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An Exhibit that Raises Questions About Judge Motz's Middleware Ruling in Novell v. Microsoft ~pj
Sunday, July 22 2012 @ 10:20 PM EDT

When Judge J. Frederick Motz ruled for Microsoft on its motion for judgment as a matter of law the other day, tossing out Novell's antitrust case against Microsoft, he explained his reasons at length. One of them was that there was, he asserted, no evidence of any realistic middleware threat.

However, here at Groklaw, we're continuing our project of trying to provide text versions of all the PDF exhibits from the Comes v. Microsoft antitrust litigation, and a volunteer posted an exhibit [PDF] he'd just transcribed, and as I was reading it to edit any mistakes, I started to say to myself, Hey, this contradicts the judge. My next thought was that maybe Novell never saw this exhibit. After all, one of the things that happened in this case was that neither party was able to easily find what the exhibits all were. There are thousands of them, and they were identifiable only by numbers, and numbers from other litigations. That's why we started on the project, to make them more easily searchable.

But then I started to dig a little, and it turns out that Novell did offer the court this very exhibit. It's Exhibit PX 44 in this PDF collection of exhibits, attached as an exhibit to Novell's opposition to Microsoft's motion for judgment as a matter of law.

How, then, I wondered, could the judge say that there was no evidence of a middleware threat, when the 1993 email chain between Bill Gates, Brad Silverberg, and other executives at Microsoft discusses that very threat not only from Novell but from IBM, Lotus and others? Let me show you what I dug up and you can be the judge. But for me, this case is increasingly disturbing. Of course, there is an appeal to come, and hopefully the appeals court will notice what I'm noticing.

Jump To Comments

This will be fairly long because I need to show you long stretches of various documents, but there's no way to understand it without looking at a chunk of the reasoning behind the judge's ruling, so here we go, and I hope it's worth it. I'll set off the documents, so you can clearly focus on the connective threads.

At the center of all of it is the question of what is middleware? Microsoft had one definition and Novell another, and it will not surprise you to learn that this judge accepted Microsoft's definition in his order, basing it, he claims, on the Findings of Fact in the US v. Microsoft case. But let's see if he got it right.

Here's the section on middleware from Judge Motz's ruling:

As described in section III, infra, according to Novell, this delay prevented WordPerfect and PerfectOffice from obtaining a sizeable share of the Windows 95-compatible word processing and suite markets. This, in turn, Novell argues, prevented Novell products from becoming successful "middleware," which could have been an effective competitor with Windows 95 in the operating systems market....

If Novell's products had been accepted in the market as middleware, ISVs would have begun to write programs using APIs exposed by the Novell applications, thereby reducing the barrier to entry into the PC operating systems market and threatening Microsoft's monopoly in that market. (Id. at 194-96).

Microsoft argues that this theory is unique and unprecedented because it is based upon conduct that occurred in one market, the software applications market, to assert a Sherman Act §2 claim in an entirely different market, the operating systems market. (See id. at 6). That alone, according to Microsoft, is fatal to Novell's claim. (Id.). Novell counters that although Microsoft, through Gates, was motivated by a desire to disadvantage Novell's applications in favor of Microsoft's own applications, its conduct was intentional, and a jury could appropriately find that its conduct had anticompetitive effects in the operating systems market. (Id. at 165-68). According to Novell, that is sufficient to establish a §2 violation.

I need not decide this issue because, even assuming Novell's argument is correct, its claim nevertheless fails for three separate and independent reasons: (1) Microsoft's conduct was not anticompetitive within the meaning of the Sherman Act; (2) Novell did not present sufficient evidence from which a jury could find that its products would have been successfully developed as middleware; and (3) there is no underlying business reality to the claims. Each of these reasons is examined in section V....

V.

I will now discuss the three reasons Microsoft's Rule 50 motion should be granted....

Novell's second argument is its middleware theory. For a middleware product to have an impact on competition in the PC operating systems market, the product (1) must be cross-platformed to various operating systems; (2) must be ubiquitous on the "dominant operating system"; and (3) must expose a sufficient number of APIs of its own to entice ISVs to write applications to it rather than to the operating system on which it sits. (See Noll, Trial Tr. at 1923-26, Nov. 15, 2011; Finding of Fact §28). Novell's office productivity applications did not meet any of these requirements.

As to the first requirement, assuming that within a reasonable period of time after 1995 effective operating systems would have come into existence to which Novell's office productivity applications could have been written, there is no basis for inferring that Novell's office productivity applications written for Windows 95 via the namespace extension APIs could have been effectively ported to those systems. This is so because the namespace extension APIs were, as Novell's own technical expert testified, "platform specific" to Windows. (Alepin, Trial Tr. at 1482-83, 1532-33, Nov. 9-10, 2011; see Murphy, Trial Tr. at 4783-84, Dec. 7, 2011; Bennett, Trial Tr. at 5023, Dec. 12, 2011 (stating that "namespace extension APIs . . . [were] a unique component of Windows 95")).

As to the second requirement, although the parties agree that the dominant operating system was Windows 95, they disagree as to the meaning of ubiquity. Microsoft contends it means that Novell's software had to run on "all or nearly all PCs running the 'dominant operating system.'" (Microsoft Mem. at 73-75; Microsoft Reply Supp. Rule 50 Mot. at 37-39, ECF No. 503). Novell argues that "something less than that" might be sufficient "by weakening, though not eliminating, the applications barrier to entry." (Novell Opp'n at 90 (quoting Noll, Trial Tr. at 1926, Nov. 15, 2011)). Novell provided no evidence as to what this lesser threshold might be.

In any event, under either definition of ubiquity, the evidence is clear that Novell's office productivity applications would never have been ubiquitous on Windows 95. In 1995, prior to the release of Windows 95, WordPerfect had roughly a 15% share of the Windows-compatible word processing market, and PerfectOffice had less than a 5% share of the Windows-compatible suite market.20(See Holley Decl. Supp. Microsoft Mem., Exs. G & K, ECF Nos. 495-7, 495-11). WordPerfect's share of the word processing market at the end of 1994 was substantially greater--approximately 36%--if one includes the installed base of PCs using the DOS platform. (See Pl.'s Ex. 599A at tbl. 13). However, 36% is only 36%, and it is entirely speculative to assume, as Novell apparently does, that its applications would have increased to a substantially greater number of computers using Windows if Microsoft had not withdrawn support for the namespace extension APIs.21 This assumption is made even more speculative by the fact that an internal Novell memorandum dated April 14, 1995, stated that "only 30% of th[e] WordPerfect for DOS installed base is remaining with WordPerfect as they transition to a Windows word processor." (Def.'s Ex. 224 at 20).

The parties also disagree about the meaning of the third requirement. Microsoft argues that to constitute middleware, an application must "expose a sufficiently broad set of APIs to enable ISVs profitably to develop full-featured personal productivity applications that rely solely upon those APIs exposed by the middleware." (Microsoft Mem. at 70 (emphasis added)). Novell, on the other hand, relying upon the testimony of Roger Noll, its antitrust expert, and Ronald Alepin, its technical expert, contends that the third element is satisfied if the application "expose[s] a wide range of APIs and sophisticated functionality to developers." (Novell Opp'n at 28). Novell concedes that if Microsoft's interpretation of the meaning of the third element is correct, Microsoft is entitled to judgment as a matter of law because Novell did not present evidence to show that its software exposed sufficient APIs of its own to allow ISVs to write full-featured personal products applications to it. (Trial Tr. at 5436-37, 5439, Dec. 15, 2011). Thus, on this issue, whether Microsoft is entitled to judgment in its favor on the Rule 50 motion turns on the meaning of the third requirement.

Microsoft's position is based upon the Findings of Fact made in the government case, upon which Novell's claim is founded. Judge Jackson found that "[c]urrently, no middleware product exposes enough APIs to allow independent software vendors ("ISVs") profitably to write full-featured personal productivity applications that rely solely on . . . APIs [of the middleware product itself]." Finding of Fact §28. In contrast, Novell argues the exposure of APIs that would result in "something less" than the writing of full-featured personal product applications is sufficient to constitute a threat to Microsoft's monopoly. (Novell Opp'n at 89-90). This argument is based on the concept, expressed by Noll, that diminishing, as opposed to nearly eliminating, the barrier to entry that protected Microsoft's monopoly in the PC operating systems market was itself sufficient. (Noll, Trial Tr. at 1926, Nov. 15, 2011). To the extent this testimony is based on the premise that other companies would produce similar middleware that, in combination with Novell's products, would diminish the barrier to entry, there is no evidence such other products existed. ...

In light of these findings, it cannot be reasoned, as Novell argues, that Microsoft’s operating systems monopoly would have been threatened by a middleware product that exposed only a limited number of APIs that permitted ISVs to write only a specialized set of applications to it. The barrier to entry that Judge Jackson found in the government case was created by a “chicken-and-egg” problem, and that problem arose because ISVs would write only to programs that supported full-featured personal productivity applications. See Finding of Fact ¶ 30. In other words, contrary to what Novell argues in support of what Microsoft has aptly described as its “watered-down version” of the third requirement, Microsoft’s monopoly in the PC operating systems market was threatened not by a product that exposed only a limited number of its own APIs but only by a product that exposed sufficient APIs to entice full-featured applications to be written to it. (See Microsoft Mem. at 77–78). Otherwise stated, diminishment of the barrier to entry is not sufficient because mere diminishment would not have affected the PC operating systems market. In order to constitute a realistic threat to Microsoft’s monopoly in that market, elimination (or, at least, near elimination) of the barrier to entry through development of full-featured applications using APIs from middleware that ran on operating systems other than Windows was required.

So to the judge, Novell couldn't compete as middleware anyway, because it didn't meet his/Microsoft's definition of the three elements middleware must have to "have an impact". This was based, in the judge's mind, on what Judge Thomas Pennfield Jackson wrote in his Findings of Fact from US v. Microsoft, which are binding in this case as well. Judge Motz references paragraphs 28 and 30, but he skips over paragraph 29, and I think that's a mistake. Let me fill it in for you:
Middleware

28. Operating systems are not the only software programs that expose APIs to application developers. The Netscape Web browser and Sun Microsystems, Inc.'s Java class libraries are examples of non-operating 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 own 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.

29. 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 a user's needs, the user will not care whether there exists a large number of 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.

30. Firms that do not currently produce Intel-compatible PC operating systems 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 demand 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 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 dominant share of all PC users. Users do not want to invest in an operating system until 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 sizeable 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 these users to scrap the investment they have made in applications, training, and certain hardware.

Do you see a difference between what Judge Motz wrote about the Findings of Fact and what they actually say? I do too. Do you see the three requirements to qualify as middleware, for example? Any requirement for full-featured applications, or a requirement that all the APIs must be exposed? I don't either. In fact, by Judge Motz's reasoning, the US DOJ's case against Microsoft was misguided and wrongly decided, because Netware and Java are definitely called middleware, according to what Judge Jackson said, and if there was no threat to Microsoft from middleware unless there were full-featured applications written to them, then they would not be middleware according to Judge Motz, who nevertheless claims he is basing his ruling on the Findings of Fact.

By the way, the judge also referenced the testimony of Dr. Noll. You can read it for yourself, to test out how accurately the judge represented his testimony, in these transcripts:

The transcripts cover pages 1886 through 2001, so you can find each item the judge or Novell references by page number.

The judge accepted Microsoft's current position, but should he have? Does it even make any sense, after you read the Findings of Fact?

And that brings us to the exhibit. Microsoft successfully persuaded the judge that their position in 2011 was correct. But this case is about events in the early to mid 1990's. Let's look at how it seemed to Microsoft back in 1993, and then I'll show you a transcript from the Novell v. Microsoft trial that you can use to see if what the judge wrote accurately depicts what Novell's position is. I think the order misrepresents Novell's position.

The exhibit, #1645, is an email thread between Bill Gates, Brad Silverberg, Paul Maritz and various underlings, dating from May of 1993, in which Silverberg expresses his fear that competitors would be able to do precisely what the judge wrote they could not do. Microsoft today scoffs as well, but let me show you what Mr. Silverberg himself said back in the relevant year of 1993, that competitors like IBM, Novell, Lotus, Borland and Sun could use the Windows APIs and then be "the provider of value added services" which would give them "more freedom to clone Windows". He wrote they already were seeing them doing this. They will, he warned, "split the windows standard" and take the Windows API as the standard "and then build their own middleware layers on top -- for networking, for object-oriented frameworks and system object models, for distributed computing, for compound documents,for messaging, for directory services, for administration, for database access, for document management, etc etc etc." With regard to Novell, he wrote that for Novell, that would make it easier to "position themselves as the supplier of connectivity services for windows to servers -- the 'middleware' which builds on windows and thus takes ownership away from us."

That, of course, is exactly what the judge said wasn't a realistic threat, but it surely was to this Microsoft executive at the time, who called it "a clear threat". Here's the exhibit showing the entire thread, as text, with the juicy bits highlighted:

PLAINTIFF'S EXHIBIT 1645
Comes v. Microsoft

From: Bill Gates
To: Brad Silverbergl Paul Maritz
Cc: Chris Peters; Jonathan Lazarus; Lewis Levin; Mike Maples; Pete Higgins; Steve Balmer
Subject: RE: Os/2 status
Date: Tuesday, May 04, 1993 7:17PM

I totally agree with this - it describes the situation very well.

I would add one point of great importance:

- keep delivering great applications that take full advantage of Windows and make sure they are very popular. This means doing a much much better job of communication between Systems and Applications on things like evolving the UI - I really hate hate hate the incredible divergences in simple things like MDI versus SDI, text selection models, tool bar handling and icons,... Chicago will look great because our Window applications are there in a big way. This means being creative about ways these products help each other. I want to see several ideas from systems about they will do for this and from applications as well. I want our chicago applications to lead the way clearly just like our original Windows applications. As it is right now I can barely keep things at all sane - we dont share dialog management, UI ideas or enough to keep ahead in applications. Microsoft can treat the best Windows ISV very very well (Microsoft). I wish the systems guys understood the importance of our applications more and I wish Applications guys understood the value of corrdinating with systems. We have the basic principal of a release timed to be right after Chicago - lets be smart about this both technically and marketing wise. Ballmer even suggested using more than a version number for chicago and then allowing applications with certain features to be labeled that way - so if Chicago is Windows FOO then this new release of Word becomes FOO word or Word for FOO or Word for FOO windows or Word for Windows FOO.

From: Brad Silverberg
To: Paul Maritz
Cc: Bill Gates; Steve Ballmer
Subject: FW: Os/2 status
Date: Monday, May 03, 1993 6:22PM

what i see is that our competitors will try to turn windows into the new unix -- in a bad way. the unix that frankenberg called the "bosnia herzegovina of operating systems".

that is, they will "adopt" windows and then split the windows standard. they will take the win 3.1 level of api as the standard and then build their own middleware layers on top -- for networking, for object-oriented frameworks and system object models, for distributed computing, for compound documents, for messaging, for directory services, for administration, for database access, for document management, etc etc etc.

they hope to create mass confusion about exactly what the windows api's are, and take them out of microsoft's ownership. every time we announce some intention for a new wosa api or other extension to windows api's, our competitors will propose some alternative.

we are starting to see this from ibm, novell, lotus, borland, and I'm sure soon sun.

if they can freeze "windows" at 3.1 (or nt) level api, then they can be the provider of value added services. it gives them more freedom to clone windows -- the definition of "windows" is static. for novell, it makes it easier for them to slip dr dos underneath. it lets them position themselves as the supplier of connectivity services for windows to servers - the "middleware" which builds on windows and thus takes ownership away from us.

this effort to balkanize windows is a clear threat and requires that we:

- reduce the microsoft confusion caused by our various win32 api sets.

- keep integrating our key api extensions directly into the os. we need to ensure that these extensions -- such as mapi and ole2 -- are really of world class quality.

- our evangelization efforts are critical.

- execute on building the best form of windows for the base set which everyone agrees is "standard". if we don't we will be challenged much harder in our ability to advance the standard.

- continue to support the pc company so that they sell Microsoft Windows. in general we have to be much more focused than we have in terms of being responsive to our oems.

From: Bill Gates
To: jonl; paulma
Cc: bradsi; jeffr; joachimk; johnni; mikemap; richta; steveb
Subject: Os/2 status
Date: Friday, April 30, 1993 3:54PM

Who really tries to track what is going on with Os/2?

