percent. 20 percent.
Unless you think that the stock market is crashing
on the days in question and that's what explains this drop,
no, the NASDAQ was just about flat. It was up a teeny amount
in the two days in question. The New York Stock Exchange,
the S&P 500 were also flat. Novell's stock took a huge hit
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downward.
And Glenn Hubbard, who's the Dean of the Colombia
Business School, will come testify in this case as an expert
for Microsoft and will tell you why, in his opinion, the
stock price dropped by 20 percent on the days in question.
He will tell you that the stock market, the shareholders of
Novell, recognized the very things that I've been describing,
that I think the evidence in this case will show. The stock
market recognized that Novell was buying products that were
in decline, that Novell made a misjudgment about the future
of those products.
And the map is more complicated than we may want to
deal with here. Dean Hubbard from Colombia will give it to
you in detail. But if you take the number of shares of
Novell that were outstanding then -- it was about 309
million -- and you multiply by the drop in the stock price,
the loss in the value of the company, what is called the
market capitalization, in those two days alone was almost
$1 1/2 billion, about the same -- not quite exactly the same
but about the same as what Novell was paying to buy the two
companies. In other words, the stock market saw that these
two products were not worth what Novell was prepared to pay.
Now, let's talk now about the name space extension
API's and the decision to de-document them. Chicago, as
Novell's lawyer told you, was the code name used by Microsoft
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for the project it was working on that ultimately became
Windows 95.
There's nothing strange about these code names.
Every software company does that when they are developing a
product. And Chicago, Novell's lawyers said it, was a big
advance in the planned user interface. The name space
extension API's were just a very small piece of what was
called the shell. And you'll see that from the witnesses who
testify, including Mr. Nakajima, who wrote the name space
extension API's and from several other Microsoft witnesses.
Thank you.
One thing that maybe got a little bit lost in the
shuffle earlier this morning, an API is the connection that
Microsoft writes in the operating system that an application
can use to call on the great things the operating system can
provide and the underlying hardware. As Novell's lawyers
say, API is an acronym. It stands for application
programming interface. And Microsoft, in working on Chicago,
what became Windows 95, worked very hard, lots and lots of
Microsoft engineers, to write many API's so that all sorts of
software -- not just word processing -- thousands
of different kinds of software products, would work well with
Windows.
There were four API's that are referred to as the
name space extension API's, just four. They are four of
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several thousand.
Our slide says approximately 2,500. I think John
Bennett, who will come here from the University of Colorado,
and is a true expert on operating systems and software
engineering, will testify that the number of API's was
something like 2,800. But the exact number isn't important.
What's important here is to keep the name space
extension API's in context. Just a very small piece of what
the operating system was being written to provide to
companies like Novell.
Now let's look at slide 41.
And bear with me for just a minute. I've tried not
to be too technical, but here it's going to be just a little
bit technical. Bill Gates will be here and talk to you about
why he decided to do what he did. And I want to show you the
e-mail that Novell's counsel so heavily relied on, but there
are three reasons Mr. Gates decided, during the development
of Chicago, to withdraw support for these four API's, three
reasons. The first is that a program written to use those
API's could potentially crash the whole shell, the Windows
shell.
These four API's -- sorry to be technical -- allowed
an ISV', like Novell or WordPerfect, to write a program that
integrated directly into the shell of Windows 95. So, that
meant that any ISV', any application developers, could use
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the name space extensions in a way that their programs
would be written in the same what's called process space as
the whole shell, and if one of those programs malfunctioned,
a program not written by Microsoft, by any one of thousands
of other companies that makes applications, it could crash
the entire shell.
Now there aren't that many things more important to
someone building an operating system than to avoid the
possibility that a user, who's using his or her computer,
would find that the whole thing crashes.
Secondly. The name space extension API's were not
compatible with future versions of Windows that were then
being developed. There were, at the time, in 1993 and 4,
actually three different teams at Microsoft all working on
different operating systems. One was Chicago, which became
Windows 95. One was something called Cairo, which was
working on an operating system that Microsoft never brought
to market. It never got released. And the third was Windows
NT, this version that was competing with Netware, an
operating system for work stations and servers.
The Windows NT team was headed by a man named Bob
Muglia. Mr. Muglia will be here and testify from the witness
stand during the trial. The NT team, because they were
writing an operating system for work stations and servers,
needed to make sure that stability and reliability could not
113
be adversely impacted by third-party programs. Mr. Muglia
and the people who worked for him were very, very opposed to
leaving the name space extension API's in the system and
available for all ISV's to use because of their fear of what
it would do to Windows NT. And they lobbied Mr. Gates hard
to withdraw support for the name space extension API's.
Thirdly. Mr. Gates, it is true, had originally
contemplated that the name space extension API's would be
more significant than what Mr. Nakajima was able to create or
invent. Mr. Gates wanted and dreamed of API's that would
allow applications to be launched from the scope pane and to
run in the view pane, the right-hand pane of the Explorer.
When Mr. Nakajima got done writing these API's, they could
not accomplish all that. All they did was to allow an
application to add a custom folder to the scope pane of the
Explorer that would display a list of files or other objects
in the view pane. In other words, they did not achieve the
functionality that Mr. Gates sometime earlier had hoped.
They turned out to be far less important or, to use
the word that Novell's lawyer used, more trivial than what
Mr. Gates had been hoping for when he was thinking, a year
earlier, about what Windows 95 might become. Again. A
complicated operating system, as Novell's lawyer said, I
believe, with millions of lines of source code. There were
many decisions to be made about what would go in the final
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product.
In effect, what Novell is arguing, is that it was
Microsoft's job to make those decisions in a way that was
best for Novell instead of a way that was best for Microsoft,
for Microsoft to make the Windows 95 that would actually
become that product that Mr. Johnson referred to, the product
where people lined up for blocks and blocks to get it, a
product that all of us -- many of us, I'm sure, wound up
using.
And let me try to show you, just briefly, what the
name space extensions are all about. Microsoft designed
Windows 95 during this time period in a way so that ISV's,
like Novell, could display their applications in a way that
would make it very easy for users to launch those
applications.
Let's look at 47.
This is the Windows 95 desktop. Windows 95 was the
first Windows operating system that had a start button. By
now, I think we're all familiar with start buttons. This was
new in Windows 95. It allowed an ISV, like Novell or anyone
else, to put a shortcut to their application, to their
software products, by clicking on the start button. And what
we show you here in this slide, clicking on the start button,
you can get right to Corel Office 7, the product Corel
launched in 1996.
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There was a second way that Windows came out with
something that people like Novell, companies like Novell
could use to make it very easy for all of us to get to
WordPerfect or PerfectOffice. And that was by clicking an
icon on the desktop.
We are all familiar with this now, but Windows 95
was the first operating system that allowed a developer like
Novell to put this shortcut right on the desktop. All you'd
have to do to use Quattro Pro or WordPerfect is to click on
one of those icons. Now, those two means of launching
WordPerfect were in Windows 95. There's no complaint about
those. Microsoft invented that technology in a way that
assisted all ISV's so that any user could get to WordPerfect
very easily.
