united states court of appeals for oralargument on november 4, 2003 in the united states court of...

SCHEDULED FOR ORAL ARGUMENT ON NOVEMBER 4, 2003

IN THE

United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 03-5030

UNITED STATES OF AMERICA,Plaintiff-Appellee,

—v.—

MICROSOFT CORPORATION,Defendant-Appellee,

—v.—

COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION andSOFTWARE & INFORMATION INDUSTRY ASSOCIATION,

Putative Intervenors-Appellants.

ON APPEAL FROM THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLUMBIA

BRIEF FOR APPELLEE MICROSOFT CORPORATION

JOHN L. WARDENRICHARD J. UROWSKYSTEVEN L. HOLLEYMICHAEL LACOVARARICHARD C. PEPPERMAN, IIBRADLEY P. SMITHSULLIVAN & CROMWELL LLP125 Broad StreetNew York, New York 10004(212) 558-4000

Counsel for Defendant-AppelleeMicrosoft Corporation

BRADFORD L. SMITHTHOMAS W. BURTDAVID A. HEINER, JR.MICROSOFT CORPORATIONOne Microsoft WayRedmond, Washington 98052(425) 706-8080

Original Version: June 18, 2003Final Version: August 6, 2003

(Additional Counsel Listed on Inside of Cover)

FINAL VERSION

DAN K. WEBBWINSTON & STRAWN LLP35 West Wacker DriveChicago, Illinois 60601(312) 558-5600

CHARLES F. RULEFRIED, FRANK, HARRIS, SHRIVER

& JACOBSON1001 Pennsylvania Avenue, N.W.Washington, D.C. 20004(202) 639-7300

CERTIFICATE AS TO PARTIES, RULINGS AND RELATED CASES

A. Parties, Intervenors and Amici Curiae

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and D.C. Circuit Rule

26.1, appellee Microsoft Corporation (“Microsoft”) certifies that it has no corporate parents and

that no publicly-held company owns 10% or more of Microsoft’s stock.

Except for the following, all parties, intervenors and amici appearing before the District

Court and this Court are listed in the Brief for Appellants.

1. Intervenors

In 1998, the following media organizations were permitted to intervene in the District

Court for the limited purpose of enforcing 15 U.S.C. § 30: Bloomberg News; The New York

Times Co.; Reuters America, Inc.; San Jose Mercury News, Inc.; The Seattle Times; ZDNET;

and ZDTV, L.L.C. In 1999, Bristol Technology, Inc. was permitted to intervene in the District

Court for the limited purpose of requesting access to documents produced in discovery.

2. Amici Curiae

The following persons were permitted to participate as amici curiae in the District Court

in 1999 and 2000: Association for Competitive Technology, Robert H. Bork, the Computer &

Communications Industry Association, Lawrence Lessig, Robert E. Litan and the Software and

Information Industry Association.

B. Rulings under Review

References to the rulings at issue appear in the Brief for Appellants.

C. Related Cases

A related case is currently before this Court in Nos. 02-7155 and 02-7156, which are

consolidated on appeal. On November 1, 2002, the District Court entered a Final Judgment in

New York v. Microsoft Corp. 224 F. Supp. 2d 76 (D.D.C. 2002). The Commonwealth of

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Massachusetts and the State of West Virginia appealed the Final Judgment by filing Notices of

Appeal on November 29 and December 2, 2002, respectively.

This case and a related case were previously before this Court in Nos. 00-5212 and

00-5213, which were consolidated on appeal. On June 7, 2000, the District Court entered a Final

Judgment in United States v. Microsoft Corp. 97 F. Supp. 2d 59 (D.D.C. 2000). On June 28,

2001, this Court affirmed in part, reversed in part and remanded in part. This Court’s decision is

reported as United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir.) (en banc), cert. denied, 534

U.S. 952 (2001).