I am a little bit out of touch with what is going on. I do run into a measurable number of large accounts with measurable amount of Os/2 - banking and financial being most common but many other types of companies as well. However, I dont get a sense they are adding companies. I also don't know if we can get people to switch.

I also dont get a sense they are picking up many random power end users either but this could be wrong.

Some data points to look at:
1. OEMS. We can ask OEMs how much they are selling. Dell, Compaq and others. I doubt it is much.
2. We can analyze the SPA data. I think if you take tools out they are still super small and not growing. This is interesting.
3. We can look at retail seller lists and talk to dealers and distributors.
4. We can talk to ISVs and get their attitude and experience.
5. We can analyze the IBM bundling situation - how many machines is OS/2 going out on nowadays.
6. We can try and get a sense whether they still give the product away.
7. We can get ones of these "workplace Os" presentations they give and try and analyze what they are really saying.
8.Someone should look over the survey that CAMP (chicago business user group) did that shows amazing numbers of Os/2 in lots of their accounts. Does this show accounts we didn't know about and if so how deep is that phenomena?
9. Is the situation for Os/2 different outside the US than inside the US?
10. What revenue is PSP getting from DOS or other products that allows them to fund their future plans? Could we be more agressive at avoiding this.

To give them credit - they are still not humiliated - they do win awards - their ads are very direct which ours are not. Os/2 2.1 will ship very soon and is a solid product. Amazingly all the improvements focus on running Windows applications and it is somewhat better than Windows NT at this in certain respects.

However we should be able to communicate the following points clearly:

API: This is a KEY KEY point. Os/2 started out as SAA and the plan was to attract lots of PM applications. People thought PM might be more popular than Windows are we would not be able to have the best applications. Today no one believes this will happen - virtually nothing is done on Os/2 first and less than 10% do their applications in a special version and even those who do often do inferior versions that cost more money (Lotus as an example). The repositioning of Os/2 as a form of Windows puts it in a very different position - it no longer is an issue for ISVs or corporate developers - they know to develop to the Windows API. It does mean that Microsoft has to deliver the BEST form of Windows and this is healthy - we feel we will be able to do this very well so this is a great situation - clarity for developers about the high volume API they should focus on (windows) - a clear challenge to MS to keep Windows moving ahead so that people buy Windows itself rather than clones. I make this point vividly when I talk about WABI - I say this just shows thanGeven in SUNS markets the devlopers want to focus on the Windows API and they have been forced to come up with some support for it but we will announce a better way to run Windows API on UNIX. I wish a few slides could make this point clearly.

Grand strategy: When IBM had a grand strategy rather than independent businesses they could have their big sales force spend time explaining and supporting OS/2. Now they have moved into a new era and this wont work. We see this with their software groups providing increasing support for Windows. I wish I had a complete list of these things on a slide for everyone to use.[I also with I knew which internal software is still Os/2 only and what we should be doing to fight this - we are still super naive about IBM as an ISV. Mike Maples - do you know someone who could help us figure out who is who in software development at IBM nowadays so at least we have a chance to do good evangelization?]

Bundling trojan horse: IBM PC hardware will deliver based on customer demand.

No future - I often dont make this point because so far I am not very good at it because I am confused about what they are promising and it comes across as rude which is in sharp contrast to the other points I make which seem very rational and business oriented. When I am pushed I do remind people it will be harder for them to keep up with us because they get no code and no user interface license from us and they lose a lot of money.

Action items:
1. Paul Maritz to pick someone to gather some of the recent data about what is going on with OS/2 and have special report sent to Windows focus squad. This is not urgent but I would like to see something in the next 45 days if possible. I would love to see included in there information about our transition plan for Os/2 customers. My basic attitude is to get some visible accounts to move over by helping them in any way that we can.
2. Jon Lazarus to make sure some group tries to capture our besst Os/2 messages including the ones I give about into some slides that can be used in presentations or in material to brief the sales force.

You can read more about the judge's reasoning by reading this transcript [PDF] from part of the last day of the trial. The jury was out deliberating by then, it's December 16, 2011, and the jury had sent a note to the judge, asking for clarification of what middleware was. Specifically, the question was, "Does 'PC operating systems' include middleware that supports apps?" It set off a heated discussion between the judge and the lawyers on how the judge should explain middleware to the confused jury.

I'll show you the complete transcript, as text, at the end so you can see the full implications of the judge's ruling on how to define middleware so you can compare what the judge wrote, under Microsoft's urging, with the Brad Silverberg 1993 email. First, though, the judge referenced pages 5436-7 and 5439 in his ruling, stating that Novell had conceded on those pages of the transcript "that if Microsoft's interpretation of the meaning of the third element is correct, Microsoft is entitled to judgment as a matter of law because Novell did not present evidence to show that its software exposed sufficient APIs of its own to allow ISVs to write full-featured personal products applications to it." But you can see from the part of the transcript the judge references that Novell didn't concede what the judge says it did, unless I'm missing something:

MR. JOHNSON: Your Honor, if I may, I think part of the reason for the confusion is what you just said. Microsoft has defined middleware in such a way that it is an operating system. And that is why you get a question like we did yesterday, is an operating system middleware? Because Microsoft's definition takes it to the extreme, which is --

THE COURT: Yeah. But Microsoft's definition is not and from my judgment relevant to your theory of the case, which is -- I mean, Microsoft can define it any way it wants for purposes of its dictionary. You have defined it in your complaint, and you have a theory that somehow middleware, and middleware makes sense in your theory only if it exposes some degree of functionality which makes it a threat to operating systems.

I don't care what Microsoft defines it as in its dictionary. It doesn't matter. You've got a theory of the case that got you beyond -- got you past limitations and got you to the jury. And I just don't -- I don't care what Microsoft's definition is.

MR. JOHNSON: Your Honor, I wasn't actually even talking about Microsoft's definition in their dictionary at all. I was talking about the definition they want you to instruct the jury on, the definition that they want you to instruct the jury on, which would be directing a verdict, by the way, and that's what it would be here --

5436

THE COURT: No, it wouldn't. You still have your franchise theory.

MR. JOHNSON: It would be directing a verdict on that portion of our theory.

THE COURT: I agree with that. Maybe so, maybe not. That's why I've got to be careful what I say. But they want me to direct a verdict.

MR. JOHNSON: Of course. Of course. And that's understandable given that we have no verdict, and they would like you to, frankly, tip the scale. I don't think that would be appropriate. Your Honor made this judgment carefully sometime ago after this argument was had for about the fifth or --

THE COURT: I understand.

MR. JOHNSON: -- fifth or sixth time. And Your Honor made a reason of judgment. And I don't think that it would be appropriate for you to change that judgment now.

I will point out that Mr. Alepin did not agree with their definition. I read from his testimony at Page 1396.

Question. You're familiar with the term middleware?

Answer. Yes, I am.

Question. The first bullet point there, software that runs on top of an operating system and exposes APIs that encapsulates meaningful functionality. Is that the sort of

5437

definition of middleware that you're comfortable with?

Answer. Yes.

So middleware does expose APIs. It does contain meaningful functionality. But that does not mean, Your Honor, that it's capable of being an operating system in running -- that you're able to create whatever their term they want to use, full-service Office productivity applications on it. That's a different thing. If middleware got to that goal, achieved that goal, it would, in fact, destroy the application barrier to entry, and there would be wide open competition.

But, of course, this case is not about that. If we had to destroy the applications barrier to entry in order to win, we could not be here today. What we have is --

THE COURT: Yes, you could. But that's a whole different question. You could have said -- in a but for world you could have had a technical expert who would have said that it would have existed in which you didn't produce, that but for Microsoft's conduct, the applications to the barrier to entry would have been effectively destroyed. So you could have, but you didn't.

MR. JOHNSON: What we had, though, Your Honor, was an expert that came in and said, as applications are written to the middleware either partially, whether it's 60 percent or 40 percent or whatever it is, that that therefore reduces porting costs to other operating systems and therefore reduces

5438

the applications barrier to entry. And that's what Dr. Noll testified to in this case. And again, Your Honor, this is all a --

THE COURT: Actually it's apropos of nothing. It seems to me that one of your experts, I think it was Noll but it could have been Alepin, actually in his -- it's not in evidence, but in his demonstration did have it destroyed. I remember him showing the wall all the way knocked down.

MR. TULCHIN: He did.

MR. JOHNSON: Your Honor, the visual that you saw showed the wall down. But the testimony of Professor Noll was not to that effect. Clearly, Your Honor, we have two positions with respect to the impact of middleware. Microsoft is defining middleware in such a way that it is an operating system which engenders frankly the confusion the jury feels because they're saying --

THE COURT: The jury -- the fact of the matter is the jury is just confused. I mean, I'm not sure that I shouldn't revisit my decision because I was basing upon the fact that the jury would have its head on straight. But it doesn't, obviously doesn't have its head on straight.

MR. JOHNSON: Your Honor, if I could, if I may, just to end this. As we said at the time, Your Honor would be directing a verdict on that issue.

THE COURT: That's true.

5439

I included page 5438 for clarity, which the judge skipped. Do you see Novell conceding that Microsoft would be entitled to judgement as a matter of law if its definition was correct? If so, point it out, because I don't see it. What I do see is a judge who doesn't know what middleware is and who therefore ignored what Novell wrote in its opposition to Microsoft's motion:

In its 2007 decision, the Fourth Circuit noted that Novell's "claims echo the government's theory" in the Government Case. Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 309 (4th Cir. 2007). This Court also has correctly observed that Microsoft's conduct to thwart Novell's office productivity applications was not significantly different from Microsoft's efforts to thwart Netscape's Navigator web browser and Sun's Java technologies. Novell introduced and proffered substantial evidence to show that all of Microsoft's conduct was part of a common plan.

Even if one looks only at the conduct "directed at" Novell, a rational juror could conclude that Novell made a prima facie showing that Microsoft's exclusion of Novell's office productivity applications strengthened and extended the applications barrier to entry. As explained in the Government Case and in trial testimony, the applications barrier to entry protected Microsoft's monopoly power and prevented potential operating systems from entering the market. "Key franchise" applications and middleware such as WordPerfect, however, could reduce the barrier and help enable consumers to consider non-Windows operating systems. By thwarting the development and distribution of Novell's office productivity applications (and related middleware, e.g., PerfectFit, AppWare, and OpenDoc), Microsoft maintained and extended that barrier to entry.

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Microsoft incorrectly argues that Novell must show that its office productivity applications would have completely eradicated the applications barrier to entry or would have single-handedly "induced users to move to operating systems other than Windows." Microsoft Mem. at 82. Microsoft is wrong in two respects. First, as a matter of law, conduct that helps maintain an entry barrier harms competition and is capable of "contributing" to monopoly power. Second, as the D.C. Circuit ruled, "neither plaintiffs nor the court can confidently reconstruct a product's hypothetical technological development in a world absent the defendant's exclusionary conduct" and requiring such proof would only encourage monopolists to take "more and earlier anticompetitive action." Microsoft, 253 F.3d at 79. Tenth Circuit law is in accord. Microsoft may mock the D.C. Circuit's "edentulous" causation test, but it makes perfect sense not to immunize a monopolist from liability for conduct targeting "nascent" threats, if the monopolist cannot justify that conduct as pro-competitive. At that point, the monopolist bears the uncertain consequences of its own conduct.

Microsoft's myopic argument that its conduct could not have harmed competition — because Windows 95's market share would have increased "but for" the de-documentation of the namespace extension APIs — is actually a critical concession that Microsoft sacrificed short-run profits for a long-term gain, consistent with its pattern of engaging in conduct that it could not justify on any ground other than it "operated to reinforce [its] monopoly power." United States v. Microsoft Corp., 84 F. Supp. 2d 9, 28 at ¶ 67 (D.D.C. 1999) [hereinafter "Finding(s) of Fact"]. Antitrust law assumes that when monopolists forgo short-term profits, they do so only in exchange for an offsetting benefit; otherwise, their conduct would be economically irrational. Here, the evidence at trial showed that Microsoft planned to offset its short-term losses with ownership of the key franchise applications and elimination of the middleware threats, all with

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the effect of artificially maintaining and increasing barriers to entry in the PC operating systems market, and without any legitimate pro-competitive justification.

Microsoft's inability to establish a legitimate pro-competitive justification is highly significant because it proves that Microsoft was not competing on the merits. It was not trying to design a better product or increase output. To the contrary, former Microsoft President and CEO Bill Gates admitted that he acted to deter innovation solely because Microsoft was not ready to compete on the merits with Novell. The evidence exposed Microsoft's "justifications" as pretextual. At best, Microsoft's proffered justifications create a question of fact unsuitable for a Rule 50 motion.

Part III (Causation And Damages): Novell had every right to rely on Microsoft's commitment to document and support the namespace extension APIs. Novell reasonably based its development plans on Microsoft's commitment given the long history of cooperation between the two parties, and there was ample evidence that Novell would have released its Windows 95 applications within 90 days of the release of Windows 95 had Microsoft not decided to break its commitment. Mr. Gates' decision to renege on Microsoft's commitment (without any nonpretextual, pro-competitive justification) left Novell with no practical ability to release a marketable product within the critical 90-day window of opportunity for new applications. Microsoft's claim that Novell is responsible for those delays rests entirely on disputed facts.

Microsoft's assertion of a black letter rule that a plaintiff must either be a consumer or a competitor to have antitrust standing relies on a misreading of a single case and ignores Tenth Circuit and Supreme Court precedent. Microsoft's claim that Novell failed to cite a case in which a private antitrust plaintiff obtained a money judgment based on a "cross-market" theory of anticompetitive harm is equally unavailing. The Government Case was a "cross-market" case

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and there is no reason to reject that decision simply because the United States sought equitable relief. Moreover, Novell has repeatedly cited Reazin v. Blue Cross & Blue Shield of Kansas, Inc., 899 F.2d 951 (10th Cir. 1990), a Tenth Circuit case in which a hospital obtained a money judgment for an antitrust claim against Blue Cross. The evidence showed that Blue Cross viewed the hospital's affiliation with a health maintenance organization as a potential threat to its monopoly in the private healthcare financing market. The Tenth Circuit specifically affirmed the hospital's standing even though the hospital did not compete in the market for private healthcare financing. Id. at 962-63.

If the jury finds that Microsoft engaged in anticompetitive conduct that proximately caused antitrust injury to Novell, it will have established Novell's right to recover damages. Courts accept a degree of uncertainty in fixing the amount of damages and will not reject them so long as the calculation is not based on "'speculation or guesswork.'" Law v. NCAA, 5 F. Supp. 2d 921, 929 (D. Kan. 1998) (citations omitted). Thus, the question of damages should not be determined in a Rule 50(b) motion. In any event, Novell's damages expert properly calculated damages under several different theories and provided the jury with a reasonable basis to determine Novell's damages.

Part IV (Under Aspen Skiing, Judgment As A Matter Of Law Would Be Improper): Although Novell's case is not a unilateral-refusal-to-deal case that would be governed by Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004), and Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), applying the Aspen Skiing framework reaches the same result — that Microsoft's conduct harmed competition and Novell — through a very similar analysis. Microsoft's long-standing course of dealing with Novell/WordPerfect, and its commitment to provide the namespace extension APIs, demonstrate

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that Microsoft's course of dealing was profitable and therefore pro-competitive. Microsoft's admission that it lost customers by reneging on its commitment is more than sufficient to establish a prima facie case of harm to competition and shift to Microsoft the burden of establishing a pro-competitive, non-pretextual justification for its conduct. The unilateral-refusal-to-deal cases relied on by Microsoft all involve situations in which the monopolist increased its short-term profits and the monopolist's conduct was therefore rational quite apart from any potential effect on preserving monopoly power.

Part V (Novell's Claim Is Properly Before The Court): Microsoft waived many of the issues it now seeks to raise by failing to raise them in its Rule 50(a) motion. Specifically, Microsoft has waived its arguments that (1) Novell sold its claim to Caldera in the Asset Purchase Agreement, (2) Novell's claim is barred by the NetWare Settlement Agreement, and (3) Novell's claim is barred by the statute of limitations. Furthermore, even if Microsoft had not waived these issues, each has already been definitively ruled on by the Fourth Circuit, and therefore Microsoft's arguments are barred by the law of the case doctrine. Microsoft has not shown, nor can it show, any exceptional circumstances that would require the Fourth Circuit's rulings on any of these issues to be revisited.