What Novell says it wanted, what Novell says it was
entitled to through the name space extensions, was a third
way, a way that would allow users to get to WordPerfect and
Quattro Pro from the Windows Explorer. Now, Windows Explorer
is different than Internet Explorer, as you probably know,
but here's a picture of the Explorer. The left-hand pane is
called the tree view. Novell's lawyer pointed out to you it
sort of looks like it has branches on the left here. That's
the tree view. And what we've shown you on this slide is
functionality that was never implemented in Windows 95.
Here there's an icon for a prototype of an e-mail
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client called Infocenter. That appears way on the left. And
then in the tree view, you can see Infocenter right there.
In this picture, a user could access his e-mail, in box, from
the Windows Explorer, as opposed to, for example, clicking on
Microsoft Outlet -- Outlook, excuse me, which is the way most
people would do it.
And let's look at the next slide.
Windows 95 provided this functionality to Novell.
It allowed Novell and any other ISV to add whatever folders
they wanted to, to the left-hand pane of the Explorers. They
didn't need the name space extension API's. And you could
add, on the right side, folders labeled WordPerfect and
Quattro Pro.
So the whole thing about the name space
extensions --
And let's go back one slide.
-- has to do with this one way, of three or four, of
getting access to WordPerfect or Quattro Pro. This was the
functionality that Microsoft did not include in Windows 95.
Microsoft withdrew support for them. And you will hear what
that means. It's technical.
The API's actually stayed in Windows 95. They were
never taken out. And if Novell needed them so desperately to
get to market in a timely way, Novell could have used them.
They stayed right there. Microsoft withdrew support, which
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just means that it warned ISV's that, in future versions of
Windows, those four API's might not remain there, so it would
be risky to rely on them because, in some future version,
let's say Windows 98, they might be taken out then.
That's what Microsoft did, withdraw support. And
the only thing that it would have given Novell is what's
depicted on our slide 48, the addition of custom folders to
the Explorer, as opposed to the way people wound up using
their software, going to the start button and finding
WordPerfect or going to the icon on the Desktop itself.
Now, thank you for your patience. I know it's been
a long morning, and we've given you lots of information. I
do have a few other things that I need to go through with
you. Let's look quickly at PX-1. And I won't take you
through it all. This is the e-mail that Novell's lawyer says
Mr. Gates wrote. And they say this is the proof.
It's 44-C, I think.
This was the paragraph. There are seven or eight
paragraphs in this e-mail, and I'm sure, before any of you
come to any judgment about what Mr. Gates was thinking and
what he meant and what his reasons are or were in 1994,
you'll listen to Mr. Gates and read the e-mail.
But this is what Novell's lawyer says was the proof
that Microsoft was trying to do something deceptive, was
trying to get some unfair advantage over Novell. And the
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sentence that he directed you to is the second sentence of
the two that I've highlighted. It says: "We can't compete
with Lotus, WordPerfect and Novell without this."
Novell's lawyer then argued to you that, what that
means is that we can't compete with WordPerfect unless we
take the name space extensions out.
It's clearly not what this e-mail says. When it
says "without this," in the second highlighted sentence, it's
plainly referring to the prior sentence. Having the office
team really think through the information-intensive scenarios
and be a demanding client of systems is absolutely critical
to our future success. Those two sentences say nothing about
the name space extension API's. Those two sentences are
about the office team thinking hard about the functionality
that would be provided in Office.
Of course Microsoft, Mr. Gates, is thinking, what do
we do to make Microsoft Office as good as it can be, as easy
to use as Windows 95, as something critical to our future
success. And the idea that we can't compete with WordPerfect
is not about the name space extension API's. The prior
sentence makes it clear. It's about continued work by the
Office developers to make its product as good as it can be.
It will be several weeks now, I believe, before
Mr. Gates can come and testify. Novell, of course, gets to
go first. But Joe Belfiore will also testify. He's from
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Microsoft as well. He will tell you about alternative ways
that Novell could have gotten the same functionality that the
name space extension API's would have given them.
If those four little API's were so critical to
Novell, there were ways for Novell to write their own
software instead of using Microsoft's inventions to get to
the desired objective. And, of course, they could have used
those same API's themselves if they were so important.
Bob Muglia, whom I mentioned earlier, who I said was
lobbying Mr. Gates to de-document the API's, he will testify.
So will Mr. Nakajima, and Brad Struss will as well. And we
will come to him in a minute.
But first if we can look at slide 50.
When I started a little while ago with my opening
statement, I said to you that one of the things that I
thought you probably hadn't appreciated in listening to
Novell's opening statement, is that the decision in October,
1994, about the name space extension API's, was made when the
product was still under development. Microsoft wasn't
finished with it. They are still working on it, developing
it. Of course it can change.
And here's the contract between Microsoft and
WordPerfect which, of course, May 24, '94, just before Novell
bought it -- so it's the contract binding on Novell as well.
And the idea that Novell advocates in this case, I think, is
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that somehow, because Microsoft in a very early version of
the Beta, included the name space API's, they could never
take them out. That was the deception. They've told us that
these API's, these four, out of thousands, might be in the
product, and then later you withdrew support for them.
Well, Novell and WordPerfect understood full well
what a Beta version is. The contract under which Microsoft
agreed to pretrial Novell with the Beta says this.
It's a pre-release version, so of course it says
this. "The product may not operate correctly and may be
substantially modified prior to first commercial shipment."
So these accusations about deception, that somehow Microsoft
deceived Novell. Novell could not have been deceived that a
Beta version of Windows 95 was subject to change. It may be
substantially modified before the final product is shipped.
Now, Novell's lawyer implied, if he didn't say it,
that -- he says now, I guess, that the reason Novell's
products were late, that they came to the market later than
the release date of Windows 95, that August 24, '95 date, was
because these developers were working so hard to build their
own root, that road, they didn't have the name space
extensions, they actually had to do the work themselves
instead of relying on Microsoft's engineers, and that's what
held them up.
That's what made the products late, and because they
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were late, I think the theory is, because they were late,
that's why Novell was able to sell those products for a much,
much smaller amount than they had paid for them.
I think you may remember Novell's lawyer said that
Novell was able to sell the products for $140 million, when
they had paid about 1.5 billion, ten times as much. Of
course, as we saw earlier, the stock market thought the
products were worth about 140 million, apparently, when the
announcement was made.
But the idea that Microsoft is to blame because
Novell was late getting WordPerfect out, that idea is just
not supported by the evidence. And I'll try to go through
this. There will be lots of evidence at trial about this. I
will give you some of it now.
THE COURT: Do you know if the lunch is here?
THE CLERK: It should have been here at 11:45.
THE COURT: According to your estimate, you have
about 20 minutes to a half an hour to go?
MR. TULCHIN: Yes, sir. Half an hour would do.
THE COURT: I think we had told everybody that the
lunch would be here. This seems like a natural stopping
spot, so why don't we stop for a light lunch for 20 minutes
and then resume.
MR. SCHMIDTLEIN: Your Honor.
THE COURT: Yeah.