This case and a related case were also previously before this Court in Nos. 98-5399 and

98-5400, which were consolidated on appeal. On August 10, 1998, various media organizations

sought permission to attend pre-trial depositions pursuant to the Publicity in Taking Evidence

Act of 1913, 15 U.S.C. § 30. The District Court granted their motion. On January 29, 1999, this

Court affirmed. This Court’s decision is reported as United States v. Microsoft Corp., 165 F.3d

952 (D.C. Cir. 1999).

No other related cases are pending in this Court or any other court.

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TABLE OF CONTENTS

CERTIFICATE AS TO PARTIES, RULINGS AND RELATED CASES.................................. i

TABLE OF AUTHORITIES ........................................................................................................v

GLOSSARY .............................................................................................................................. vii

STATEMENT OF THE ISSUES..................................................................................................1

STATEMENT OF THE CASE.....................................................................................................1

STANDARD OF REVIEW ..........................................................................................................2

SUMMARY OF ARGUMENT ....................................................................................................2

ARGUMENT................................................................................................................................4

I. This Appeal Should Be Dismissed Because CCIA and SIIA Are Not Proper Intervenors...........................................................................4

A. CCIA and SIIA Are Not Entitled to Permissive Intervention...........................................5

B. CCIA and SIIA Are Not Entitled To Intervene as of Right To Enforce the Tunney Act’s Procedural Requirements ..................................................6

II. The Consent Decree Is in the Public Interest..........................................................................7

A. The Consent Decree Properly Addresses This Court’s Liability Determinations ..............................................................................7

1. Commingling ..............................................................................................................8

2. Add/Remove Programs Utility ...................................................................................9

3. Java .............................................................................................................................9

4. OEM Flexibility ........................................................................................................10

B. The District Court Properly Rejected Additional Remedies...........................................10

1. Remedies Proposed by the Litigating States in New York v. Microsoft................................................................................11

2. API and Communications Protocol Disclosures.......................................................12

a. No Ambiguities...................................................................................................12

b. Adequate Disclosures..........................................................................................14

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C. The Consent Decree Includes Appropriate Enforcement Provisions .............................15

III. Microsoft Complied with the Tunney Act’s Disclosure Requirements ...............................................................................15

CONCLUSION...........................................................................................................................17

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TABLE OF AUTHORITIES

(Authorities on which Microsoft chiefly relies are marked with asterisks.)

CASES

* Alternative Research & Dev. Found. v. Veneman, 262 F.3d 406 (D.C. Cir. 2001) ................................................................................................4

Arizonans for Official English v. Arizona, 520 U.S. 43 (1997)....................................................6

Dillard v. City of Foley, 166 F.R.D. 503 (M.D. Ala. 1996) .........................................................5

EEOC v. Nat’l Children’s Ctr., Inc., 146 F.3d 1042 (D.C. Cir. 1998) ..............................................................................................2

* Mass. Sch. of Law at Andover, Inc. v. United States, 118 F.3d 776 (D.C. Cir. 1997) ....................................................................................2, 4, 5, 7

Mova Pharm. Corp. v. Shalala, 140 F.3d 1060 (D.C. Cir. 1998) ................................................6

New York v. Microsoft Corp. 224 F. Supp. 2d 76 (D.D.C. 2002)..................................................i

S. Christian Leadership Conference v. Kelley, 747 F.2d 777 (D.C. Cir. 1984) ................................................................................................6

Tripp v. Executive Office of the President, 194 F.R.D. 344 (D.D.C. 2000)................................................................................................5

United States v. G. Heileman Brewing Co., 563 F. Supp. 642 (D. Del. 1983)......................................................................................... 6-7

United States v. LTV Corp., 746 F.2d 51 (D.C. Cir. 1984) ......................................................2, 4

* United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir.), cert. denied, 534 U.S. 952 (2001)........................................................................................................... ii, 7

United States v. Microsoft Corp., 165 F.3d 952 (D.C. Cir. 1999)............................................... ii

* United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995) ..........................................................................2, 4, 6, 7, 9, 13