In any event, even assuming that Microsoft had not waived these issues and that the law of the case doctrine did not apply here, Microsoft's arguments still should be rejected because they are substantively meritless. First, Novell did not, through the Asset Purchase Agreement, sell its claim to Caldera. Microsoft's argument hinges on the same mistaken interpretation of "association" that the Fourth Circuit found lacked logical limiting principles. More to the point, a mere utterance of the term "DOS" during the trial — in reference to WordPerfect's installed base — does not create an association to the products explicitly identified as the subject of

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Novell's Asset Purchase Agreement with Caldera. Second, the NetWare Settlement Agreement does not bar Novell's claim. That agreement expressly preserved Novell's right to introduce any and all factual evidence in support of its claims, which is exactly what Novell has done. The evidence adduced at trial supports the claim stated in Novell's Complaint and therefore Microsoft's argument that Novell's claim was released under the NetWare Settlement Agreement is without merit. Finally, the statute of limitations does not bar Novell's claim. Microsoft's argument on this issue suffers from two fundamental flaws: first, Microsoft mischaracterizes the arguments made by Novell's counsel during trial, and second, Microsoft continues to misinterpret the findings in the Government Case. The portions of statements of Novell's counsel relied on by Microsoft are taken out of context and do not support Microsoft's statute of limitations argument. Moreover, Novell's middleware and key franchise applications theories are perfectly consistent with the findings in the Government Case.

PROCEDURAL HISTORY

I. NOVELL'S COMPLAINT

On November 12, 2004, Novell filed a Complaint alleging in Count I that Microsoft unlawfully maintained its monopoly in the PC operating systems market through anticompetitive conduct targeting Novell's office productivity applications. Compl. ¶¶ 151-155.2 More specifically, the Complaint alleges that Microsoft viewed Novell's office productivity applications, including WordPerfect and Quattro Pro, as a threat to Microsoft's PC operating systems monopoly power in two ways. First, Novell's office productivity applications contained

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and acted as "middleware," a category of software that threatened Microsoft's monopoly power, as shown in the Government Case. Compl. ¶¶ 43-51; Microsoft, 253 F.3d at 53-54. Second, Novell's office productivity applications, as popular and important cross-platform applications available on operating systems other than Windows, could have helped reduce the applications barrier to entry protecting Microsoft's monopoly power. Compl. ¶ 52; Microsoft, 253 F.3d at 55.

The Complaint outlines the Government Case against Microsoft in detail, noting that "Microsoft's Windows monopoly was threatened by 'middleware' such as Netscape Navigator . . . and Sun Microsystems' implementation of the 'Java' technologies." Compl. ¶ 44. It also reiterates the courts' determination that "Microsoft engaged in anticompetitive conduct designed to exclude such middleware from installation on PCs using the dominant Windows operating system, on which any middleware would depend for survival until sufficient competing operating systems could emerge" and that Microsoft was found to have "violated Section 2 of the Sherman Act 'by preventing the effective distribution and use of products that might threaten [its] monopoly'" in a dozen ways. Id. (quoting Microsoft, 253 F.3d at 58).

The Complaint goes on to state that "[f]or related reasons, Novell's WordPerfect and other office productivity applications posed a significant threat to the applications barrier to entry that protected the Windows monopoly." Compl. ¶ 45. Specifically, the Complaint notes that Novell developed a "strategy to provide cross-platform functionality to applications (including its office productivity applications)," using cross-platform middleware technologies such as "OpenDoc" and "AppWare." Compl. ¶¶ 47, 51. The Complaint describes Novell's strategy of combining WordPerfect, AppWare, and OpenDoc as being nearly identical to Netscape's and Sun's strategy of coupling Navigator and Java to form a middleware platform with the potential to erode the applications barrier to entry protecting Microsoft's PC operating systems

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dominance. Compl. ¶¶ 47, 48, 51. "Like the Netscape-Java combination, the combination of WordPerfect, a popular application, with the system-neutral OpenDoc-protocol and AppWare development environment, threatened Microsoft's operating systems monopoly." Compl. ¶ 51.

II. MICROSOFT'S MOTION TO DISMISS

In January 2005, Microsoft moved to dismiss Novell's Complaint. On Count I, Microsoft argued that Novell had sold its claim when it transferred its DR-DOS (a PC operating system) business to Caldera. Microsoft also argued that Novell lacked antitrust standing to bring Count I because Novell was neither a competitor nor a consumer in the PC operating systems market.3

On June 10, 2005, the Court held that Novell continued to own the claim set forth in Count I because that claim is for damage to Novell's applications software rather than to DR-DOS, and it would be a "far stretch" to infer otherwise. Novell, Inc. v. Microsoft Corp. (In re Microsoft Corp. Antitrust Litig.), No. 1:05-cv-01087, 2005 WL 1398643, at *1 (D. Md. June 10, 2005), aff'd, 505 F.3d 302 (4th Cir. 2007). The Court also confirmed that Novell had antitrust standing to bring Count I, as the law does not require a plaintiff to be a competitor or a consumer in the relevant market.4 Id. at *2-3.

At Microsoft's request, the Court certified this case for interlocutory appeal. The Fourth Circuit granted Microsoft's appeal request only as to the issue of standing.5 See Fourth Circuit Order (Jan. 31, 2006) (attached as Ex. A). The Fourth Circuit affirmed the District Court and remanded the case for further proceedings. Novell, 505 F.3d at 305.

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III. SUMMARY JUDGMENT PROCEEDINGS

On remand, the parties undertook a lengthy discovery process that included dozens of depositions and the exchange of millions of pages of documents. Fact discovery closed in the spring of 2009 and was immediately followed by expert discovery. The parties submitted nine expert reports, and experts were deposed in August and September 2009.

After the close of expert discovery, the parties briefed motions for summary judgment. Novell renewed an earlier motion for summary judgment on certain Microsoft affirmative defenses based on Microsoft's allegation that Novell had sold its Count I claim to Caldera. See Novell Mem. in Supp. of Renewed Mot. for Summ. J. at 1 (Oct. 7, 2009) (D. Md. Dkt. # 102-1). Novell argued, relying on the Court's earlier ruling, that nothing in its transaction with Caldera regarding DR-DOS transferred claims related to the office productivity applications. Id. Microsoft opposed Novell's motion and cross-moved for summary judgment, arguing that Novell had sold the claim set forth in Count I to Caldera. See Microsoft Mem. in Opp'n to Novell's Renewed Mot. for Summ. J. & in Supp. of Microsoft's Cross-Mot. for Summ. J. at 1-2 (Nov. 13, 2009) (D. Md. Dkt. # 104-2).

Microsoft also moved for summary judgment on the merits, arguing that no genuine issues of material fact existed and that Microsoft was entitled to a judgment in its favor as a matter of law. See Microsoft Mem. in Supp. of Mot. for Summ. J. (Oct. 7, 2009) ("Microsoft Summ. J. Mem.") (D. Md. Dkt. # 101-2). In particular, Microsoft argued that Novell could not substantiate a Section 2 claim because Novell's allegations fell outside of the construct set forth in Aspen Skiing, and instead more closely resembled the allegations deemed insufficient in Trinko. See Microsoft Summ. J. Mem. at 29-35. Microsoft also contended that Novell could not

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provide facts sufficient for a jury to conclude that Microsoft's conduct harmed competition in the PC operating systems market. Id. at 23-29.

In March 2010, the Court entered summary judgment against Novell on Count I, holding that Novell had sold any claims associated with the PC operating systems market in its transaction with Caldera for DR-DOS. Novell, Inc. v. Microsoft Corp. (In re Microsoft Corp. Antitrust Litig.), 699 F. Supp. 2d 730, 735 (D. Md. 2010), rev'd in part, 429 F. App'x 254 (4th Cir. 2011). The Court also held, however, that but for the sale-of-claims issue, Count I set forth a triable claim that could not be resolved as a matter of law.6 Id.

In holding that Count I presented a triable claim that could not be resolved as a matter of law, the Court noted that Novell's allegations of anticompetitive conduct go beyond a mere refusal to cooperate that would be barred by Trinko because "Novell has presented evidence that Microsoft affirmatively misled Novell about Windows 95." Id. at 746. Moreover, the Court held, even assuming Microsoft's conduct could properly be characterized as a refusal to cooperate, "there is a question of fact about whether it was anticompetitive under Aspen and Trinko." Id. The Court also held Novell had presented evidence of Microsoft's "predatory motives" and a fair inference could be drawn that Microsoft "'sacrifice[d] short-run benefits and consumer goodwill in exchange for a perceived long-run [anticompetitive impact].'" Id. (second brackets in original) (citation omitted).

The Court also found that Novell had raised a genuine issue of fact as to whether Microsoft's conduct "directed at" Novell significantly contributed to harming the PC operating systems market. Id. at 749. Specifically, the Court stated:

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Novell has no obligation to create some "hypothetical market place," in which none of the other ISVs or applications had been weakened by anticompetitive conduct, and then prove that the conduct at issue would still have significantly contributed to anticompetitive harm in that hypothetical market. It would be contrary to the purpose of § 2 to immunize a monopolist for anticompetitive conduct, which in fact significantly contributed to anticompetitive harm, simply because that harm was caused by conduct directed at multiple small threats, none of which could prove that the conduct directed at any single firm would have by itself significantly contributed to the defendant's monopoly if none of the other small firms had been similarly weakened. . . . Rather, Novell need only prove that the conduct that harmed its software applications contributed significantly to Microsoft's monopoly in the PC operating system market considering all the characteristics of that market at the time, including the condition of other ISVs and applications.

Id. at 749-50 (citations omitted).

Novell appealed, arguing that it did not sell the claim set forth in Count I to Caldera. See Novell Appellant Br. at 2-3 (Sept. 7, 2010) (relevant portions attached as Ex. B). In opposition, Microsoft argued that the Court's judgment should be affirmed on the same grounds on which it had been decided, or on the alternative grounds that Count I was barred by res judicata and that Novell could not prove as a matter of law that Microsoft's conduct harmed competition in the PC operating systems market. See Microsoft Appellee Br. at 1-3 (Sept. 17, 2010) (relevant portions attached as Ex. C).

The Fourth Circuit reversed this Court's ruling regarding the sale-of-claims issue and remanded for further proceedings, holding that Novell did not sell the claim set forth in Count I. Novell, 429 F. App'x at 255. Additionally, the Fourth Circuit found that Microsoft's res judicata argument was meritless and rejected Microsoft's arguments that it was entitled to judgment as a matter of law on the ground that Novell could not prove harm to competition in the PC operating systems market, finding that Novell's Count I claim was "appropriate for trial." Id. at 261-63.

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IV. COLLATERAL ESTOPPEL EFFECT OF THE GOVERNMENT CASE

In the Government Case, the United States alleged that Microsoft had violated both federal and state antitrust laws by engaging in anticompetitive conduct to protect its monopoly power in the PC operating systems market. See Microsoft, 253 F.3d at 47. After a bench trial, Judge Thomas Penfield Jackson issued 412 Findings of Fact. See Microsoft, 84 F. Supp. 2d 9. Based on those Findings of Fact, Judge Jackson issued Conclusions of Law holding that Microsoft (1) illegally maintained its monopoly in the PC operating systems market, (2) unlawfully attempted to monopolize the web browser market, and (3) entered into an illegal tying arrangement by bundling Internet Explorer with Windows. See United States v. Microsoft Corp., 87 F. Supp. 2d 30, 35-56 (D.D.C. 2000), aff'd in relevant part and rev'd in part, 253 F.3d 34 (D.C. Cir. 2001). As a remedy for this conduct, Judge Jackson ordered that Microsoft be separated into two companies, one with responsibility for the operating systems business and the second with responsibility for the applications business. Microsoft, 253 F.3d at 45 (citing United States v. Microsoft Corp., 97 F. Supp. 2d 59, 64-65 (D.D.C. 2000)).

Microsoft appealed Judge Jackson's decision and the United States Court of Appeals for the District of Columbia Circuit affirmed Judge Jackson's determination that Microsoft had illegally maintained its monopoly in the PC operating systems market through twelve types of anticompetitive conduct. See id. at 51, 58-80. The D.C. Circuit, however, reversed Judge Jackson's ruling with respect to the tying and attempted monopolization claims, as well as eight other types of conduct he had determined were anticompetitive. See id. at 46, 64-97. In addition, the D.C. Circuit reversed Judge Jackson's order of divestiture, in part because the Government needed to prove more than just liability to justify such a drastic remedy — it had to prove a clearer indication of a significant causal connection between the anticompetitive conduct

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and maintenance of monopoly power. Id. at 80, 106-07. Nevertheless, the D.C. Circuit did not set aside any of Judge Jackson's Findings of Fact, as Microsoft had requested. See id. at 116. Some of those Findings of Fact have collateral estoppel effect in this case. See, e.g., Holley Aff., Ex. B to Microsoft Mem. (Dkt. # 495-3).

...

D. Novell's Office Productivity Applications And Suite Were "Middleware" With
The Potential To Weaken The Applications Barrier To Entry

WordPerfect and its shared code "PerfectFit," as well as AppWare and OpenDoc in the PerfectOffice suite, were "middleware" because they relied on interfaces provided by the underlying Windows operating system while simultaneously exposing their own APIs to developers. See Finding of Fact ¶ 28. Novell's office productivity applications and shared code technologies were popular, were cross-platform, and exposed a wide range of APIs and sophisticated functionality to developers.

1. Middleware Could Reduce the Applications Barrier to Entry

Microsoft argues that Novell has failed to establish that "WordPerfect, AppWare, OpenDoc and PerfectFit" or "some combination of them" were middleware that could have affected competition in the PC operating systems market. Microsoft Mem. at 6. Microsoft's definition of middleware, however, rests on a deeply flawed interpretation of the opinions in the Government Case and of Dr. Noll's testimony in this case.

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The Government sued Microsoft under the theory that middleware could reduce the "chicken-and-egg problem," Finding of Fact ¶ 39, by taking over some of the platform functionality provided by Windows and thereby "weaken the applications barrier to entry." Finding of Fact ¶ 68. Judge Jackson defined "middleware" as software that "relies on the interfaces provided by the underlying operating system while simultaneously exposing its own APIs to developers." Finding of Fact ¶ 28. The D.C. Circuit agreed, writing that middleware simply refers to "software products that expose their own APIs." Microsoft, 253 F.3d at 53 (citing Finding of Fact ¶ 28).

The Government focused its attention on two specific types of middleware software: Netscape's Navigator and Sun's Java technologies. Id. Judge Jackson and the D.C. Circuit found that both Navigator and Java were middleware products. Id. (citing Finding of Fact ¶ 28). In fact, Microsoft's counsel admitted that Navigator posed a potential threat to Windows before the D.C. Circuit. Id. at 79.

Judge Jackson found that Navigator had three attributes that gave it "the potential to diminish the applications barrier to entry." Finding of Fact ¶ 69. First, the Navigator browser was a complement to Windows and had the potential to gain widespread use. Id. Complementing Windows thus makes a middleware product more likely, not less likely, to diminish the applications barrier to entry. Cf. Microsoft Mem. at 87-90. Second, Navigator exposed "a set (albeit a limited one) of APIs" which provided platform capabilities. Finding of Fact ¶ 69. Third, Navigator was cross-platform. Id. Similarly, the Java technology exposed its own APIs and had the potential to reduce porting costs. See Findings of Fact ¶¶ 68, 77. Although a potential threat, neither Navigator nor Java exposed enough APIs to support the development of "full-featured applications that will run well on multiple operating systems

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without the need for porting." Finding of Fact ¶ 74. In fact, both products were at least "several years" away from evolving into a real threat to the applications barrier to entry, if at all. Findings of Fact ¶¶ 28, 29.

Novell's software had all of the characteristics of middleware. Like Navigator and Java, Novell's office productivity applications would complement Windows. See Tr. 265:25-267:8, 268:1-270:25 (Harral); Tr. 638:7-12 (Richardson); Tr. 1227:1-6, 1227:15-18 (Frankenberg); Tr. 1664:23-1665:11, 1666:4-1667:23 (Alepin). Novell's office productivity applications were also very popular and had the potential to gain widespread use on Windows 95 due to WordPerfect's existing installed base. See, e.g., PX 378; PX 412; PX 599A; Tr. 830:22-23, 831:9-11 (Gibb) (describing WordPerfect as "very popular" and agreeing that WordPerfect had a "big loyal base of customers"); PX 414 at NOV-B00668860 (noting that with PerfectFit, developers could develop programs for more than 18 million people who use WordPerfect and other products in the PerfectOffice suite); Tr. 1009:6-1010:18, 1011:4-20 (Frankenberg) (explaining that Novell had a large opportunity to gain market share in suites given its installed base of millions of users); see also discussion supra Facts Part I.A-B.