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MR. SCHMIDTLEIN: Can we be heard once the jury has
been --
THE COURT: Sure. Okay. I'll stay here if you
want. If the lunch isn't there, let me know, Theresa, and
we'll continue.
(Jury leaves the courtroom.)
MR. SCHMIDTLEIN: Your Honor, during one of the
motion in limine rulings, I think Novell filed a motion in
limine on the beta release, and I think you denied the
motion. But you stated, at the time -- and we can get the
transcript -- you stated at the time that a limiting
instruction would be given.
Mr. Tulchin has just told the jury that, in light of
that beta release language, that warranty language, there can
be no deception in this case.
I think we are entitled to an instruction at either
the close of this or some appropriate time very soon after,
that explains to the jury -- and I believe you said it at the
time, that you will give an instruction that that language is
not immunity or does not otherwise, as a defense to the
antitrust claims in this case.
MR. TULCHIN: Your Honor, if I may --
THE COURT: No. I understand the point. As far as
I'm concerned you all are here, and you shouldn't be here
now, but you are here now, and just wait it out, and I will
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give a limiting instruction when I give it, and I'm not going
to give a limiting instruction at the end of what you are
saying.
(Short break.)
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THE COURT: Let me clarify what I meant. And
obviously I might not let you all avoid my ruling in terms
of --
THE COURT REPORTER: I'm sorry. I can't hear you.
THE COURT: -- in terms of Mr. Schmidtlein's
objection. I just think it was in the realm of fair argument.
I don't recall what I said before. I mean, I really, to some
extent it is a defense to the deception. It may not audibly
be a defense to anticompetitive conduct, and that's something
with which -- I had -- it just seemed to me it was in the
wrong --
MR. SCHMIDTLEIN: What we'll probably do is, I take
Your Honor's point about the context right now giving that
instruction, but what we might do is submit something to you
so that when they do produce --
THE COURT: Sure.
MR. SCHMIDTLEIN: -- because it may come up in the
first witness.
THE COURT: That's when I think it might come up.
And I may submit something. But again, recheck the
transcript. It's not so much -- it's obviously deception
blurs any anticompetitive conduct. But I really thought it
was not a defense to anticompetitive conduct.
MR. SCHMIDTLEIN: Right. We'll look at that this
afternoon, and we'll probably approach you in the next day or
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so.
THE COURT: Fair enough.
MR. SCHMIDTLEIN: Thank you, Your Honor.
THE COURT: We have another half hour?
MR. TULCHIN: I hope it's more like 20, Your Honor,
20 or 25.
THE COURT: You're not doing anybody any disfavor
by breaking up the collateral of estoppel.
MR. SCHMIDTLEIN: Well, I think what we're going to
do, Your Honor, if it's okay, if Mr. Tulchin gets done roughly
around 1 o'clock, we could do probably a half hour of it and
split it in half.
THE COURT: That sounds perfect.
MR. SCHMIDTLEIN: And pick up it up in the morning.
THE COURT: That's fine.
MR. SCHMIDTLEIN: Thank you.
(Whereupon, the jury returned to the court
proceedings.)
MR. TULCHIN: Thank you, Your Honor.
Ladies and gentlemen, I will try to finish up in
the next 20 or 25 minutes, and I thank you for all the
patience that you've shown already.
THE COURT: This is a good part of the next hour.
The bad part is during the collateral estoppel, so enjoy it
while you can.
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MR. TULCHIN: I think you will remember that during
his opening Novell's lawyers said it was absolutely critical
to get an application out to the market at around the time
that a new operating system was coming out. And in that
connection, what I thought I would do is to show you now
evidence from Novell's own files about what was happening at
Novell. They own the products now. We're in the period from
June of '94 to '96. What was happening at Novell and the
reasons Novell was late.
Let's start with Slide 58. Now, this is August of
1994. So it's less than two months after Novell takes over
WordPerfect. And this is a memo written by a man named Mr.
Reed Felt, who was a senior executive at WordPerfect and then
Novell. And what he says is:
After Windows 3.1 products are released this
year, move large percentage of Windows resources
over to Chicago, 32-bit.
Well, I think the evidence will show that
Windows 3.1, which was the Microsoft operating system that had
come out years before, was what's called a 16-bit system.
Windows 95 was 32. It was an improvement in the technology.
And what this memoranda by Mr. Reed Felt indicates
is that WordPerfect Novell has very few resources working on
Chicago Windows 95, even in August of '95. They're still
working on versions of the products, which did come out in
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late '94 that will run on the old Windows operating system,
Windows 3.1.
So as you hear the evidence as we go through the
trial, there will be evidence on this and related subjects.
Why was Novell late? Novell like WordPerfect before, it was
always late. They're way behind here. They're working on the
prior version, versions of their products to run on the old
technology. And there are very few resources on Chicago
Windows 95 even then.
And let's look at Slide 60. This is Exhibit 271.
We're now in April of 1995. Novell Business Applications
Business Plan, produced by Novell in this case. And again,
this is six months after the NameSpace extension APIs. That
decision was made by Mr. Gates.
And in this document, which is lengthy. And I
can't show you all of it now, but the document will be in
evidence. What Novell recognizes is this tremendous growth in
the suite category has resulted in a corresponding drop in
standalone applications like WordPerfect and Quattro Pro. And
as I showed you earlier, and the evidence at trial will show,
Novell was very weak in suites. Microsoft Office, you
remember that prior exhibit, has the strongest 1-2 punch in
the industry, so said Novell.
And let's look at 61. This is from the very same
document, Defendant's Exhibit 271. It's just a little bit
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deeper into it. Again, it's Novell's business plan. And
here's what I thought was a revealing comment. Was it the
NameSpace extensions that caused Novell's product to be
unsuccessful, or is it something more basic, something that
all of us can relate to? Good products sell; weak products
usually don't.
And here's Novell itself in its own business plan.
In the middle of 1995, after all, Windows 95 is coming out in
August of that year, just a few months later. And Novell
candidly evaluates its own position in the market. And it
says, quote:
Weak vis-à-vis Microsoft in perception for
corporate strategy, vision and ability to develop
software, unquote.
Ability to develop software. Pretty basic thing.
These are both software companies, Microsoft and Novell.
And then let's look at the Slide 62. This is the
next month, May of 1995. The prior document was April.
Novell says, we're weak as compared to Microsoft in ability to
develop software.
Now, the acquisition that Novell made of
WordPerfect had taken place a little less than a year earlier.
And there will be evidence from witnesses who will come here
to testify who worked for Novell during the relevant period
about the difficulty Novell had in integrating WordPerfect
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into the Novell business. As some of you I'm sure can relate
to, when one company buys another, it's sometimes very
difficult to integrate the businesses and make people work
together well. Borland, and Quattro Pro was the Borland
product, was in California. And the software engineers who
worked on Quattro Pro at Borland remained in Scotts Valley,
California, not too far from San Francisco.
And here's Exhibit 16. A survey was taken by
Novell. Novell employees survey.
48 percent of employees originally hired at
WordPerfect are thinking about quitting.