Further, Novell's office productivity applications, and the PerfectFit and AppWare technology integrated and bundled with them, exposed a large set of APIs to software developers. See, e.g., PX 371 at 6-8 (indicating PerfectFit Shared Code 2.3 had 1555 APIs, with more to be added in PerfectFit 95); PX 368 at 15-17 (same); PX 191 at FL AG 0099045-47; Tr. 1405:4-1406:16, 1408:8-1409:10, 1410:8-14 (Alepin). In addition, WordPerfect and PerfectFit were cross-platform on a variety of operating systems, and Novell planned to make PerfectOffice for Windows 95 cross-platform as well. Finally, Novell's AppWare and OpenDoc technologies, when integrated and bundled with Novell's office productivity applications,

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allowed developers to create their own cross-platform software applications. See, e.g., PX 410 at NOV-B00656847, 54-56; PX 90 at MS-PCA 2410390; PX 412 at NOV 00498197, NOV 00498202-03; Tr. 1013:19-1015:11, 1016:9-1017:19 (Frankenberg); Tr. 1408:8-1409:10 (Alepin). In fact, unlike Navigator and Java, AppWare allowed for the development of fully portable stand-alone programs. See infra Facts Part I.D.3. Even if developers only partially relied on the APIs exposed by Novell's office productivity applications, these middleware technologies, either alone or in combination with AppWare and OpenDoc, would reduce porting costs and lessen the applications barrier to entry. See, e.g., Finding of Fact ¶ 74 (even partial reliance on Java APIs reduces porting costs and encourages cross-platform applications development).

2. Microsoft Reasonably Feared Novell as a Middleware Vendor

There is substantial contemporaneous evidence in the record that Microsoft viewed Novell's middleware technologies as a potential threat to its continued monopoly power in the PC operating systems market.

According to Microsoft, Novell was well positioned to threaten the Windows monopoly even before Novell acquired WordPerfect because "they have an installed base; they have a[] channel; they have marketing power, they have good products. AND they want our position. They want to control the APIs, middleware, and as many desktops as they can in addition to the server market they already own." PX 32 at MS7079459. Microsoft considered Novell "THE competitor to fight against" because, in the words of senior Microsoft executive Jim Allchin, "[t]hese guys are really good." Id.

Novell was "dangerous not only because of [its NetWare product] but because they are intent on becoming a 'CROSS-PLATFORM' PLATFORM company." PX 33 at MS 5011635.

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In contrast, Microsoft did not have sufficient "ability to differentiate its applications from the competition" and did not "have credible products to counter Notes and Novell." Id. at MS 5011640. In Microsoft's view, Novell's "strong cross-platform API push" was an "insidious" and ever-present threat to Microsoft's continued dominance, see id. at MS 5011648, and Microsoft executives continually voiced their fears that competitors would use middleware products to undercut Windows:

What I see is that our competitors will try to turn windows into the new unix — in a bad way. [T]he unix that Frankenberg called the "[B]osnia [H]erzegovina of operating systems." [T]hat is, they will "adopt" windows and then split the windows standard. [T]hey will take the win 3.1 level of api as the standard and then build their own middleware layers on top . . . . [T]hey hope to create mass confusion about exactly what the windows api's are, and take them out of microsoft's ownership. . . . If they can freeze "windows" at 3.1 (or nt) level api, then they can be the provider of value added services. [I]t gives them more freedom to clone windows — the definition of "windows" is static. [F]or [N]ovell, it makes it easier for them to slip dr dos underneath. [I]t lets them position themselves as the supplier of connectivity services for windows to servers — the "middleware" which builds on windows and thus takes ownership away from us. [T]his effort to balkanize windows is a clear threat . . . .

PX 44 at MS7080466-67. Mr. Gates "totally agree[d]" with this view. Id. at MS7080466.

Similarly, in an internal Microsoft email thread dated June 15, 1993, senior Microsoft executive Brad Silverberg wrote "our competitors are going to do everything they can to fragment windows, they will build their own middleware to claim api ownership." PX 54 at MS 0185884. In response, Microsoft executive John Ludwig wrote to Brad Silverberg, David Cole, Paul Maritz, and others: "[O]ur worst nightmare is novell/lotus being successful at establishing their 'middleware' as a standard. [O]urs ought to be ubiquitously available to forestall this. [O]ur huge advantage vis-Ã -vis novell is our end-user franchise, we shouldn't cast aside this advantage." Id.

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A few months later, Mr. Silverberg wrote that "Novell is coming at us from every direction possible and has a very concerted, multilayer attack strategy, including the political system. I would [also] include [as competitors] other companies who are intent on building 'middleware,' which is just system software by another name." PX 88 at MSC 090001843-44. Mr. Silverberg cautioned that Microsoft should not continue to "vastly underestimate the competitive situation for operating systems" that middleware represented because "[e]ach competitor can exploit a weakness, and they are getting better every day." Id.

3. Novell's Office Productivity Applications and Suite Were Middleware

Shared code was a component of the WordPerfect word processor13 that was shared among the word processor and other WordPerfect Corporation products for efficiency purposes. Tr. 206:3-207:5 (Harral). WordPerfect had been working on shared code since as early as 1991. Tr. 210:24-211:3 (Harral). Each product had an application "engine" that was built on top of the shared code layer, which could then move between any operating system platform where shared code resided. Tr. 206:3-207:5 (Harral). Because multiple product engines shared a common layer of code, their behaviors would be the same and they would all operate in a similarly integrated way. Id. Shared code eventually started to take on file handling and file management functionality, such as providing dialogs for opening and saving files. Tr. 209:15-210:22 (Harral).

WordPerfect had traditionally published or provided to third parties portions of the shared code. Tr. 218:21-219:16 (Harral). Over time, WordPerfect began to publish all of its shared code, and promoted it explicitly to ISVs as a resource that could be written to and that would

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enable them to use the same code base across different operating systems. Tr. 218:21-219:16 (Harral). When Novell acquired WordPerfect, Novell branded the shared code as "PerfectFit." Id.; Tr. 786:16-787:2 (Gibb). PerfectFit became a part of the PerfectOffice suite and shipped with PerfectOffice. Tr. 212:16-19, 390:24-391:2 (Harral).

All the functionality that PerfectFit provided to WordPerfect, including file viewers, file converters, button bars, and menus, was available to third-party developers as well. Tr. 226:9-19 (Harral). WordPerfect offered "a PerfectFit Software Developers Kit (SDK) to [third parties] that include[d] a broad range of developer tools including PerfectScript, shared programming code, and APIs." See PX 207 at NOV 00498183. PerfectFit offered third-party developers a (1) common look and feel (menus, icons, toolbars); (2) common dialogues (File Open, Save, Save As); (3) common tools (Speller, Thesaurus, Grammar Checker, File Manager); (4) common automation (QuickCorrect, QuickHelp, QuickMenus); (5) common scripting language (record and play back across applications); and (6) common code (shared between applications). See PX 395 at NWP00008289.

The common scripting language in shared code, called PerfectScript, gave third-party developers the ability to call scriptable components and to capture and replay tasks performed in WordPerfect. Tr. 227:23-229:10 (Harral). WordPerfect also contained the WordPerfect Open API ("WOAPI"), which allowed developers to intercept certain commands and insert new code to customize WordPerfect functionality. Tr. 229:12-230:23 (Harral); see also PX 410 at NOV-B00656859. WOAPI was supported on the Windows, DOS, and UNIX versions of WordPerfect and other applications. See PX 192 at MX 9037665. WordPerfect also exposed Writing Tools APIs that were supported on the Windows and UNIX versions of WordPerfect. Id. PerfectFit, PerfectScript, and WOAPI were all technologies that were included in the

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WordPerfect word processor. Tr. 230:24-231:3 (Harral). These technologies were also included within the PerfectOffice suite. Tr. 231:4-6 (Harral). In using these features, third-party developers would write their own applications with shared code using the shared code libraries, which contained the shared code APIs that could be called. Tr. 226:20-227:13 (Harral). Third parties would simply write their applications against the shared code layer and associated APIs, and then compile their programs using the shared code libraries for use in their products. Id. As a result of using shared code, application developers (at least for the functionality utilized) did not have to understand the underlying operating systems on which their programs ran. Tr. 1016:3-8 (Frankenberg).

Novell started a program called PerfectFit Partners to market shared code to developers outside the company who wished to license it. Tr. 225:6-17 (Harral); Tr. 784:9-24 (Gibb); PX 192 at MX 9037665. PerfectFit Partners included at least 1,000 member companies. See Tr. 887:17-25, 888:13-15 (Gibb); see also PX 333 at MS-PCA 1985716. Two teams within Novell, the shared code team and the documentation team, worked together to document the shared code so that third parties could use it. Tr. 225:18-226:8 (Harral); Tr. 784:9-24 (Gibb). Novell also provided support, similar to Microsoft's Premier Support, to developers utilizing shared code in their products. Tr. 225:18-226:8 (Harral).

WordPerfect and its shared code was indisputably middleware because it exposed its own APIs to software developers. Tr. 783:5-18 (Gibb); Tr. 1404:19-1406:16, 1408:8-1409:23, 1410:8-14 (Alepin); see also Tr. 236:2-6 (Harral); Microsoft, 253 F.3d at 53; Finding of Fact ¶ 28. It was software that sat "in the middle" between the application core and the operating system and provided features that would help programs work through problems and achieve needed functionality. Tr. 233:15-234:19 (Harral). Developers would purchase or license the

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shared code as middleware so that they could use its features in their products instead of having to incur the costs to develop these features themselves, which could in some cases take years. Id. Microsoft recognized that PerfectOffice was an emerging middleware platform. For example, Cameron Myhrvold wrote in 1994 that "[Microsoft] is in a platform war with Office just as we are with Windows" because "Lotus and Novell/WP are building competing application 'platforms.'" See PX 201 at MX 6046625. Microsoft was particularly concerned about Novell providing "PerfectFit Technology and WP 'SDKs' & WP 'Windows Open API'" to ISVs and including "Visual App Builder [AppWare] in PerfectOffice." See id. at MX 6046634.

AppWare, which was part of the PerfectOffice suite, was both middleware — because it provided APIs to developers — and an interface that allowed the use of these APIs. Tr. 1406:11-16, 1408:8-1409:10, 1410:8-14 (Alepin); Tr. 236:2-8 (Harral). It was a graphical and object-oriented application development tool (formerly known as Visual AppBuilder) that allowed developers to build stand-alone programs. PX 410 at NOV-B00656854. Developers could use AppWare in PerfectOffice to build applications that integrated with PerfectOffice or were completely stand-alone programs independent of PerfectOffice. Id. Developers could quickly build fully portable software by linking components called AppWare Loadable Modules ("ALMs").14 PX 412 at NOV 00498203; see also Tr. 1408:8-1409:10 (Alepin) (noting that if a programmer uses AppWare defined programming interfaces his "application will be portable across multiple platforms"). As Dr. Noll explained, "anybody who writes a program using

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AppWare, therefore is writing a program that is cross-platform, and, by doing so, reducing the applications barrier to entry."15 Tr. 1771:2-11 (Noll).

AppWare enabled cross-platform development by taking WordPerfect's shared code and other technologies and presenting them in a conceptual way that allowed non-programmers to write programs. Tr. 234:22-236:1 (Harral). In fact, using AppWare in PerfectOffice enabled users to build applications through a simple interface by combining and connecting different ALM icons. PX 412 at NOV 00498203. In total, the combination of WordPerfect and AppWare exposed more programming interfaces to third-party developers than Netscape Navigator exposed. Tr. 1410:8-14 (Alepin).

Senior Microsoft executive Paul Maritz thought of AppWare as an explicit attempt by Novell to develop a layer that would provide all of the services required by applications. Dep. of P. Maritz, May 24, 1994 (played Oct. 25, 2011) at 108:1-11 (Dkt. # 283). He claimed internally that Novell's goal with AppWare was for third-party software developers to know only about AppWare and obtain all the services that their applications needed from AppWare. Id. Microsoft viewed AppWare as one of its most serious long-term threats because AppWare held the potential to allow Novell to incrementally obtain what would amount to an operating system over time. Id. at 108:12-21. In fact, Mr. Silverberg believed that AppWare had already become the equivalent of an operating system by 1994:

Q. What is your understanding of AppWare?

A. AppWare is an [operating] system. AppWare contains all of the functions of an operating system and is a wonderful attempt by Novell to again reduce Windows or anything underneath it to a commodity so it could then

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get applications completely dependent on AppWare, have no dependence on Microsoft or other pieces underneath it, so they can then supply their own pieces underneath it and thus eliminate — as Mr. Noorda has stated, his goal is a Windows-free world.

Tr. 932:18-933:1 (Silverberg) (emphasis added).

Similarly, Mr. Silverberg wrote that Novell's strategy with AppWare "will be an incremental, insidious one." See PX 127 at MS 5064010. Microsoft viewed AppWare as "dangerous," stating that AppWare "might be [the] first viable platform for commercial cross-platform development" and "could in the long run blur the o/s API line and [squeeze] us into the camp of BIOS builders." See PX 90 at MS-PCA 2410390. AppWare was "scary" because "it is just another windowing API, and a fairly complete one. This is direct competition to Windows." PX 102 at MS7096165 (emphasis added).

Microsoft's Mr. Ludwig recognized in October 1993 that AppWare was a very real competitive threat, writing that "[t]he AppWare Foundation provides a 'common, cross-platform set of APIs . . . (which) allows developers to maintain a single-source base for all development platforms.' Basically, this layer virtualizes all services of the underlying OSes on which it is hosted, insulating the developer from differences in these platforms." See PX 531 at MS 0115590-91. According to Mr. Ludwig, "[t]he AppWare Foundation is an entirely new [operating system] API. It offers virtually all the services of the OSes it is hosted upon, but with a brand new and different API set." Id. (emphasis added). Likewise, a February 22, 1994 email forwarded by Microsoft executive Steven Sinofsky to Mr. Gates states that "AppWare's cross-platform nature makes it total goodness in the eyes of the customer. We need to take it seriously, make sure we understand it, create a cohesive competitive statement, and distribute appropriate info to combat the threat." See PX 144 at MS 5036490.

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In the spring of 1995, Novell outlined a comprehensive plan to provide OpenDoc software development through AppWare. See PX 391 at NOV-B01192363. OpenDoc was an industry-standard architecture for component software that was backed by numerous industry-leading software and systems vendors. Id. It enabled developers to use interchangeable components to construct applications that could be shared across hardware and operating system platforms, including Macintosh, OS/2, Windows, and UNIX. Id.

Just as with WordPerfect, PerfectFit, and AppWare, Microsoft feared the threat posed by OpenDoc. See Tr. 933:2-9 (Silverberg); Dep. of P. Maritz, May 24, 1994 (played Oct. 25, 2011) at 104:10-106:6. For example, in an email dated December 29, 1993, Mr. Silverberg wrote, "[Component Integration Laboratories] is a group consisting of IBM, Novell, Apple, Oracle, WordPerfect, XSoft and Taligent intent on building a competitive OS's to ours. OpenDoc, for example, is part of their effort." See PX 488 at MS-PCA 2608514. Microsoft was so concerned with OpenDoc as a competitive operating system technology that it wanted to impose a nondisclosure agreement so that OpenDoc developers within WordPerfect and other companies would not receive Microsoft's operating system betas. See, e.g., PX 489. Mr. Silverberg in particular wanted to "exclude those people who are working on competitive os efforts, such as opendoc and os/2, from access to chicago [Windows 95]." See PX 490 at MS-PCA 2618244.

4. Novell's Cross-Platform Office Productivity Applications and Suite Could
Have Helped Alternative Operating Systems Compete with Microsoft

WordPerfect was a cross-platform application during the relevant time period. For example, WordPerfect architect Adam Harral testified at trial that the company had written WordPerfect to over a dozen different operating systems, including DEC, NeXT, Macintosh, Amiga, DOS, Windows, and OS/2. Tr. 216:3-18 (Harral).

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Gary Gibb also testified that WordPerfect Corporation's technology was specifically developed to run on many different operating systems and that the company had several platform-specific groups, including a Mac group, a VAX/VMS group, a UNIX group, an OS/2 group, and a NeXT group. Tr. 776:2-18, 777:17-778:8, 781:14-782:2 (Gibb). Mr. Gibb noted that when he worked in "engine" development, WordPerfect released versions of its word processing software for all the major operating systems available. Tr. 777:7-16 (Gibb). The whole point of the engine group itself, according to Mr. Gibb, was to create a core engine of software that could be leveraged across multiple operating systems in a functionally consistent way — allowing documents to be exchanged successfully, among other things. Id. Dr. Murphy admitted that, at least by design, once the shared code running under WordPerfect was made cross-platform, the other applications that relied on shared code would also be cross-platform. Tr. 4915:1-8 (Murphy).

In addition, Mr. Frankenberg testified that WordPerfect had a cross-platform presence:

Q. To your knowledge, did WordPerfect have experience in working with 32bit systems prior to Microsoft's development of Chicago?

A. Yes. WordPerfect ran on a number of other 32-bit systems including digital equipment corporations, [VAX], operating [VAX] systems and several Unix16 systems. So they were well acquainted with the 32-bit development.

***

Q. And during your tenure with Novell, did WordPerfect continue to develop versions of WordPerfect for multiple operating systems?

A. Yes, we did.

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Q. And during your tenure, did Novell also develop a version of WordPerfect for the Linux17 operating system?

A. Yes, we did.

Q. Given that Microsoft had a monopoly in PC operating systems using Intel Processors at this time, why did Novell continue to develop cross-platform versions of WordPerfect?

A. Well, there were two main reasons. One reason was that our customers, as I mentioned a moment ago, wanted to have one word processor that could work across their work station or their PCs or their larger systems. The other reason was to provide some real competition in the operating system environment.

Tr. 994:12-18, 995:24-997:5 (Frankenberg) (emphasis added).

Mr. Frankenberg also testified that, in 1994, Novell's "next generation" WordPerfect office productivity suite (codenamed "Tapestry") was already under development and also intended to be cross-platform. Tr. 997:24-998:10 (Frankenberg). Thus, during Mr. Frankenberg's entire tenure, from spring of 1994 to summer of 1996, Novell actively developed WordPerfect and shared code for non-Windows platforms — including Linux, an Intel-compatible PC operating system alternative to Windows.

In addition to the testimony outlined above, numerous exhibits admitted into evidence establish that WordPerfect was a cross-platform application during the relevant time period. For example, as of August 13, 1995, WordPerfect was running on DOS, Windows, Macintosh, OS/2, and UNIX. See DX 370 at NOV 00062681-82, 89-90. WordPerfect's goal was to "[b]e number #1 in market share in the DOS, Windows, UNIX, and OS/2 markets, and number #2 in market share in the Mac and VMS markets for shipments during 1994." Id. at NOV 00062687.

In 1994, a WordPerfect for Windows Marketing Business Plan noted that WordPerfect had deep experience with "OS/2, Unix, Mac, NT" and that WordPerfect should "[t]out engine

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concept; we understand cross-platform." PX 125 at NOV-B01491192. WordPerfect's goal was to "leverage our years of developing WordPerfect in the multi user environments of UNIX, Data General, VAX and IBM Mainframe as a strength for our NT version of WordPerfect." Id. at NOV-B01491203.

Reflecting this strong cross-platform presence, WordPerfect's April 22, 1994 Registration Statement filed with the United States Securities and Exchange Commission states that "WordPerfect is now available in 23 languages and on all of the most widely used computing platforms and operating systems, including DOS, MS Windows, UNIX, Apple/Macintosh and DEC's VAX/VMS." PX 174 at NOV00364208 (emphasis added). As of July 19, 1994, WordPerfect was developing new versions of WordPerfect, Quattro Pro, and Presentations for DOS, as well as new versions of WordPerfect for Macintosh, UNIX, and OpenVMS. PX 200 at NOV-25-006587-90.

Following the merger in 1994, a Novell/WP/QP Integration Plan noted under "Business Applications" that "[d]evelopment includes PerfectOffice, WordPerfect for Windows, DOS, Macintosh and UNIX, Presentations, Electronic Publishing tools, the PerfectOffice engine group and Tapestry." DX 4 at NOV-25-006572. By October 1994, WordPerfect had shipped WordPerfect Windows 5.2+ and WordPerfect UNIX 6.0 (SCO) and was moving ahead with other WordPerfect for UNIX, DOS, and VMS products as well. See DX 205 at NOVB15912823-24. In fact, WordPerfect UNIX (SunOS, Solaris) was released to manufacturing on June 7, 1994, WordPerfect 6.0 UNIX (SCO, Intel) was released to manufacturing on October 6, 1994, and WordPerfect 6.1 DOS was released to manufacturing on August 10, 1995. See DX 231 at NOV00161055.

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Similarly, WordPerfect's PerfectFit and WOAPI technologies were available for Windows, DOS, and UNIX. See PX 192 at MX 9037665. Novell also intended to make OpenDoc cross-platform and was "committed to deliver OpenDoc for Windows in 1995, which will provide users with a clear advantage for component software and distributed cross-platform object support, as well as cross-application integration." PX 395 at NOV 00019492; see also PX 412 at NOV 00498197.

Even Microsoft recognized that "WordPerfect Strengths" included "[c]ross-platform compatibility" and that "[a] consistent use of the cross-platform positioning could neutralize Word's Windows leadership." PX 554 at MS-PCA 1330664; see also PX 560 at MS7059705. Indeed, in assessing the competitive situation presented by WordPerfect for Windows 6.0, Microsoft noted that "WordPerfect is also available on UNIX and the Macintosh. They also have worked to make 6.0a run as well on OS/2 as its WordPerfect for OS/2 predecessor. No one else has the same breadth across platforms for word processors." PX 378 at MX 2175209 (emphasis added).

Likewise, Novell intended to continue developing cross-platform office productivity applications well into the future. Mr. Harral testified that Novell intended to make the entire PerfectOffice suite cross-platform after the initial release of PerfectOffice 95 to make it available on DOS, OS/2, Macintosh, UNIX, and Linux platforms. Tr. 371:13-372:7 (Harral). Mr. Gibb testified that "we wanted to make everything cross-platform and go across the different operating systems." Tr. 787:11-15 (Gibb). Even Dr. Murphy acknowledged the testimony that Novell planned to release PerfectOffice across multiple platforms. Tr. 4912:13-18 (Murphy).

Microsoft cannot dispute the collaterally estopped finding that numerous companies existed with the technical and financial capability to easily expand their output to create

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competition in the operating systems market if the applications barrier were sufficiently lowered.18 Finding of Fact ¶ 30. As Judge Jackson noted, however, the ability to meet a large demand is useless if demand for the product is small and during the relevant time period signs indicated that demand for alternative operating systems was "severely constrained" by the applications barrier to entry. Id. Mr. Gates testified that from 1995 to 1999, he believed that Windows faced competition from Apple's Mac OS, Be's BeOS, various versions of UNIX, and IBM's OS/2 Warp, in addition to Linux. Tr. 2852:20-2853:2 (Gates); see also Tr. 4900:6-13 (Murphy) (acknowledging the existence of Windows competitors).

Dr. Murphy testified that by 1998, Linux had between five to ten million users and had become increasingly competitive with Microsoft Windows in particular segments and that Linux was comparable in size, capability, and complexity to Microsoft's Windows 98 and Windows NT. Tr. 4896:19-4897:8, 4900:14-21 (Murphy). Dr. Murphy accepted that consumers might reasonably choose a WordPerfect version written for Linux instead of Windows, because Linux was free. Tr. 4899:25-4900:5 (Murphy).

E. Novell's Key Franchise Applications Had The Potential To Weaken The
Applications Barrier To Entry

Microsoft cannot deny that it viewed ownership of the word processing and suite markets as critically important to maintaining the applications barrier to entry. In an email sent to investor Warren Buffett, senior Microsoft executive Jeff Raikes wrote:

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If we own the key "franchises" built on top of the operating system, we dramatically widen the "moat" that protects the operating system business . . . . We hope to make a lot of money off these franchises, but even more important is that they should protect our Windows royalty per PC.

PX 360 at MS-PCA 1301176 (emphasis added).

"The 'moat' refers to the applications barrier to entry." Novell, 505 F.3d at 317. Because consumers buy computers to run applications, not to run operating systems, Microsoft could keep consumer demand focused on Windows if Microsoft controlled the office suite, word processing, and spreadsheet markets. Tr. 1387:1-1388:8 (Alepin); see also Tr. 290:5-19 (Harral); Tr. 1969:1-6 (C. Myhrvold); Finding of Fact ¶ 37; cf. Tr. 1718:21-1719:5 (Noll). According to Mr. Gibb, word processing and spreadsheet applications amounted to 80 to 90 percent of everything people did on personal computers in the mid 1990s. Tr. 782:3-12 (Gibb). Even if 70,000 applications were written for a rival operating system, if that rival could not offer word processing, spreadsheets, or suites, then it would not be able to attract significant consumer demand. See, e.g., Microsoft, 253 F.3d at 55; Tr. 1969:1-6 (C. Myhrvold).

Other internal Microsoft documents confirm Mr. Raikes' admission that by owning key franchises, Microsoft helps maintain the applications barrier to entry protecting its monopoly power. For example, as early as 1989, Mr. Gates recognized that "a strong applications business is extremely helpful to [Microsoft's operating] systems strength." PX 3 at X 159503 (emphasis added). Similarly, Mr. Allchin admitted that "[a]pplications drive the world. Applications are the reason that the VAX was so successful. Applications make people switch computer systems and vendors." PX 524 at MS 0119615.

As discussed more fully below, Mr. Raikes' email does more than express a theory. Microsoft actually used its control of the key franchise office suite market "'as a club'" to

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control a potential operating systems competitor, Apple. See Microsoft, 253 F.3d at 73 (citation omitted). At trial, Dr. Noll explained that the strength of the applications barrier to entry was directly proportional to Microsoft's strength in the applications market, and "the more market share [Microsoft] can gain in applications, the greater the barrier to entry of new operating systems will be." Tr. 1740:20-1741:5 (Noll).

Is it possible to read this and agree with the judge that Novell presented no evidence that it was a middleware threat?

The transcript at the very end of the day on December 15 also includes a conversation where the judge and the lawyers discuss what to do about the hung jury, which by then was clearly what was going on in the jury room. The judge has what he calls a "radical" proposal, which he won't do unless the parties' lawyers agree. He proposes, since they have 12 jurors and only need six that they ask the jurors if there are only one, two or three holding out for one side or the other that they abstain and in essence step aside. Novell's Jeff Johnson asks the right question:

MR. JOHNSON: By the way, Your Honor, do you have any law on this?

THE COURT: It's like my summary judgment opinion, which you'd like to keep sending back to me. My guess is there is no law on this. I mean, the law clerks found nothing on it. The only thing that occurred to me was we might be able to do it because it's less than --

So that's the essence of the problem in this picture, that he pushes forward with creativity even when there is no law supporting him. Now, a judge can forge ahead, and in fact he has to, if there is no law, if it's an issue that must be decided. But not every issue needs to be decided on the spot. For example, if there is a hung jury, there is a process in place already. A judge doesn't need to create a new solution, when there is a process in place that everyone follows. Here, he left it up to the lawyers, who obviously were not interested in this "radical" solution, but did you notice that the judge acknowledged that his summary judgment ruling, meaning the one that was overturned on appeal, was not based on case law. And yet we know, from the transcript of July 7th's hearing and his order on Microsoft's motion, he still thinks he called it right. I guess what I'm saying is that a case law legal system is not the best context for radical independent thinking.

And here's the complete transcript, as text, so you can reach your own conclusions about all this:

********************

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
____________________________________

NOVELL, INC.,

Plaintiff,

vs.

Case 2:04-CV-1045 JFM

MICROSOFT CORPORATION,

Defendant.

_____________________________________)

BEFORE THE HONORABLE J. FREDERICK MOTZ

DATE: DECEMBER 15, 2011

REPORTER'S TRANSCRIPT OF PROCEEDINGS

JURY TRIAL

Reported by: KELLY BROWN HICKEN, CSR, RPR, RMR

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A P P E A R A N C E S

FOR THE PLAINTIFFS:
DICKSTEIN SHAPIRO

BY: PAUL R. TASKIER, ESQ
JEFFREY M. JOHNSON, ESQ
MIRIAM R. VISHIO, ESQ
[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, ESQ
SHARON L. NELLES, ESQ
[address]
MICROSOFT CORPORATION
BY: STEVE AESCHBACHER, ESQ
[address]
RAY, QUINNEY & NEBEKER
BY: JAMES S. JARDINE, ESQ.
[address]

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SALT LAKE CITY, THURSDAY, DECEMBER 15, 2011

* * * * *

THE COURT: Good morning again. You have a note which is:

Does, quote, PC operating systems, unquote, include middleware that supports apps?

Apparently it's from juror Number 4. My proposed answer is as follows:

No. As the instructions I previously had given to you indicate, quote, middleware, unquote, is relevant to this case only because one of the Novell's claims is that its Office productivity applications constituted middleware that threatened Microsoft's monopoly in the PC operating systems.

MR. TULCHIN: I'm sorry. I didn't quite get that.

THE COURT: I'll do it again.

MR. TULCHIN: Would you?

THE COURT: This is my proposed answer:

No. As by the instructions I have previously given you indicate, quote, middleware, unquote, is relevant to this case only because one of Novell's claims is that its Office productivity applications constituted, quote, middleware that threatened Microsoft's monopoly in the PC operating systems market.

MR. TULCHIN: Your Honor, I think that's fine. But I do think that we should add to it. I think this emphasizes

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the importance of some instruction about what middleware is along the lines of the letter that we sent in this morning, Your Honor. You might even make it a little more abbreviated than what we suggested by saying something like, middleware as the term is used in this case is software that sits on top of an operating system that is, one, cross-platform; two, is available on all or nearly all PCs, and that's -- both of those things are exactly what Professor Noll said; and, three, exposes a sufficient number of APIs to make it feasible for full-featured office -- sorry -- productivity applications to run on top of the middleware.

And again, I'd be happy to show you Professor Noll's testimony on this, but that is the theory, not only the theory that exists in the complaint which is how we got here, how the tolling provision of Clayton -- of the Clayton Act was invoked in the first place, but that is what Dr. Noll's theory is.

The first two of the three requirements are precisely from his mouth, that the middleware must be cross-platform and must be available on all or nearly all PCs. We've had a debate about what the third is. But, I mean, I think our view is the correct one, the complaint adopts the definition in the government case.

And I'm afraid, Your Honor, that these notes are so confused and reflect such a lack of understanding of what

5432

middleware is and what an operating system is that we're really at a point that some guidance from the Court is necessary. I mean, we've been here eight weeks, and it seems to me that the jury at this point not only is entitled to know, but really must know what middleware is and what it isn't.

THE COURT: What's your understanding of how Dr. Noll differs on the third element?

MR. TULCHIN: Well, I can get his testimony, Your Honor. He said he didn't -- Dr. Noll didn't define exactly what he meant, but he said it had to expose a sufficient number of APIs, and then I don't have the exact words, but to be attractive enough so that other ISVs would write applications to that middleware.

And I do think that Ron Alepin provided the third requirement probably a little more clearly than Professor Noll did. And I think Alepin's statement that you need full-featured productivity applications, which is what I recall him saying, is consistent with what Novell adopted from the government case. So the answer the Court --

THE COURT: I understand.

MR. TULCHIN: You know, it's a good start, Your Honor. I think we have to go on and give the rest of it.

THE COURT: Mr. Johnson?

MR. JOHNSON: Yes. We've been around this horn so

5433

many times. That was not what Professor Noll said, and he did not agree with anything other than it has to be cross-platform. What he said about being on a lot of PCs and what he said about writing applications to the middleware, that it was entirely a continuum and that the more that applications were written even partially to middleware that that alone reduces porting costs and therefore reduces the application barrier to entry.

THE COURT: How is that -- how is his definition consistent with your complaint in the tolling?

MR. JOHNSON: Both our complaint and the finding of facts, in fact, agree completely, Your Honor, with our theory of middleware. Remember --

THE COURT: How are the findings of fact possibly consistent with your theory of middleware?

MR. JOHNSON: Because as the findings of fact say so as middleware grew in popularity and exposed more APIs, there would be further applications written to the middleware. And it is a continuum. Again, the standard --

THE COURT: Does the word continuum come out of the findings of fact?

MR. JOHNSON: Your Honor, if I may.

THE COURT: No. I just asked you a question. You just said continuum, and continuum is nowhere in the findings of fact, that I'm aware of. And my question is a simple one.

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Does the word continuum appear in the findings of fact?