It's indicative of the difficulty Novell had in
this period in integrating the two businesses. There would be
evidence from a number of witnesses who were former Novell
employees. Dave Acheson, who worked as -- at WordPerfect
beginning in '93 and at Novell into the middle of '95, will
testify about the difficulty and what that meant for Novell's
ability to be successful with these products.
Craig Bushman will also come in, another former
WordPerfect Novell employee. I think he worked a total of
about 10 years for those companies. Nolan Larsen is the third
one. He worked from 1985 to 1996 for Novell and WordPerfect.
There may be others, as well.
And let's look at Slide 63. We showed that almost
half of the people who had been hired at WordPerfect wanted to
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quit. Things were not going well with Novell. There were
lots of problems. This is much later in the year, December of
'95. And it's just a little snippet. You need the whole
document to understand it. But it's Exhibit 230. It will
come up during the trial.
And what happened is that out in California, the
Quattro Pro developers were quitting in mass. And in December
of '93, about 15 additional people submitted their
resignations. All except one are going to Oracle. From a
development standpoint this leaves us with just two people.
Two software engineers.
Now Novell's lawyer pointed out that Corel wasn't
able to get the Perfect Office suite out into the market until
May of '96. There was a long delay there. Here is some of
the reasons.
There was -- in California among the Quattro Pro
software engineers, according to Exhibit 230, there were just
two left in December. And you can't get the suite out. The
suite includes WordPerfect and all the functionality of
Quattro Pro. The suite itself can't be released until
Quattro Pro is finished.
Let's look at Slide 64. This is more about
Quattro Pro, and I'm going back in time now to the middle of
1994. One slight explanation. I know there's so much
information that's been thrown at you this morning. But when
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software engineers talk about internationalizing a product or
sometimes they say localized versions as you'll see there,
they're talking about writing a piece of software for some
language other than English. Of course, all these products,
Microsoft products, Novell products, WordPerfect, were so
worldwide. And if you're a user in France, I pick France
particularly, I guess, you may not want the version that runs
in English. You want to see it in French. Same for many,
many other places around the world. Sometimes Americans
forget that people speak other languages elsewhere.
And so here's a document, Exhibit 4, from the
middle of '94, which indicates that Quattro Pro has a little
bit of a problem. They need to increase resources to write
the Quattro Pro spreadsheet to foreign languages.
And then let's look at 66. Now we're already in
1995. It's on the same subject of getting Quattro Pro written
to local languages so it can be sold outside English speaking
countries. February 2nd, '95. This is months after the
NameSpace extension APIs decision. And if the question is,
could Novell have been ready to come out with a suite by
August when Windows 95 came out, here's in part one of the
answers. It's a Novell document, Exhibit 219. It says that:
Quattro Pro folks are still working on
international versions of Quattro Pro 6.0.
That was the old Quattro Pro written to run on
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Windows 3.1, which ultimately came out in 1994, October of
'94. But it came out in English, and they're still working on
international versions.
Expect to finish that by the end of March '95,
and then, according to Novell and only then, will
they begin working on the next version of Quattro
Pro.
That's the version of Quattro Pro to be written to
Windows 95.
So the NameSpace extension decision, and it's the
only thing that Novell's lawyer told you this morning that
Microsoft did wrong, the only thing, the only thing he said
that caused all these problems and made these products late
was Mr. Gates's decision in October of '94. That's what he
said. There were no other, no other acts that Microsoft
committed that he said caused any delay.
And here he is, this document indicates that it's
not going to be until March or April of '95 that Novell is
even going to begin working on the version of Quattro Pro that
would be written to run on Windows 95. Quattro Pro, that
version didn't depend on the NameSpace extensions. What
Novell's lawyer told you this morning, it was the shared code
group that was writing their PerfectFit technology, which
would be used for all their applications in the suite. It was
the shared code group that needed the NameSpace extension
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APIs, he said. They weren't going to begin working on the
next version of Quattro Pro until a few months before
Windows 95 comes out.
And then let's look at 60 -- sorry -- Slide 70. We
talked earlier before your break about the fact that
WordPerfect and Novell were late. They were always late.
WordPerfect was late to see the shift to Windows. They were
king on DOS, and they were happy making money and pulling in
the revenue on DOS. But when the shift to Windows came, when
Windows 3.0 came out, that was a revolutionary technological
leap in May of 1990, they were way behind. It took them a
year and a half to get out a product to run on Windows 3.0.
When it came out, that product was slow and buggy. They were
behind. Microsoft Word was doing much better on Windows.
And we talked also about suites. WordPerfect had
no spreadsheet. They couldn't develop a suite until they
partnered with Borland. And the first two suites that
included the WordPerfect Word processing software were called
Borland Office 1.0 and Borland Office 2.0. Those products
were panned. Even Novell itself and WordPerfect in their
documents say those products were way behind Microsoft and
that Microsoft was first to suites.
And by the way, I don't think I mentioned this
earlier. Microsoft was the first company in 1990 to come out
with an Office suite. It was an innovation. It was
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Microsoft's idea. And Office became very successful right off
the bat.
And this slide, which is Slide 70, in effect sums
up that situation in the suite market. Remember, the
NameSpace extension API decision was October of '94. And
according to Novell, that might have affected its ability to
get out a product in the middle of '95, a suite product, or so
they say. The evidence I think will show otherwise.
But even before October of '94 and before the
middle of 1995, how was Office doing in the market and how was
the Novell and WordPerfect suite doing in the market?
And here it is. Borland Office 1.0, Borland
Office 2.0 and the PerfectOffice product, the Corel release in
1996 were never successful. Never. Borland Office came out
before the NameSpace extension APIs. It would be irrational
to blame Microsoft for the lack of success, and they don't.
The truth is that in the market for suites, and we
saw earlier that slide that had the orange bar showing that
everyone was going to suites real fast, it happened really
quickly in the market, as can happen in a high-tech market.
When it came to suites, Office as Novell's own documents
recognize, Office was the strongest. It had the strongest
1-2 combination, Word and Excel.
So Microsoft Office was successful from the
beginning. It always had high market shares. The Borland
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WordPerfect, Novell product eventually Corel, was never
successful.
Here's a case in which, as I told you earlier,
Novell contends that it's Microsoft's fault that Novell's
products were late. And Novell contends, and Mr. Johnson said
earlier today that they would have an expert,
Dr. Warren-Boulton to tell you about the damages. And they
said that they lost $1 billion. And I predict to you that
Dr. Warren-Boulton, Novell's expert, will offer the opinion
that Microsoft should pay Novell $1 billion or more.
We think the evidence will show in trial that the
reason Novell was late had nothing to do with the one and only
act that Novell says Microsoft committed that was wrongful,
Mr. Gates's decision in October of 1994 to withdraw support
for those NameSpace extensions. Remember, Microsoft provided
Novell and everyone else with the technology in Windows 95
that made it really easy for all of Novell's customers to
launch WordPerfect or Quattro Pro or a suite from the start
button from an icon right on the desktop.
And it's not just that Novell made a misjudgment
when it paid so much for WordPerfect in 1994. It did make a
misjudgment. It paid much too much. The stock market
reaction immediately shows that. It's not just that. It's
that Novell also made some bad choices along the way.