MR. JOHNSON: The word continuum does not appear. However, the words which state that as middleware became more popular and as more applications were written to the middleware that this would cause a reduction. It would cause it to erode. I believe that's the word. I can find it for you if you'd like. Eroding is not the same as destroying. But what Microsoft continues to do, Your Honor, is to want to define the term middleware --

THE COURT: The simple fact is middleware is no threat to the operating system unless it exposes lots of APIs that people are going to write to instead of the operating system. It's as simple as that, as far as I'm concerned. I mean, I don't see how any other theory is -- there might be lots of arguments short of that. But the principle has got to be that your theory is that middleware constituted a threat to the operating system. How middleware which doesn't suppose -- expose sufficient APIs to mirror closely or at least in some close approximation the functionality and operating system, it doesn't -- you know, I mean, we can argue around the edges, but that has got to be true. It can't be that middleware, quote, middleware to which you write, the analogy I remember or the example I remember was box scores on top of a spreadsheet is not full function and is no threat to an operating system.

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MR. JOHNSON: Your Honor, if I may, I think part of the reason for the confusion is what you just said. Microsoft has defined middleware in such a way that it is an operating system. And that is why you get a question like we did yesterday, is an operating system middleware? Because Microsoft's definition takes it to the extreme, which is --

THE COURT: Yeah. But Microsoft's definition is not and from my judgment relevant to your theory of the case, which is -- I mean, Microsoft can define it any way it wants for purposes of its dictionary. You have defined it in your complaint, and you have a theory that somehow middleware, and middleware makes sense in your theory only if it exposes some degree of functionality which makes it a threat to operating systems.

I don't care what Microsoft defines it as in its dictionary. It doesn't matter. You've got a theory of the case that got you beyond -- got you past limitations and got you to the jury. And I just don't -- I don't care what Microsoft's definition is.

MR. JOHNSON: Your Honor, I wasn't actually even talking about Microsoft's definition in their dictionary at all. I was talking about the definition they want you to instruct the jury on, the definition that they want you to instruct the jury on, which would be directing a verdict, by the way, and that's what it would be here --

5436

THE COURT: No, it wouldn't. You still have your franchise theory.

MR. JOHNSON: It would be directing a verdict on that portion of our theory.

THE COURT: I agree with that. Maybe so, maybe not. That's why I've got to be careful what I say. But they want me to direct a verdict.

MR. JOHNSON: Of course. Of course. And that's understandable given that we have no verdict, and they would like you to, frankly, tip the scale. I don't think that would be appropriate. Your Honor made this judgment carefully sometime ago after this argument was had for about the fifth or --

THE COURT: I understand.

MR. JOHNSON: -- fifth or sixth time. And Your Honor made a reason of judgment. And I don't think that it would be appropriate for you to change that judgment now.

I will point out that Mr. Alepin did not agree with their definition. I read from his testimony at Page 1396.

Question. You're familiar with the term middleware?

Answer. Yes, I am.

Question. The first bullet point there, software that runs on top of an operating system and exposes APIs that encapsulates meaningful functionality. Is that the sort of

5437

definition of middleware that you're comfortable with?

Answer. Yes.

So middleware does expose APIs. It does contain meaningful functionality. But that does not mean, Your Honor, that it's capable of being an operating system in running -- that you're able to create whatever their term they want to use, full-service Office productivity applications on it. That's a different thing. If middleware got to that goal, achieved that goal, it would, in fact, destroy the application barrier to entry, and there would be wide open competition.

But, of course, this case is not about that. If we had to destroy the applications barrier to entry in order to win, we could not be here today. What we have is --

THE COURT: Yes, you could. But that's a whole different question. You could have said -- in a but for world you could have had a technical expert who would have said that it would have existed in which you didn't produce, that but for Microsoft's conduct, the applications to the barrier to entry would have been effectively destroyed. So you could have, but you didn't.

MR. JOHNSON: What we had, though, Your Honor, was an expert that came in and said, as applications are written to the middleware either partially, whether it's 60 percent or 40 percent or whatever it is, that that therefore reduces porting costs to other operating systems and therefore reduces

5438

the applications barrier to entry. And that's what Dr. Noll testified to in this case. And again, Your Honor, this is all a --

THE COURT: Actually it's apropos of nothing. It seems to me that one of your experts, I think it was Noll but it could have been Alepin, actually in his -- it's not in evidence, but in his demonstration did have it destroyed. I remember him showing the wall all the way knocked down.

MR. TULCHIN: He did.

MR. JOHNSON: Your Honor, the visual that you saw showed the wall down. But the testimony of Professor Noll was not to that effect. Clearly, Your Honor, we have two positions with respect to the impact of middleware. Microsoft is defining middleware in such a way that it is an operating system which engenders frankly the confusion the jury feels because they're saying --

THE COURT: The jury -- the fact of the matter is the jury is just confused. I mean, I'm not sure that I shouldn't revisit my decision because I was basing upon the fact that the jury would have its head on straight. But it doesn't, obviously doesn't have its head on straight.

MR. JOHNSON: Your Honor, if I could, if I may, just to end this. As we said at the time, Your Honor would be directing a verdict on that issue.

THE COURT: That's true.

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MR. JOHNSON: And I don't think that that would be appropriate.

THE COURT: It's not the time to direct a verdict yet.

MR. JOHNSON: Thank you, Your Honor.

MR. TULCHIN: Your Honor, if I could point out the testimony that I was referring to. On Pages 1925 to 1926 Professor Noll says:

That the middleware program has to be present on all or nearly all of the PCs that use the operating system to which the application otherwise would be written, and that the middleware program has to be cross-platform.

With respect to Mr. Alepin, and I'll just stick with him for a moment on this third requirement, Mr. Johnson read an answer that he gave on Page 1396 that it has to be software that exposes APIs that encapsulate meaningful functionality. And on cross at Page 1461 to 1462, Mr. Holley asks:

In fact, there are literally thousands and thousands of software products that expose some APIs that can be called by other software products. Isn't that right, sir?

Answer. Absolutely. And in part that was the purpose of the refinement in the definition of middleware, that they have -- there has to be some other thing that they do other than just expose APIs. Otherwise, it's just -- it's

5440

a program with APIs.

And Mr. Holley went on:

So it's not enough to say that something is middleware, and it isn't even enough to say that something is middleware that exposes some APIs or that software product that referring to to constitute any sort of a threat to Windows; isn't that right?

Answer. There's got to be more, yes. There's got to be more than just the exposure of APIs or the encapsulation of meaningful abstraction of APIs. You need more.

So if I can back up for a second --

THE COURT: And that was Alepin or Holley?

MR. TULCHIN: I'm sorry?

THE COURT: Who said you need more?

MR. TULCHIN: Yes.

THE COURT: What's more?

MR. TULCHIN: That was Mr. Alepin. That you need more. There's got to be more.

The point I'm making, Your Honor, is that the first two requirements are not in dispute; has to be available, has to be cross-platform. Available on a number of alternative operating system platforms. That's -- I'm reading Dr. Noll. The second requirement is that it has to be available on all or nearly all of the PCs.

And as to the third, we think that our letter of

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this morning is direct, that the definition in the government case was adopted in Paragraphs 44 and 48 of Novell's complaint.

THE COURT: But that would be the equivalent of a directed verdict.

MR. TULCHIN: Your Honor, I think on that theory, it probably would, although the jury is so confused I'm not sure what they would do.

But even if you went with what Mr. Alepin says that the third requirement is that the middleware expose a sufficient number of APIs to be a threat to Windows that it's not enough for middleware simply to expose some APIs, that there has to be more.

THE COURT: Let me ask you this. I mean, you've got your point on the directed verdict, and frankly, I think you might be right. I think if the jury came back saying they accepted the middleware claim but not the franchise claim, it is within my power to still grant you a directed verdict. I mean, it's within that -- whether that's right or wrong we'll hear argument on it, but you could be right about that, and I hear you. I mean, I frankly don't see that -- but that's another issue than what I should tell the jury.

What about --

MR. SCHMIDTLEIN: Your Honor, not to complicate things further, but actually technically, does a PC operating

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system include middleware? Their position is that Internet Explorer is part of the operating system. They have said that over -- that is their position. Internet Explorer is part of Windows. Internet Explorer is middleware.

MR. TULCHIN: Well, we don't agree with that, Your Honor, and it's not even relevant.

THE COURT: I'm not going there.

My -- what about adding, because the jury is obviously hung up about that, a definition of middleware that says, at the least, middleware must, then the things that Noll said, that it's got to be on virtually all operating systems? And secondly, has to be cross-platform, third -- at the least; and, thirdly, it has to expose enough APIs to constitute whatever that language was, encapsulate -- what is it? Substantial functionality or something like that?

MR. TULCHIN: Well, I think at the very least we should say that, Your Honor. I think it would be helpful for the jury. He said there's got to be more than just the exposure of the APIs.

THE COURT: Well, before the more. The definition he gave on direct, because I don't know what the more is. He says more, actually, but maybe he encapsulates --

MR. HOLLEY: Your Honor, what he clearly meant by more, if you continue reading, because I then took him through every one of the alleged middleware products, and he said no,

5443

there are no applications written to that. So what he meant by more is elucidated by the continuation of the cross. And by the end of the cross, it was clear what he meant was exactly what Novell said in Paragraphs 44 and 48 of the complaint, which is you have to, as Your Honor said, it's obvious as a matter of law logic, you have to have enough APIs to serve as an alternate development platform to Windows. Otherwise, the middleware --

THE COURT: If that's right, the jury shouldn't even have the question. Wouldn't you agree, Mr. Holley?

MR. TULCHIN: We agree with that, Your Honor.

THE COURT: And I know that. But I'm not -- the jury does have the question. It seems to me, and you could be right. I'm not saying you're right or you're wrong. But I understand your position, and I'm inclined to think you're right. But I don't -- it seems to me that where we are at this stage of the litigation it would be to give the definition which incorporates the two things Novell agrees to and then whatever it was that he testified to on direct, it was something like encapsulate substantial functionality, something like that.

MR. TULCHIN: And that's what I would suggest to Your Honor, to say at the very least after we talk about the first two requirements, when we get to the third to say that at the very least, middleware must expose a sufficient number

5444

of APIs to be a potential threat to Windows.

And maybe just leaving it vague that way. I mean, that, after all, is what -- there can't be any dispute about that. That's what they say. That's the idea. And without going further, I agree with you that if you --

THE COURT: I hear you. Okay.

MR. SCHMIDTLEIN: Your Honor, this is obviously a very serious and controversial issue. They're making representations about what they think our experts say.

THE COURT: They're quoting from testimony.

MR. SCHMIDTLEIN: I understand. But they're quoting from parts of the testimony. I don't think we entirely agree --

THE COURT: What's wrong -- with your theory, why shouldn't it be that middleware must, one, be cross-platform; two, whatever it is, whatever the language is --

MR. TULCHIN: Must be present on all or nearly all of the PCs.

THE COURT: Must be present on all or nearly all PCs?

MR. TULCHIN: That use the operating system. I would say that use Windows. That's at the very least what Professor Noll said.

THE COURT: They use Windows? Why they use Windows?

5445

MR. TULCHIN: I mean, arguably it's on all or nearly all PCs. That's what I think --

THE COURT: Okay. All PCs.

MR. TULCHIN: That's what I think their theory is.

THE COURT: And then, three, must expose sufficient APIs as to threaten Microsoft's monopoly in the PC operating system market.

MR. TULCHIN: Your Honor, that seems to me to be a sensible answer to the question. I don't think it goes far enough for purposes of the theory that Novell has. But we would -- in the interest of trying to eliminate some of the confusion among jurors, we would be amenable to that instruction without waiving our position that, indeed, Novell's theory requires more than that. I want to be clear that we're not waiving that. And that --

THE COURT: No. No. Absolutely.

MR. TULCHIN: And that we still have the argument.

MR. SCHMIDTLEIN: Your Honor, my point is simply this. The question that was asked was, do PC operating systems include middleware that supports applications or apps? This definition of middleware obviously is going well beyond answering this question. I understand everybody --

THE COURT: Oh, no. I'm not buying that one. They're confused, and this clearly shows -- they should have a definition of middleware. And so I don't -- this does not

5446

fall within the two questions of yesterday. So let me --

MR. JOHNSON: Your Honor, may I respond briefly?

THE COURT: Sure.

MR. JOHNSON: Professor Noll does not agree with the second requirement which you are putting in this definition. He does not agree with it. What he said was, Your Honor, Mr. Tulchin asked him a series of questions about middleware, and he went through the three requirements that Microsoft likes, and I will get his testimony for you. And he said, what you're describing is a definition that would reduce Windows to a commodity; in other words, would destroy the applications barrier to entry.

MR. TULCHIN: It's not true, Your Honor.

MR. JOHNSON: And the wall would be completely down. That's what Professor Noll stated. And then he went on to say, I'm getting the testimony right now, Your Honor. He went on to say that it is a continuum. The one thing he did agree to, Your Honor, he agreed that the middleware needed to be cross-platform. But with respect to the number of PCs he was on, number two, and with respect to its abilities to support full service, whatever the phrase is they use, he said no, that's not how it works. That if a middle -- if applications are written some portion of which to the middleware, that that would reduce porting costs and will reduce the applications barrier to entry, and that it is a

5447

continuum. Obviously it has to be significant. It can't be de minimis. But it is simply not true to say that Professor Noll agreed that it had to be on all PCs or the majority of PCs.

He said, and I asked the question, Your Honor on Page 1958:

It was quite a bit of cross-examination with respect to whether or not full-featured applications had been written to middleware during various time periods, and I ask you, sir, if applications were writing to middleware that still had relying in some senses on operating systems beneath, does that have any affect on increasing competition?

Answer. The effect on competition in the operating system market depends on the degree to which the middleware is reducing the porting costs of becoming cross-platform, that if middleware is exposing a certain number of APIs, you can write to those APIs and be on an access function in multiple operating systems. You may have to write additional codes separately for each operating system. But if the middleware reduces the amount of code you have to write to be cross-platform, then it makes being cross-platform more attractive. And obviously, it's a continuous relationship that the higher the fraction of functions that can be accessed through the middleware, the more the porting costs have been reduced and, hence, the more the middleware affects

5448

competition.

So that's why it's a continuous process. It's not an either/or process. Middleware can begin to have an affect on competition in the operating systems market if it starts to be used because it's reducing porting costs and, therefore, increasing the number of applications that are cross-platform and thereby reducing the application barrier to entry.

So, Your Honor, Professor Noll testified unambiguously that it is a continuum. It is not an either/or. The more middleware is exposed on more PCs, not on all PCs or most PCs, but on more PCs, and the more applications use that middleware to port in part or in whole, in other words, reduce their dependency on the underlying Windows, that reduces porting costs and, therefore, increases competition in the PC operating systems market.

MR. TULCHIN: Your Honor, that --

MR. JOHNSON: So if you're going to accurately provide the jury with what it at least has to be, that would be something that you would need to take into consideration. And I thought, Your Honor, frankly, that because this issue is clearly highly contested --

THE COURT: We won't go there. It's contested right now. I'm not sure you're even here if I buy your theory of the events -- I mean your theory, because we're here because you got limitations tolled, which was based on the

5449

government's case.

MR. TULCHIN: Your Honor --

MR. JOHNSON: Yes, Your Honor. And I believe that our theory is entirely consistent with the government case. You may recall, Your Honor, that neither Java nor Netscape had sufficient APIs to meet the requirements being put forth now. And what they were talking about in that findings of fact 28 is that if ultimately, if ultimately middleware achieved this higher goal, they could reduce Windows to a commodity. That never happened. But it was sufficient in the government case, even though Netscape and Java would not have met the definition posed by Microsoft here, it was sufficient in that case to find that they were a threat and that they had the potential -- sorry, Your Honor. I had this on in case of another note.

THE COURT: Don't worry about that.

MR. JOHNSON: Have the potential --

THE COURT: Do you want to see if it's important? The jury is not here.

MR. JOHNSON: I had it on because I was obviously waiting for notes, so I needed to keep my phone on. I forgot to turn it off when I came in this morning.

THE COURT: Okay. Let me --

MR. JOHNSON: So --

THE COURT: I want to hear from Mr. Tulchin. I

5450

understand your position.

Mr. Tulchin?

MR. TULCHIN: Mr. Johnson, of course, is correct that Java and Netscape didn't meet the definition of middleware as it was used in the government case. It didn't because of the edentulous causation test.

THE COURT: Exactly.