Keep that up there for a minute, Dave. Sorry.
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Novell made some bad choices along the way. They
didn't integrate the two companies well. We saw just a little
piece of that. They were having trouble writing Quattro Pro
for foreign languages. They recognized that in many ways
Microsoft's products were better.
And as the world shifted to suites, this was the
natural result. Consumers, people across this country and
around the world, preferred Microsoft Office. Novell's own
documents explained why. Novell's products were slow. They
were buggy. They were late to the market, long before the
NameSpace extension APIs came out.
And Microsoft's strong share is also attributable
not just to mistakes by Novell. Nobody's perfect, and
business people can make mistakes, for sure. But also to the
fact that Microsoft was making the best products it could.
And again, the idea that Mr. Gates in 1994 had some obligation
to design Windows 95, the product they were working on very
hard, to design it in a way that helped Novell instead of
design it in a way that was best for Microsoft to make the
best Windows 95 that they could, that idea just seems
peculiar.
Let's look at Slide 2. Yesterday Judge Motz
provided you with this instruction, that:
In order to prove its claim, Novell must
establish among other things that Microsoft
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willfully maintained its monopoly in the operating
system market by engaging in anticompetitive
conduct against Novell's products during the time
Novell owned those products.
I submit to you that Novell won't be able to do
that. It won't be able to show that Microsoft's conduct was
anti-competitive. It won't be able to show that any conduct
injured the Novell products. Those products were in a decline
all the way along and continued. Novell made it worse with
their own business choices. And Novell also won't be able to
show, we predict, that Microsoft maintained its monopoly by
that conduct, that Microsoft kept the monopoly in Windows by
virtue of the NameSpace extension APIs, because for Novell to
prevail in this case they have to prove to your satisfaction,
as the Court instructed you yesterday, that Microsoft's
monopoly in operating systems, in Windows, came about because
of the conduct they claim was wrong, the decision to withdraw
support for the NameSpace extension APIs. Four APIs out of
thousands.
And to think that the market for operating systems
would have been different -- you remember Novell's lawyer
showing you that picture of the launch date of Windows 95. He
said the Rolling Stones were hired and Jay Leno had something
to do with it. I forget what. And millions and millions of
people across our country and the world lined up to get
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Windows 95.
And to prevail in this case, Novell is going to
have to show you that somehow if WordPerfect had come out
earlier, and they have to be able to prove that it would have
come out earlier, had the NameSpace extension decision not
been made, that that would have changed everything in the
market for operating systems, that Windows' popularity would
have declined significantly.
We don't think there is any evidence, there will be
any evidence at the trial that the market for operating
systems would have been any different had WordPerfect come out
sooner or had the NameSpace extension APIs been fully
documented or anything else that Novell lawyer -- Novell's
lawyer asserted.
So I know you'll be glad to hear I'm almost done.
Windows 95 was one of the most significant
technology products to be released to the public in the last
25 years. It was a huge success. It was a game changer. It
provided great functionality for people to use. Microsoft
developed it in a way that was best for Microsoft. That's
what it's supposed to do. That's called competing in our
country. And the Microsoft engineers who worked on it and the
executives who supervised including at the very top
Bill Gates, had one thing in mind, to make the best product
they could, the one that would work best for consumers and be
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most successful for Microsoft, of course.
We don't think there will be any evidence that
Mr. Gates withdrew support for the NameSpace extensions to
hurt Novell. In fact, Brad Struss, S-T-R-U-S-S, will come
testify, he worked for Microsoft then, still does today.
Mr. Struss had a relationship with WordPerfect and Novell. He
spoke frequently to someone at Novell named Norm Creighton.
Mr. Struss was told before Mr. Gates made the decision that
Novell was not working on the NameSpace extension APIs. And
Mr. Struss wrote an e-mail after Mr. Gates made the decision
10 days or two weeks later in October of '94 saying that
WordPerfect appears to be okay with the decision to withdraw
support for the NameSpace extensions. WordPerfect appears to
be okay. No one at WordPerfect said to Microsoft at the time,
boy, if you withdraw support for the NameSpace extensions,
this is a huge problem for us, for WordPerfect or Novell.
Microsoft thought the contrary. And Mr. Struss will come tell
you, and you'll see his e-mail.
We don't think there will be any evidence, no
document from Novell, contemporaneous document written in 1994
or 1995, that will indicate that they complained to Microsoft
about the decision. The developers at WordPerfect, Novell,
may have had work to do to write some source code to give them
whatever features in WordPerfect they needed to go sell their
product. Of course, if so, they should have done the work.
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Microsoft's responsibility alone was to write good software
for Microsoft and for other users.
And as I told you when I started this opening
statement way back when, though the decision was made in '94
and Novell made no complaint in 1994, the lawsuit was filed
10 years later. If this decision had been such a killer for
Novell, had made life so impossible, if there was no way for
Novell to compete in the market, I ask you, because as a juror
you don't have to leave your common sense home, would Novell
have remained silent at the time?
We think that at the end of the case you will find
that there is no liability, that there was no anticompetitive
conduct, that Novell wasn't hurt by anything Microsoft did.
We also think that you will find that the operating system
competition would not have been affected, Windows would have
remained just as popular as it was regardless of the NameSpace
extension APIs.
And lastly, even if you thought that there was some
liability, we will ask you at the conclusion to determine that
damages are zero because the decline in WordPerfect and
Quattro Pro and the suite was a function of Novell's
misjudgments and Novell's bad business choices and also of the
great products that Microsoft was making. Thank you.
THE COURT: Thank you, Mr. Tulchin.
Now we're going to begin the evidence, which is
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going to begin with a reading by Mr. Taskier. And he's going
to read the estoppel findings. We'll stop -- I think because
of the schedule, we'll probably only get about halfway
through.
Pick a time around or before 1:30, Mr. Taskier.
Let me just make a couple of remarks before we
begin. Number one, it was mentioned to you during opening
statement by one of the lawyers. You may be feeling
overwhelmed right now. There's an awful lot of information.
I mean, I've learned a lot of information, and I've been
working on this case for a while. You are going to learn more
about the case. Don't feel overwhelmed, as you have an
outline of what the evidence is going to show, and you're
going to be living with the case for a long time, and you'll
come to understand it as it goes along.
Secondly, let me just say that I don't know if you
all realize this, but I do. I've been around the system for a
long time. I just want to comment on it. Even though a lot
of information was imparted upon you which may be
overwhelming, you are very fortunate in having very good
lawyers on both sides of this case. I mean, bad lawyers could
have made this go on for days and days and days. They really
were able to summarize on both sides what the case is all
about. And I think you'll find this true throughout the case.
I mean, they work very hard preparing their witnesses and
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preparing opening statements, and there are all kinds of legal
issues which when you all go home sometimes they work out
among themselves. Sometimes I have a pretty small part, it is
a pretty small because they work out things so that I don't
have to make a decision on it.