MR. TULCHIN: And the Court of Appeals was very clear, I think Judge Jackson was, as well, that these were nascent threats. They were newborn threats. They couldn't affect Microsoft's position in the PC operating system market, precisely because they didn't meet the third requirement here. But in a government enforcement case, of course, the attorney general, the Department of Justice --

THE COURT: I understand. I understand.

MR. TULCHIN: But there's a second point, Your Honor. Mr. Johnson's statement about Dr. Noll's question on redirect didn't go to the first of the two requirements, the first two, I should say, of the three requirements. The first one that it has to be cross-platform. He said this on 1925 to 1926. It has to be cross-platform, and it has to be available on all or nearly all of the PCs.

So that part of it should be clear. I don't think there can be any dispute. I believe that Mr. Johnson used a slide on the direct examination of Professor Noll which says

5451

that. And certainly -- and the answers at Page 1925 Line 25 through 1926 Line 13, that's what Professor Noll said.

So I do -- the response, Your Honor, that you propose to give to the jury's question seems to me to be a reasonable response. Again, our position is that it doesn't fully reflect the proper --

THE COURT: No. Your position is simply that they cannot prevail on the middleware claim. I mean --

MR. TULCHIN: Yes, but --

THE COURT: And I understand it, but we're not there.

MR. TULCHIN: For present purposes, Your Honor, we do think the jury should be told something so that some of this confusion can be, I hope, ameliorated.

THE COURT: What does it mean to be on all or nearly all PCs?

MR. TULCHIN: Well, the theory here of middleware, which, of course, you know, it's an interesting theory, is that you can't threaten Windows, you can't threaten Windows market share or position in the market unless the middleware is available on all or almost all, nearly all of the PCs. Without that, something like WordPerfect or PerfectOffice could not become a device by which millions of consumers would be transferring to Linux or OS/2 or some other operating system. It's only when it's so pervasive that the many, many

5452

millions and millions of users of Windows worldwide would have some easily portable way, to use the phrase that Professor Noll used, some easy access to some competing operating system.

If, for example, PerfectOffice has 8 percent of the market, which is all it had before Windows 95 came out, that's what Professor Noll said, if it has 8 percent of the market, it cannot by definition be sufficiently ubiquitous to allow users to move to Linux. They have to go buy Linux or OS/2.

THE COURT: Well, again for free. That's another issue.

MR. TULCHIN: Well, not really, Your Honor. There was a version of Linux available for free, which no one really used. I mean, almost no one. No one obviously is too strong. And there were versions of Linux that were being sold by companies like SUSE Linux for, I think, 59.95 at the time that gave users a little more of the functionality that they were used to seeing in an operating system from PCs. So there was a version of Linux that was stripped down that was for free that almost no one chose.

In any event, Your Honor, I mean, the first two of the three requirements come from Professor Noll. And I just don't know how we could be debating those two. I understand how we can be debating the third, and I agree that there was testimony that wasn't crystal clear, although Mr. Alepin

5453

certainly says it has to be more. It's not just exposing APIs so that a dental practice could use WordPerfect, which was conceivable. Could WordPerfect like any other form of application on top of Windows expose some API?

And I believe it's correct that a dental practice could use a piece of software written to call the APIs of WordPerfect to allow the dentist to send out automatic reminders to his patients or her patients of appointments upcoming. That in itself, of course, is no threat to Windows because it's such a narrow use of the APIs of WordPerfect that it doesn't comprise a sufficient threat to Windows and really no threat to Windows. You would still need the operating system. You're not commoditizing it through a dental practice reminder application.

So, I mean, the whole theory here is that it has to be broad enough so that many, many, millions of users around the world would be switching by the convenience of having WordPerfect or PerfectOffice available on two platforms or more, let's say Windows, let's say OS/2 or Linux, and you could easily move to that other platform. And again, it can't be 1 percent or 1/2 percent of the users in the world, it has to be all or nearly all. And that's the only way that Windows could be threatened at all. That's exactly what Noll said.

THE COURT: Yes, Mr. Johnson.

MR. JOHNSON: That is exactly what Dr. Noll did not

5454

say. In fact, Mr. Tulchin was going along this same line of questioning at Page 1925. And he's talking about the conditions, these first two conditions, not the third. And Professor Noll answers:

You're overstating what I said. I said this alternative could be an attractive option if two conditions were met.

Fair enough.

That is what I said.

Fair enough. I'm with you.

And then he goes on to discuss those two conditions.

And the second condition being that the middleware program has to be cross-platform; correct?

Yes.

It has to be available on a number of alternative operating system platforms. And that's different from being on most or all PCs.

He says, yes.

Correct.

Yes.

Question. Okay.

Answer. Notice, although -- and he's talking about his report, this is Professor Noll. Notice, although, at the end it says this is a condition for eliminating the

5455

applications barrier to entry commoditizing the operating system. It is not correct to say that something less than that couldn't increase competition. It is just that this last sentence is crucial. That's about eliminating the applications barrier to entry.

Professor Noll was absolutely clear --

MR. TULCHIN: No.

MR. JOHNSON: -- in what he said, that those conditions are only necessary to eliminate the applications barrier to entry, not necessary to increase competition. And he said this over and over again. And I read Your Honor before the continuum testimony and how as more applications are written to part of middleware it reduces porting costs and thereby increases competition.

So to state to the jury that it has to be at least those two conditions -- I agree it has to be cross-platform. I certainly agree to that. But to state that it has to be on all PCs or almost all PCs and it has to write -- you have to be able to actually be an operating system, again, as I said, that would be directing a verdict on this issue, and it would be inconsistent with Novell's position in this case, which is as Your Honor said, maybe we're wrong, but we have given this issue to the jury appropriately, I think, Your Honor, after careful consideration that you gave. And to be sitting here for the --

5456

THE COURT: I really thought -- I thought before the only dispute was about the third one.

MR. TULCHIN: That was the only dispute, Your Honor.

MR. JOHNSON: No, Your Honor. Both the second and third are disputed. The first is not disputed. I certainly agree with that.

THE COURT: No. No. I'm just telling you what my understanding was. I understood that we were only talking about the third.

MR. JOHNSON: That's because Microsoft has been saying that over and over and over again --

THE COURT: Well, be that as it may, okay.

MR. JOHNSON: -- without reference to what Dr. Noll actually said.

MR. TULCHIN: My question, Your Honor, on 1925 was whether the conditions that I was talking about could become a threat to Windows. The question was not about eliminating the barrier, the question was becoming a threat. And he said all or nearly all. So --

THE COURT: Where we are, and suppose -- I'm just trying to answer the question, suppose the answer was, no. Quote, middleware must be cross-platform. And just forget two. And, two, expose sufficient APIs to whatever the language Mr. Alepin was exposed to encapsulate substantial

5457

functionality --

MR. JOHNSON: Meaningful functionality is what you said.

THE COURT: -- meaningful functionality and threaten Microsoft's monopoly in the PC operating system market. Just make -- the question of threat is still there that it has to be nearly ubiquitous arguably, but that's something for the jury to decide. But just to say, no. Middleware is software that is, one, cross-platform; and, two, exposes sufficient APIs to encapsulate meaningful functionality and threaten Microsoft's monopoly in the PC operating market.

I understand that Microsoft objects to that on the grounds that basically I should direct a verdict and take the whole concept of middleware out of the case, which is a fair position. But short of that, the answer to the jury's question, short of direct the verdict, doesn't that get us where we need?

MR. TULCHIN: Your Honor, when you say cross-platform, could you at least say, in the sense that it runs on multiple operating systems, so that they understand what we're talking about here?

THE COURT: Okay. Cross-platform, i.e., run on multiple operating systems; and, two, expose sufficient APIs to encapsulate meaningful --

5458

MR. JOHNSON: Functionality.

THE COURT: -- functionality?

MR. JOHNSON: Yes, Your Honor.

THE COURT: And threaten Microsoft's monopoly in the PC operating system market.

I'm just trying to move the jury along from that. And I understand Microsoft's position. Look, it shouldn't even be in the case because it doesn't expose sufficient APIs to -- it's not ubiquitous or there's no evidence that it was nearly going to be nearly ubiquitous, and that's a fair position. That's something that I've -- right now I've got to answer the question.

So the answer would be, no. Quote, middleware must be cross-platform, i.e., run on multiple operating systems; and, B, expose sufficient APIs to encapsulate meaningful functionality and threaten Microsoft's monopoly in the PC operating system market.

Nobody likes it. Nobody's satisfied with it, but I'm trying to -- is there any problem with that?

MR. JOHNSON: Your Honor, obviously we would like to reserve an exception to it.

THE COURT: Why?

MR. JOHNSON: Because we don't think you should be defining to the jury --

THE COURT: Okay.

5459

MR. JOHNSON: I thought your original --

THE COURT: Oh, no. Mr. Schmidtlein's point to ask a question. That's right.

MR. JOHNSON: Yeah. So we would except to it on that basis.

THE COURT: Sure.

MR. JOHNSON: But it's certainly better than the alternative.

MR. TULCHIN: Well, for present purposes, I think we should go with that. Our position is --

THE COURT: No, I understand. I'm just trying --

MR. TULCHIN: Let's go with that for now.

THE COURT: Is it platformed or platform without the ed?

MR. HOLLEY: Platform.

MR. AESCHBACHER: Platform.

MR. TULCHIN: No ed. Sometimes it appears that way, but I think it's better to just have it cross-platform forward.

THE COURT: But sometimes I say Namestake.

(Time lapse.)

THE COURT: I can't even write it, answer it. I'm sure glad I'm not a patent lawyer. Can you imagine trying to translate these technical things into English for them and everybody attacks it?

5460

MR. JOHNSON: It keeps a lot of lawyers busy, Your Honor.

THE COURT: I picked a good job.

Okay. This is the answer I propose one more time.

No. Quote, middleware, unquote, one, must be cross-platform, i.e., run on multiple operating systems; and, two, must expose sufficient APIs to encapsulate meaningful functionality and threaten Microsoft's monopoly in the PC operating system market.

I understand, and it's fair. But I just want, so the record is clear, Novell objects on the ground that I shouldn't define middleware at all. Microsoft objects on the ground that I should include something about ubiquity, and, frankly, I guess it objects on the grounds that I shouldn't define middleware at all but rather should take the middleware issue from the jury because there is insufficient evidence that Novell's product in question expose sufficient functionality so as to threaten -- I forget what the magic language is, but it's out of the findings of fact, but essentially the product in question, Novell's product in question simply in no sense could constitute middleware. And that's fair, and that's something depending on the jury's verdict I'll have to deal with in due course.

But subject to those exceptions, is this language okay?

5461

MR. JOHNSON: Yes, subject to the exceptions.

THE COURT: Subject to the exceptions. And I have no quarrel with your exception. I'm just giving what I'm giving.

MR. JOHNSON: Just trying to make the record, Your Honor.

THE COURT: I hate to look over somebody's shoulder.

THE CLERK: No. I don't mind at all.

THE COURT: And we'll wait until the next question comes out to talk about it.

(Time lapse.)

THE COURT: One more time just so I've got it right.

Answer. No. Quote, middleware, one, must be cross-platform, i.e., run on multiple operating systems; and, two, must expose sufficient APIs to encapsulate meaningful functionality and threaten Microsoft's monopoly in the PC operating system market.

MR. HOLLEY: Yes, Your Honor.

THE COURT: And that's given with the exceptions which I understand.

THE CLERK: Operating systems. What is this?

THE COURT: Market.

And while I'm here, we won't give it now, but at

5462

some appropriate time, does Novell have, this morning, have objection to me giving what seems to me to be a rather mild Allen charge? I'm having my law clerks research what an Allen charge in civil cases in the 10th Circuit is. But this one seems to me to be relatively mild.

MR. JOHNSON: No objection, Your Honor.

THE COURT: Good. Should I do that now?

MR. SCHMIDTLEIN: It's a little early.

THE COURT: We'll wait for the next question.

MR. JOHNSON: I think we'll get one, Your Honor.

THE COURT: I think we will, too. Thank you.

(Recess.)

THE COURT: Good afternoon.

MR. HOLLEY: Good afternoon, Your Honor.

THE COURT: This one I think I can answer, as follows:

If you have a no answer to either of the two sub-questions in Question 4, your answer to the entire Question 4 must be no.

MR. TULCHIN: Agreed, Your Honor.

MR. JOHNSON: Your Honor -- sorry.

MR. TULCHIN: Sorry. I wrote out something that amounts to I think the same thing. I'll hand it up. I don't think it's all that different.

THE COURT: That's fine. It's probably a little

5463

better.

MR. JOHNSON: You know, Your Honor, looking at the question, I don't know obviously which part they think they've answered yes to and which part they haven't.

THE COURT: I wouldn't speculate they think anything.

MR. JOHNSON: That's the difficulty. But my comment is 4 seems to have two parts.

THE COURT: Yeah, it does.

MR. JOHNSON: And 5 doesn't.

THE COURT: That's right. And that's because I thought I stated -- I thought that Microsoft's position was that you have to show both harm to competition and some significant contribution. I thought your position was that you did not have to show harm to competition, so I left it out of 5.

MR. JOHNSON: And the reason is capable standard. That's true. That was our position.

THE COURT: Exactly.

MR. JOHNSON: I agree. I think you have to.

THE COURT: Okay. So actually --

MR. JOHNSON: I'm there with standard.

THE COURT: It's their theory of the case, so --

MR. JOHNSON: Yeah.

THE COURT: Let me -- did I give you -- I think

5464

Mr. Tulchin's is a little better than mine, which is basically the same.

In order to answer yes to Question 4, you must find that Novell has proven both parts of Question 4. If you believe that either part of Questions 4 is no, then your answer in the verdict form should be no as to Question 4.

Okay.

MR. JOHNSON: I think that's a little more than you need, Your Honor, but okay.

THE COURT: Well, it just -- it probably is.

MR. JOHNSON: I don't think you have to tell them two or three times.

THE COURT: If you believe that the answer to -- I'll say what I said. If you believe, which was, Theresa, if you have a, quote, no, unquote, answer to either of the two sub-questions in Question 4, your answer to the entire Question 4 must be no.

MR. JOHNSON: Thank you, Your Honor.

(Recess. )

THE COURT: Good afternoon.

MR. HOLLEY: Good afternoon, Your Honor.

THE COURT: I guess the time has come for the charge that we discussed this morning.

MR. TULCHIN: I think so, Your Honor. That's what I would suggest is that you give the charge that we sent in

5465

this morning to bring some assembly to it.

THE COURT: I'm sure -- I just want to make it clear that what the note says is, may I talk to Theresa? Thank you. It has to do with a hung jury.

I'm sure you agree with me this is not a poor reflection on Theresa at all. I think that it's perfectly -- it's nice she's established a nice relationship with them, and it's a natural thing for them to ask. But let's bring them in, and I'll give the jury the --

THE CLERK: Are you ready right now?

THE COURT: I'm as ready as I'll ever be. I'm just getting to know you guys.

(Whereupon, the jury returned to the court proceedings.)

THE COURT: Ladies and gentlemen, it's come to my attention that you may be having some difficulty in reaching a unanimous agreement. That's not unusual. Sometimes after further discussions jurors are able to work out their differences and agree. This is as you know an important case. All cases are important, but this one is lengthy, shall we say. If you should fail to agree upon a verdict, the case is left open and it may be tried again. Obviously another trial would require the parties to make another large investment of time and effort, and there's no reason to believe that the case can be tried by either side better or more exhaustively

5466

than it's been tried before you.

It is your duty as jurors to consult with one another and deliberate with a view toward reaching an agreement if, and let me add, this is important, if you can do so without violence to your individual judgment. Each of you must decide the case for yourself. But as I said before, do so only after an impartial consideration of the evidence with your fellow jurors. In the course of your deliberations, do not hesitate to reexamine your own views and change your opinion if you are convinced it is erroneous. But do not surrender your honest conviction as to the weight of the evidence solely because the opinion of your fellow jurors or for the -- merely for the purpose of returning a verdict.

What I've just said is not meant to pressure you into agreeing on a verdict. Take the time you need to discuss this. There's not -- there is not an urgency or hurry, but I will ask you that you now retire once again and continue your deliberations with these additional comments in mind to be applied, of course, in conjunction with all of the instructions that I previously gave you. Thank you.

I'll stay here with counsel for a minute.

(Whereupon, the jury left the court proceedings.)

THE COURT: Please be seated. I guess I will not be conducting a hearing in Baltimore tomorrow.