Fourth, the collateral estoppel is not exciting,
and everybody here knows it's not going to be exciting for
you. But let me mention that because this -- these binding
facts, I've used the term collateral estoppel, which is a
legal term, by having these facts read to you it is saving you
a lot of time. You would have had a lot of witnesses come in
and testify. So even though these findings have a binding
effect here may be a little boring for you to hear it really
is a big timesaver.
So with that, Mr. Taskier. I'm sorry I used the
word collateral estoppel.
MR. SCHMIDTLEIN: You were going to give I think --
THE COURT: Oh, yes. Excuse me. I certainly was.
Now there was also mentioned in the opening
statement the previous litigation in 1999 in the District of
Columbia certain factual findings were made that were binding
in this case. As you will hear these findings were somewhat
lengthy, but they will now be read to you. Thanks.
MR. TASKIER: Thank you, Your Honor.
Ladies and gentlemen.
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An operating system is a software program that
controls the allocation and use of computer resources such as
central processing unit time, main memory space, disk space
and input/output channels. The operating systems also
supports the function of software programs called application
that perform specific user oriented tasks. The operating
system supports the function of application by exposing
interfaces called application programming interfaces or APIs.
These are synapses at which the developer of an application
can connect to invoke prefabricated blocks of code in the
operating system. These blocks of code in turn perform
crucial tasks, such as displaying text on the computer screen.
Because it supports applications while interacting more
closely with the PC system's hardware, the operating system is
said to serve as a platform.
An operating system designed to run on an
Intel-compatible PC will not function on a
non-Intel-compatible PC, nor will an operating system designed
for a non-Intel-compatible PC function on an Intel-compatible
one. Similarly, an application that relies on APIs specific
to one operating system will not generally speaking function
on another operating system unless it is first adapted or
ported, to the APIs of the other operating systems.
In 1981, Microsoft released the first version of
its Microsoft disk operating system commonly known as MS-DOS.
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The system had a character-based user interface that required
the user to type specific instructions at a command prompt in
order to perform tasks such as launching applications and
copying files. When the International Business Machines
Corporation, IBM, selected MS-DOS for pre-installation on its
first generation of PCs, Microsoft's product became the
predominate operating system sold for Intel-compatible PCs.
In 1985, Microsoft began shipping a software
package called Windows. The product included a graphical user
interface which enabled users to perform tasks by selecting
icons and words on the screen using a mouse. Although
originally just a user interface or shell, sitting on top of
MS-DOS, Windows took on more operating system functionality
over time.
In 1995, Windows introduced a software package
called Windows 95 which announced itself as the first
operating system for Intel-compatible PCs that exhibited the
same sort of integrated features as the Mac OS running PCs
manufactured by Apple Computer Company, Inc., Apple.
Windows 95 enjoyed unprecedented popularity with consumers,
and in June 1998, Microsoft released its successor Windows 98.
Microsoft is the leading supplier of operating
systems for PC. The company transacts business in all 50 of
the United States and in most countries around the world.
Microsoft licenses copies of its software programs
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directly to consumers. The largest part of its MS-DOS and
Windows sales, however, consists of licensing the products to
manufacturers of PCs known as original equipment manufacturers
or EOMs, such as the IBM PC company and the Compaq Computer
Corporation Company. An OEM typically installs a copy of the
Windows onto one of its PCs before selling the package to a
consumer under a single price.
Although certain Web browsers provided graphical
user interfaces as far back as 1993, the first widely popular
graphical browser distributed for profit called Navigator was
brought to market by the Netscape Communications Corporations,
Netscape, in December of 1994. Microsoft introduced its
browser called Internet Explorer in July 1995.
Currently there are no products, nor are there
likely to be any in the near future, that a significant
percentage of consumers worldwide could substitute for
Intel-compatible PC operating systems without incurring
substantial costs. Furthermore --
THE COURT: Let interrupt you. Just a reminder.
As you were told before, these findings were made in 1999. So
when you hear the world "currently" it's referring to the time
period, refers to in 1999. Excuse me.
MR. TASKIER: Thank you, Your Honor.
Furthermore -- now it works -- no firm that does
not currently market Intel-compatible PC operating systems
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could start to doing so in a way that would, within a
reasonably short period of time, present a significant
percentage of consumers with a viable alternative to existing
Intel-compatible PC operating system. It follows that if one
firm controlled the financing licensing of all
Intel-compatible PC operating systems worldwide, it could set
the price of a license substantially above that which would be
charged in a competitive market and leave the price there for
a significant period of time without losing so many customers
as to make the action unprofitable. Therefore, in determining
the level of Microsoft's market power, the relevant market is
the licensing of all Intel-compatible PC operating systems
worldwide.
Since only Intel-compatible PC operating systems
will work with Intel-compatible PCs, a consumer cannot opt for
a non-Intel-compatible PC operating system without obtaining a
non-Intel-compatible PC. Thus, for consumers who already own
an Intel-compatible PC system, the cost of switching to a
non-Intel-compatible PC operating system includes the price of
not only a new operating system, but also a new PC and new
peripheral devices. It also includes the effort of learning
to use the new system, the cost of acquiring a new set of
compatible applications and the work of replacing files and
documents that were associated with the old applications.
Very few consumers would incur these costs in response to the
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trivial increase in the price of an Intel-compatible PC system
that would result from even a substantial increase in the
price of an Intel-compatible PC operating system. For
example, users of Intel-compatible PC operating systems would
not switch in large numbers to the Mac OS in response to even
a substantial, sustained increase in the price of an
Intel-compatible PC operating system.
Operating systems are not the only software
programs that expose APIs to application developers.
Netscape's Web browser and Sun Microsystems, Inc.'s Java class
libraries are examples of nonoperating system software that do
likewise. Such software is often called middleware because it
relies on the interfaces provided by the underlying operating
system while simultaneously exposing its only APIs to
developers. Currently no middleware product exposes enough
APIs to allow independent software vendors, ISVs, profitably
to write full-featured personal productivity applications that
rely solely on those APIs.
Even if middleware deployed enough APIs to support
full-featured applications, it would not function on a
computer without an operating system to perform tasks such as
managing hardware resources and controlling peripheral
devices. But to the extent the array of applications relying
solely on middleware comes to satisfy all of the user's needs,
the user will not care whether there exists a large number of
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other applications that are directly compatible with the
underlying operating system. Thus, the growth of
middleware-based applications could lower the costs to users
of choosing a non-Intel-compatible PC operating system like
the Mac OS. It remains to be seen, though, whether there will
ever be a sustained stream of full-featured applications
written solely to middleware APIs. In any event, it would
take several years for middleware and the applications it
supports to evolve from the status quo to a point at which the
cost to the average consumer of choosing a
non-Intel-compatible PC operating system over an
Intel-compatible one falls so low as to constrain the pricing
of the latter systems.