I don't ask you all to agree to this at all.

5467

Obviously I don't have anything to do, so I've been thinking about this. I actually thought about this last night. And I I've had my law clerks do some research on less than a unanimous verdict, and they haven't found anything.

Heaven knows what's happening. I don't know. I mean, one could infer one thing, and I'm not sure that's the proper inference. There are other inferences they try to find something that they could agree upon wherever they found it on the verdict form and couldn't find it.

I hesitate even to suggest this to you all, and I'm not twisting your arms. And there's no question that I think we would be making new law. But this is a very, very huge investment that you all put in this case, and that is to somehow try to come up with a solution which I either will impose upon you, which I don't think I will do, or with your agreement, which I don't expect to be forthcoming, to take less than a unanimous verdict. And let me tell you my thinking in that regard.

We have 12 jurors. All we need is six. In secular terms, we could ask jurors to abstain. I will tell you, I think I mentioned once before I went to a Quaker school, and I'm probably the only Quaker that tried to join the Marines. But I do have Quaker as my background. And they have -- and I do know from my experience that they have, and I think I'd like it better because more than abstention, it is stepping

5468

aside from a consensus decision if you simply can't join in the consensus and act on the part of the person who does it who -- I came across as a young man when we were, frankly, incorporating friend school separately from the Quaker meeting, which was a big step for the meeting, and there were old timers that didn't think it should be done. But they realized that what was being proposed probably would be in everybody's interest, and they may be standing against a good decision and against the times. But their own royalties made it impossible for them to accept incorporation of a school separate from the meeting. So several stepped aside from the decision and allowed the decision to go forward by under Quaker procedure had to be a consensus decision. And they actively said, we will step aside. We recognize, we will step aside from the decision, and so be it.

I have no idea what's going on. I have no idea what the vote is. Everybody got's their risk in the case, and it existed throughout. And a way to do this would be to ask if the jurors would be willing, if there's a strong consensus on the other side, to be able to step aside and let the verdict be rendered without, you know, without them joining in it. It would leave the jurors' the decision to do that. it's -- I have no idea what it is that's motivating them. I don't know whether it's royalty to a -- it could be that a substantial number of jurors have decided Microsoft is right

5469

and others out of loyalty to WordPerfect and Novell said, no, we can't -- we don't want to be associated with the pro-Microsoft verdict. It could be as to questions, the sequence of questions might be read as saying that the majority of the jurors are for the plaintiff. And yet there's just one holdout or two holdouts saying no, Microsoft, whatever.

So I'm not asking you to make -- to address it now. All you have to do is tell me no, and I probably won't do it. But it occurs to me we do have legally the possibility of doing that since really we only need six people to return the verdict and we have 12. I would not personally be comfortable with the process, which as I say in secular terms is basically asking the jurors to abstain, although I think there's a certain more active involvement of a juror stepping aside from a verdict. I would not be comfortable if it were more than three, to tell you truth. I've been trying to think this out. To have six step aside or abstain and leave it up to six, I would not be comfortable with that. If it was three, I think probably the maximum I would be comfortable with is nine if three stepped aside.

I'm not twisting your arms, but I know you all have a lot invested in this case. I know that nobody has any idea what is going on in that juryroom and who runs the risk of what I'm suggesting, if anybody. I mean, it could be that

5470

jurors don't want to step aside, and they say no. It's got to be a unanimous verdict, and that's my right.

But consider it, think about it, and I'm going go call Delta and tell them I'm not going home tonight. Thank you.

MR. HOLLEY: Thank you.

THE COURT: Maybe if I call Delta they'll come back with a verdict.

(Recess.)

THE COURT: Let me ask you something less radical. They've been here since 8 o'clock this morning. I'm wondering, I would think it would probably be a good idea for Theresa to send them a note saying, do you prefer to stop deliberating around 5 o'clock tonight or deliberating until 7:00 or 8:00.

The reason the question should be asked now rather than waiting is because they order dinner now, and frankly, there's just so much one can do. And I'm not one - this is a business-like kind of thing. If they -- I don't want -- it seems to me -- frankly, it seems to me if I were them I would want to stop at 5:00 and come back tomorrow.

MR. TULCHIN: I think that's a good idea, Your Honor. I don't know if I'm reading this right, but there looked to be a couple of faces that were maybe tense, maybe close to upset when they came out. And I think it might be a

5471

good idea to let them go at 5:00 and tell them to come back in the morning.

THE COURT: Give them the choice.

MR. TULCHIN: Or give them the choice.

MR. SCHMIDTLEIN: Yeah. I think there are some of them who depending -- they've got long drives.

THE COURT: Yeah. And I can say 5:00. I can say, would you prefer to stop now or deliberate until around 5:00 or around 7:00 or 8:00? So maybe it's now. Now that I look at the clock it's been eight hours.

MR. SCHMIDTLEIN: Just have Theresa go back and ask them?

THE COURT: Yeah. Why don't you go back and ask them.

MR. SCHMIDTLEIN: Instead of bringing them out here and putting them on the spot.

THE COURT: I was going to send them a note.

THE CLERK: Do you want me to do a note or go in and talk to them?

THE COURT: Either. Go in and ask them.

MR. JARDINE: They love you, Theresa.

MR. JOHNSON: We love you, Theresa.

THE COURT: And we can talk about that other thing tomorrow morning. We don't have to -- I don't need your answer now. I realize it's radical. I don't think it's --

5472

and there are risks. And frankly I think it's a good idea.

MR. SCHMIDTLEIN: I think it's at the very least we need to talk to our client about this.

THE COURT: Yeah. Talk to your clients about it.

MR. JOHNSON: By the way, Your Honor, do you have any law on this?

THE COURT: It's like my summary judgment opinion, which you'd like to keep sending back to me. My guess is there is no law on this. I mean, the law clerks found nothing on it. The only thing that occurred to me was we might be able to do it because it's less than --

MR. JOHNSON: The door's not closed, Your Honor.

THE COURT: But, no.

MR. JOHNSON: Thank you for the constructive suggestion.

THE COURT: And if you all can find something, feel free.

MR. SCHMIDTLEIN: No. I think Mr. Johnson's question really was obviously part of the evaluating --

MR. JARDINE: You better close that door.

THE COURT: Feel free. You won't offend me if you try to find something.

(Whereupon, the Judge closed the door.)

THE COURT: At some point, and again, you all can think about this tonight, we also ought to discuss the

5473

schedule for tomorrow. I mean, I do have to go back this weekend. But as of right now, there are seats available, there's a 5:15 flight, which would mean I would have to stop here by around 4:00. But there also is a flight at 10 o'clock the next morning on Saturday, which I can take, which is probably the most realistic thing.

You all should consider -- whatever you decide on this less than unanimous thing as to whether or not -- I mean, they may just -- they may enter, of course, saying they just can't reach it. But one thing you may consider is whether or not to --

THE CLERK: They said they're making progress, and they would like to stay at least until 7:00. And they are ordering dinner right now.

THE COURT: That answers that. Okay. The question is if they don't make enough progress whether or not they should come back on Monday. Just think about that.

MR. TULCHIN: Well --

THE COURT: Obviously we have to hear what they have to say. But that is a possibility.

MR. TULCHIN: Right. Your Honor, what I was going to say is that it might be helpful if you want to catch a plane tomorrow to tell them before they leave tonight that the schedule tomorrow is that they would deliberate 'til 3:30. And if they don't reach a verdict we'll come back Monday.

5474

THE COURT: I can do that. But, in fact, I have -- you know, it really doesn't matter. I mean, I lose my hearing tomorrow, anyway, in Baltimore, so I probably can stay until 10:00. I mean, I can -- but maybe we ought -- before the weekend maybe we ought to tell them we're going to stop at sometime tomorrow, anyway. It is a weekend.

MR. TULCHIN: Right.

THE COURT: I hope they are making progress.

MR. HOLLEY: Thank you, Your Honor.

(Recess.)

5475

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 December 15, 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 5429 through 5475 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

5476


  


An Exhibit that Raises Questions About Judge Motz's Middleware Ruling in Novell v. Microsoft ~pj | 111 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections thread
Authored by: nsomos on Sunday, July 22 2012 @ 10:34 PM EDT
Please post any corrections in this thread.
A summary in the posts title may be helpful.
Before offering a correction to the transcript,
check against the original, as we try to be true
to originals, even if they were in error.

Thnx -> Thanks

[ Reply to This | # ]

Off Topic
Authored by: Tufty on Monday, July 23 2012 @ 02:31 AM EDT
Off tropic will be good

---
Linux powered squirrel.

[ Reply to This | # ]

News Pics
Authored by: Tufty on Monday, July 23 2012 @ 02:31 AM EDT
Read all abaaaarrrt it

---
Linux powered squirrel.

[ Reply to This | # ]

Comes Documents
Authored by: Tufty on Monday, July 23 2012 @ 02:32 AM EDT
We see the importance of this project here

---
Linux powered squirrel.

[ Reply to This | # ]

Time to retire, Motz?
Authored by: Anonymous on Monday, July 23 2012 @ 06:07 AM EDT
It seems we have a judge with memory issues who likes making new law "from
the bench".


When (and how (for ongoing cases, etc...)) do judges normally retire? And do
they ever need to be "pushed" to it?

[ Reply to This | # ]

Another big problem with the middleware ruling?
Authored by: Anonymous on Monday, July 23 2012 @ 08:21 AM EDT

The judge's reliance on the U.S. v. Microsoft findings of fact in order to rule against Novell raised a big red flag for me. I don't know whether the Novell lawyers made the appropriate objection and preserved it, but under ordinary application of principles of offensive non-mutual collateral estoppel in federal courts, the factual findings from the previous case could only be used in Novell's favor, not against it.

Microsoft already had a full and fair opportunity to litigate the issues and would thus collaterally attack the validity of the prior judgment against it if allowed to relitigate the same issues in a later case. Novell, on the other hand, as a non-party to the earlier proceeding cannot be bound by the earlier findings of fact because it had no prior opportunity to litigate those facts. So ordinarily, the judge could use the prior findings of fact against Microsoft, but not against Novell.

However, quirky exceptions to the ordinary application of the principle can be created by the case's procedural posture. For example, if Novell relied on the findings without offering its own alternative evidence, I can see a colorable argument that its proffer of the findings became a representative admission of those facts under F.R.E. 801(d) (2)(A). But it would surprise me were Novell's lawyers so careless.

In any event, I think the judge's use of the findings against Novell is a sufficient departure from the norm to need at least a footnote explaining the procedural posture that made reliance on the findings against Novell's interests appropriate. But I didn't see a relevant explanation when I read the opinion, albeit somewhat hurriedly.

[ Reply to This | # ]

Middleware is a creature of network operations
Authored by: hardmath on Monday, July 23 2012 @ 10:41 AM EDT

When one says that middleware "sits on top of an OS", one should clarify that by and large it is a networking OS that is relevant.

In the 90's Microsoft recognized the dominanance of Novell's LAN protocols in the customer base and did their usual trick of seeming to implement something compatible while rigging in gratuitous incompatibility to sway developers to the Microsoft way of doing things.

Even so Novell's Netware ruled in application support from the backend databases of Oracle to frontend multiplayers games such as Doom. To suggest that Novell (whose Netware protocols were running under DOS and Unixware, and who supplied compatible clients on Mac, Windows, and OS/2) could not mount a credible offering as to middleware is to forget who really had the upper hand on the LAN at the time.

If you are writing an application that does not use networked computers, then the point of middleware is moot. You'd almost as well build a monolithic "kitchen sink" application. Middleware comes into its own when sitting between the frontend presentation to a user on one computer and a backend server on another computer.

---
"Prolog is an efficient programming language because it is a very stupid theorem prover." -- Richard O'Keefe

[ Reply to This | # ]

His Billness: "...we will announce a better way to run Windows API on UNIX."
Authored by: tiger99 on Monday, July 23 2012 @ 11:09 AM EDT
I do believe that we are still waiting!

[ Reply to This | # ]

Motz is good at this
Authored by: Anonymous on Monday, July 23 2012 @ 02:16 PM EDT
He picks the arguments he wants to hear and denies the existence of any
arguments he does not. This is not the first time he has done this in the
trial. He just blindly denies the existence of any evidence that would hurt
Microsoft's case, even if that evidence is smack dab in front of his face.

[ Reply to This | # ]

The Jury doesn't have its head on straight
Authored by: Anonymous on Monday, July 23 2012 @ 03:46 PM EDT
Ouch. (Transcript p.5439)

[ Reply to This | # ]

Answer to P.J.'s question
Authored by: Anonymous on Monday, July 23 2012 @ 05:46 PM EDT
Do you see Novell conceding that Microsoft would be entitled to judgement as a matter of law if its definition was correct? If so, point it out, because I don't see it.
Apparently it's this:
MR. JOHNSON: ...I was talking about the definition they want you to instruct the jury on, the definition that they want you to instruct the jury on, which would be directing a verdict, by the way, and that's what it would be here --
If the definition would be sufficient to direct a verdict, then that must only be a matter of law. If it's a only matter of law, then it would be sufficient for a JMOL. Wouldn't that be true?

If that logic is wrong, I think the appeals court would quickly see the problem. I would hope that Judge Motz has enough experience that he wouldn't make a mistake like that.

[ Reply to This | # ]

WordPerfect vs. Netscape
Authored by: Anonymous on Monday, July 23 2012 @ 08:02 PM EDT
I don't see how paragraph 29 of the Findings of Fact would help Novell's case. Most of it would cut against Novell's argument. The only help might come from this sentence:
But to the extent the array of applications relying solely on middleware comes to satisfy all of a user's needs, the user will not care whether there exists a large number of other applications that are directly compatible with the underlying operating system.
That would seem to require a very broad group of APIs, but WordPerfect only offered a limited set. Netscape had a limited set of APIs, too, but things were a bit different in Netscape's case as paragraphs 69 and 70 pointed out. Paragraph 70 is probably the one most helpful to Netscape:
70. Adding to Navigator's potential to weaken the applications barrier to entry is the fact that the Internet has become both a major inducement for consumers to buy PCs for the first time and a major occupier of the time and attention of current PCs users. For any firm looking to turn its browser product into an applications platform such to rival Windows, the intense consumer interest in all things Internet-related is a great boon.
That was written in 1999 and it makes the point that people were buying computers just to connect to the Internet. The "array of applications" required to meet those users' needs wouldn't have been very broad. WordPerfect was targeted to the Office Productivity market, however. The "array of applications" required there may have been much broader. Perhaps Novell did show that customers wanted to buy Office-Productivity-Only PCs and the people making the purchasing decisions in those cases were unconcerned about having a broad variety of software available for those PCs, but it wasn't in the Findings of Fact as far as I know.

[ Reply to This | # ]

Motz is (again) getting the basic allegation wrong
Authored by: Anonymous on Monday, July 23 2012 @ 08:11 PM EDT
Novell is not claiming that WordPerfect would have become a
Windows-crushing middleware and Novell's failure to prove
that which they don't claim is irrelevant.

Novell is claiming the Microsoft *attempted* to protect its
OS monopoly by doing something *unjustified* which *happened
to harm* Novell's WordPerfect products.

It doesn't matter if the threat to Microsoft was real, only
that this was part of Microsoft's motive at the time. It is
not legally required that Microsoft's actions were directed
at Novell or otherwise malicious, that is just a bonus
argument. It does matter if Microsoft's actions delayed the
commercial release of WordPerfect for Windows 95 and cost
Novell money.

Novell is suing over criminal recklessness. It is similar
to suing an already convicted car thief for smashing your
fruit stand during the police chase. You don't need to
prove that he had a good reason to smash it, only that he
unlawfully smashed it as part of his crime.

[ Reply to This | # ]

middleware APIs
Authored by: darkonc on Wednesday, July 25 2012 @ 05:22 AM EDT
"[c]urrently, no middleware product exposes enough APIs to allow independent software vendors ("ISVs") profitably to write full-featured personal productivity applications that rely solely on . . . APIs [of the middleware product itself]."
This implies that examples of Middleware exist (with no knoen counter-examples) which do not expose enough APIs to allow full-featured productivity applications that rely solely on . . . APIs [of the middleware product itself].

That having been said, to accept the defendant's definition of a critical word in the plaintif's complaint and then throw out the case based on the new definition is like changing the rules of a game mid-play and then penalizing a player for not having followed a rule that didn't exist a few seconds ago.

---
Powerful, committed communication. Touching the jewel within each person and bringing it to life..

[ Reply to This | # ]

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