Firms that do not currently produce
Intel-compatible PC operating system could do so. What is
more, once a firm had written the necessary software code, it
could produce millions of copies of its operating system at
relatively low cost. The ability to meet a large demand is
useless, however, if the demands for the product is small and
signs do not indicate large demand for a new Intel-compatible
PC operating system. To the contrary, they indicate that the
demand for a new Intel-compatible PC operating system would be
severely constrained by an intractable chicken-and-egg
problem. The overwhelming majority of consumers will only use
a PC operating system for which there already exists a large
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and varied set of high quality, full-featured applications and
for which it seems relatively certain that new types of
applications and new versions of existing applications will
continue to be marketed at pace with those written for other
operating systems. Unfortunately, for firms whose products do
not fit that bill, the porting of applications from one
operating system to another is a costly process.
Consequently, software developers generally write applications
first and often exclusively for the operating system that is
already used by a dominate share of all PC users. Users do
not want to invest in an operating system unless it is clear
that the system will support generations of applications that
will meet their needs, and developers do not want to invest in
writing or quickly porting applications for an operating
system until it is clear that there will be a sizable and
stable market for it. What is more, consumers who already use
one Intel-compatible PC operating system are even less likely
than first-time buyers to choose a newcomer to the field, for
switching to a new system would require those users to scrap
the investment they have made in applications, training and
certain hardware.
The chicken-and-egg problem notwithstanding, a firm
might reasonably expect to make a profit by introducing an
Intel-compatible PC operating system designed to support a
type of application that satisfies the special interests of a
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particular subset of users. For example, Be, Inc., Be, market
an Intel-compatible PC operating system called BeOS that
offers superior support for multimedia applications, and the
operating system enjoys a certain amount of success with the
segment of the consumer population that has a special interest
in creating and playing multimedia content with a PC system.
Still, while a niche operating system might turn a profit, the
chicken-and-egg problem hereinafter referred to as the
applications barrier to entry, would make it prohibitively
expensive for a new Intel-compatible operating system to
attract enough developers and consumers to become a viable
alternative to a dominant incumbent in less than a few years.
To the extent that the developers begin writing
attractive applications that rely solely on servers or
middleware instead of PC operating systems, the applications
barrier to entry could erode. As the Court finds above,
however, it remains to be seen whether server- or
middleware-based development will flourish at all. Even if
such development were already flourishing, it would still be
several years before the applications barrier eroded enough to
clear the way for the relatively rapid emergence of a
viability alternative to --
THE COURT: Just a minute.
Thank you.
MR. TASKIER: Even if such developments were
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already flourishing it would be several years before the
applications barrier eroded enough to clear the way for the
relatively rapid emergence of a viable alternative to
incumbent Intel-compatible PC operating systems. It is highly
unlikely then that a firm not already marketing an
Intel-compatible PC operating system could begin marketing one
that would in less than a few years present a significant
percentage of consumers with a viable alternative to
incumbents.
Microsoft enjoys so much power in the market for
Intel-compatible PC operating systems that if it wished to
exercise this power slowly in terms of price, it could charge
a price for Windows substantially above that which could be
charged in a competitive market. Moreover, it could do so for
a significant period of time without losing an unacceptable
amount of business to competitors. In other words, Microsoft
enjoys monopoly power in the relevant market.
Viewed together, three main facts indicate that
Microsoft enjoys monopoly power. First, Microsoft's share of
the market for Intel-compatible PC operating system is
extremely large and stable. Second, Microsoft dominant market
share is protected by a high barrier to entry. Third, and
largely as a result of that barrier, Microsoft's customers
lack a commercially viable alternative to Windows.
Microsoft possesses a dominate persistent and
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increasing share of the worldwide market for Intel-compatible
PC operating systems. Every year for the last decade,
Microsoft's share of the market for Intel-compatible PC
operating systems has stood above 90 percent. For the last
couple of years, the figure has been at least 95 percent. And
analysts project that the share will climb even higher over
the next few year. Even if Apple's Mac OS were included in
the relevant market, Microsoft's share would still stand well
above 80 percent.
Microsoft's dominate market share is protected by
the same barrier that helps define the market for
Intel-compatible PC operating systems. As explained above,
the applications barrier would prevent an aspiring entrant
into the relevant market from drawing a significant number of
customers away from a dominant incumbent even if the incumbent
priced its product substantially above competitive levels for
a significant period of time. Because Microsoft's market
share is so dominate, the barrier has a similar effect within
the market. It prevents Intel-compatible PC operating systems
other than Windows from attracting significant consumer
demand, and it would continue to do so even if Microsoft held
its prices substantially above the competitive level.
Consumer interest in a PC operating system derives
primarily from the ability of that system to run applications.
The consumer wants an operating system that runs not only
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types of applications that he knows he will want to use, but
also those types in which he might develop an interest later.
Also, the consumer knows that if he chooses an operating
system with enough demand to support multiple applications in
each product category, he will be less likely to find himself
straitened later by having to use an application whose
features disappoint him. Finally, the average user knows that
generally speaking, applications improve through successive
versions. He thus wants an operating system for which
successive versions of his favorite applications will be
released promptly at that. The fact that a vastly larger
number of applications are written for Windows than for other
PC operating systems attracts consumers to Windows because it
reassures them that their interests will be met as long as
they use Microsoft's product.
Software development is characterized by
substantially economies scale. The fixed costs of producing
software including application is very high. By contrast
marginal costs are very low. Moreover, the cost of developing
software are sunk, once extended to develop software,
resources so devoted cannot be used for another purpose. The
result of economies of scale and sunk costs is that
application developers seek to sell as many copies of their
applications as possible. An application that is written for
one PC operating system will operate on another PC operating
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system only if it is ported to that system. And porting
applications is both time consuming and expensive. Therefore,
application developers tend to write first in the operating
system with the most users -- system with the most users
Windows. Developers might then port their applications to the
other operating systems, but only to the extent that the
marginal added sales justify the cost of porting. In order to
recover the cost of ISVs that do go to the effort of porting
frequently set the price of ported application considerably
higher than that of the original versions written for Windows.
Consumer demand for Windows enjoys positive network
effects. A positive network effect is a phenomenon by which
the attractiveness of a product increases with the number of
people using it. The fact that there is a multitude of people
using Windows makes the product more attractive to consumers.
The large installed base attracts corporate customers who want
to use an operating system that new employees are already
likely to know how to use, and it attracts academic consumers
who want to use software that will allow them to share files
easily with colleagues at other institutions. The main reason
that demand for Windows experiences positive network effect,
however, is that the size of Windows' installed base impels
ISVs to write applications first and foremost to Windows
thereby ensuring a large body of applications from which the
consumers can choose. The large body of applications thus
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reinforces demands for Windows, augmenting Microsoft's
dominate position and thereby perpetuating ISVs incentives to
write applications principally for Windows. This
self-reenforcing cycle is often referred to as a positive
feedback loop.
Microsoft continually releases new and improved
versions of its PC operating system. Each time it does,
Microsoft must convince ISVs to write applications that take
advantage of new APIs so that existing Windows users will have
incentive to buy an upgrade. Since ISVs are usually still
earning substantial revenue from applications written for the
last version of Windows, Microsoft must convince them to write
for the new version. Even if ISVs are slow to take advantage
of the new APIs, though, no applications barrier stands in the
way of consumers adopting the new system for Microsoft ensures
that successive versions of Windows retain the ability to run
applications developed for earlier versions. In fact, since
ISVs know that consumers do not feel locked into their old
versions of Windows and that new versions have historically
attracted substantial consumer demand, ISVs will generally
write to new APIs as long as the interfaces enable attractive
innovative features. Microsoft supplements developers'
incentives buy extending various seals of approval, visible to
consumers, investors and industry analysts, to those ISVs that
promptly develop new versions of their applications adapted to
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the newest version of Windows. In addition, Microsoft works
closely with ISVs to help them adapt their applications to the
newest version of the operating system, a process that is in
any event far easier than porting an application from one
vendor's PC operating system to another's. In sum, despite
the substantial resources Microsoft expends inducing ISVs to
develop applications for new versions of Windows, the company
does not face any obstacles nearly as imposing as the barrier
to entry that vendors and would-be vendors of other PC
operating systems must overcome.
Do you want me to stop here, Your Honor?
THE COURT: It's up to you. If you want to go for
more five minutes. Stop?
MR. TASKIER: I think it's a natural place to stop.
THE COURT: Okay. Thank you.
We'll resume tomorrow at 8:30. I'm going to ask
you something now which I have not cleared with the lawyers, I
haven't cleared with the court staff, and any of you can say
no. I was just talking to another judge here who said he
sometimes starts earlier than 8:30 and sometimes goes to 2:30
rather than 1:30. The lawyers may not be able to do it, the
court staff may not be able to do it. But if you say no, say
8:15 to 2 o'clock, that's the end of it. If any one of you
says no because this is not a bait and switch. But I'm
getting sort of used to the pace around here, and people do
157
get here earlier. And to the extent that we'd spend a little
more time in a day, the sooner the case will be over, which
may be a benefit to you, also. So I'm only asking that just
for you, also.
Don't tell me now. Talk to one another about it.
Tell Theresa. As I say, if one or certainly if one just says,
I can't do it, that's fine, because you all were picked as
jurors on the basis of the 8:30 to 1:30 schedule. But if we
pick up, you know, 45 minutes a day, that's 45 minutes a day
and it comes off the back end. So I'm asking for your
benefit, so just let me know.
And have a nice afternoon. I'm going to forget to
tell you this every day. In fact, I'm not going to tell you
every day on purpose because I don't like to hear myself talk.
But now that we're in the trial, please don't talk about the
case in anyone. More importantly make sure you don't read
anything about it. And most importantly, particularly because
what you all were asked to absorb today was overwhelming. You
might want to think, look, to really understand this, I have
to learn a little bit more on my own, do a little research,
particularly on the Internet or everywhere.
Don't do that. You will learn the case during the
course of the coming weeks, and don't try to -- your verdict
has got to be based upon what you hear here in the courtroom,
and, please, don't do any independent research.
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Most importantly of all have a very, very nice
afternoon, and see you tomorrow at 8:30 tomorrow. I'll stay
here with counsel.
(Whereupon, the jury left the court proceedings.)
THE COURT: Please be seated. Just a couple
things, and then I'm going to ask you if there is anything you
should take up with me about tomorrow. Number one, if you all
can't do it, you let me know, too. I mean, just say it's not
going to work. I saw everybody was here around 8:15 this
morning or 8:00. So if you can do it and they can do it,
we'll pick up some time.
MR. TULCHIN: We're happy to start earlier, Your
Honor.
MR. JOHNSON: The same, Your Honor.
THE COURT: We'll see what they say, and also the
Court staff.
Secondly, totally selfish. If any of you know of
any particularly interesting witness that's going to come up,
please let me know so I can connect my office. Just like they
wanted to hear the opening statement, I'm sure they want to
hear from Bill Gates. But if there is anyone that you think
is particularly interesting let me know so I can let them know
who it is and we can connect them. That's fine.
Thirdly, and, Mr. Taskier, you're doing a wonderful
job, a wonderful terrible job. This is not as a criticism to
159
you. I have no objection, and I don't know if anyone does, I
have no objection if you want to call a live witness and then
use some of these things as fillers from time to time, that is
fine with me. It's also fine with me if you just finish it up
right now. But I just want to let you know that I don't stand
on ceremony. So if you think it would be good to change the
pace a little and have a live witness and resume, that's fine
with me. But it's entirely up to you, unless what does
Microsoft think.
MR. TULCHIN: I wasn't sure I understood you.
THE COURT: No. I said instead of reading all of
the collateral estoppel findings at the same time maybe split
them up between witnesses.
And I'm not saying you should. I'm just letting
you know I'm not opposed to it.
Okay. What, if anything, should I have to think
about? Hopefully nothing. Is there anything I should
consider for tomorrow?
MR. SCHMIDTLEIN: I think we're all set for
tomorrow.
MR. TULCHIN: I understood tomorrow, Your Honor,
that Novell would be playing videotapes of two depositions.
THE COURT: Fine.
MR. SCHMIDTLEIN: I think we've resolved all the
objections.
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MR. TULCHIN: Yes.
THE COURT: Have a nice evening. See you all in
the morning.
Do you want the court reporters here while the
depositions are being taken? Or since you already have
copies, do you just want to maybe have an official court
reporter here just to say the videotapes are being taken
and then --
MR. SCHMIDTLEIN: We can just provide the
transcripts.
THE COURT: And provide the transcripts.
MR. JOHNSON: Yeah. No need to be here at the
start. But once we turn on the tape, I don't see any reason
for them --
THE COURT: Sure.
MR. TASKIER: -- to record what has been recorded.
MR. TULCHIN: I agree with have that, Your Honor.
It might be a good idea to have someone here in case.
Sometimes a juror says something.
THE COURT: Sure.
MR. TULCHIN: Or there's some unanticipated
commotion.
THE COURT: Someone will be available to be here
the whole time. And so at the beginning to say what's
happening. In case, you know, you all think of something.
161
And I will be around the courthouse at 8:15, so if something
over night comes up that you think needs my attention, just
find me and I'll come here, and so when the jury gets here at
8:30, we'll get started. Thank you all.
MS. NELLES: Your Honor, do you want a copy of the
testimony that's being played? The parties can provide that
if you want it.
THE COURT: I'll have it for my office, just as a
courtesy. I think they wanted to hear the opening statements.
Just they're interested.
MR. SCHMIDTLEIN: Judge, we're going to e-mail your
clerk with that streaming information, if you want.
THE COURT: That's terrific. Thanks a lot.
(Whereupon, the court proceedings were concluded.)
* * * * *
162
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
I, KELLY BROWN HICKEN, do hereby certify that I am
a certified court reporter for the State of Utah;
That as such reporter, I attended the hearing of
the foregoing matter on October 18, 2011, and thereat reported
in Stenotype all of the testimony and proceedings had, and
caused said notes to be transcribed into typewriting; and the
foregoing pages number from 125 through 162 constitute a full,
true and correct report of the same.
That I am not of kin to any of the parties and have
no interest in the outcome of the matter;
And hereby set my hand and seal, this ____ day of
_________ 2011.
______________________________________
KELLY BROWN HICKEN, CSR, RPR, RMR
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