United States v. Microsoft Corp., No. 98-1232, 2003 WL 262324 (D.D.C. Jan. 11, 2003)................................................. 2, 5-6

United States v. Microsoft Corp., No. 98-1232, 2002 WL 31654530 (D.D.C. Nov. 12, 2002) ................................. 9-10, 12, 13

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* United States v. Microsoft Corp., 231 F. Supp. 2d 144 (D.D.C. 2002) .............................................1-2, 8, 10, 11, 12-13, 14, 15

United States v. Microsoft Corp., 215 F. Supp. 2d 1, 19 (D.D.C. 2002) ....................................................................................16

United States v. Microsoft Corp. 97 F. Supp. 2d 59 (D.D.C. 2000)............................................ ii

United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999)..............................................9

STATUTES & RULES

15 U.S.C. § 16................................................................................................................... 1, 15-16

FED. R. CIV. P. 24..................................................................................................................2, 5, 6

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GLOSSARY

“APIs” Application Programming Interfaces.

“CCIA” The Computer & Communications Industry Association.

“CCIA/SIIA Br.” Brief for Appellants.

“Consent Decree” Final judgment entered in this action on November 12, 2002 and reported at 2002 WL 31654530 (D.D.C. Nov. 12, 2002).

“IAPs” Internet Access Providers. IAPs provide consumers with a connection to the Internet, with or without their own proprietary content.

“ICPs” Internet Content Providers. ICPs provide content to users of the Internet by maintaining Web sites.

“IE” Internet Explorer.

“IHVs” Independent Hardware Vendors. IHVs are entities that develop hardware to be included in or used with a personal computer running Windows.

“ISVs” Independent Software Vendors. ISVs are entities other than Microsoft that are engaged in the development or marketing of software products.

“Litigating States” The District of Columbia and nine other States (California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia) that declined to join the November 2001 settlement between Microsoft and the United States and the other plaintiff States in New York v. Microsoft Corp., No. 98-1233 (D.D.C.).

“Microsoft” Microsoft Corporation.

“OEMs” Original Equipment Manufacturers. OEMs are manufac-turers of personal computers.

“SIIA” The Software & Information Industry Association.

“USRPC” U.S. Response to Public Comments.

STATEMENT OF THE ISSUES

1. Whether the District Court properly denied the motion to intervene filed by the

Computer & Communications Industry Association (“CCIA”) and the Software & Information

Industry Association (“SIIA”)—two trade associations consisting largely of Microsoft

competitors.

2. Whether the Consent Decree negotiated by the U.S. Department of Justice and

entered by the District Court is in the “public interest” within the meaning of the Antitrust

Procedures and Penalties Act (“Tunney Act”), 15 U.S.C. § 16(b)-(h).

3. Whether Microsoft and the United States complied with the procedural

requirements of the Tunney Act.

STATEMENT OF THE CASE

After this Court vacated the prior judgment and remanded this case for further

proceedings, the District Court ordered the parties into intensive settlement negotiations. The

parties “conducted strenuous good-faith negotiations day and night,” which culminated in a full

settlement of this action. J.A. 94 (statement of mediator). The District Court reviewed the

settlement in accordance with the Tunney Act, receiving the full text of the 32,392 public

comments submitted on the proposed Consent Decree—including lengthy comments submitted

by CCIA and SIIA.

On November 1, 2002, the District Court concluded that the Consent Decree was in the

“public interest,” praising it “for the clear, consistent, and coherent manner in which it

accomplishes its task.” 231 F. Supp. 2d 144, 202 (D.D.C. 2002). The District Court explained:

[T]he proposed final judgment adopts a clear and consistent philosophy such that the provisions form a tightly woven fabric. The proposed final judgment takes account of the theory of liability advanced by Plaintiffs, the actual liability

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imposed by the appellate court, the concerns of the Plaintiffs with regard to future technologies, and the relevant policy considerations.

Id.

The District Court entered the Consent Decree on November 12, 2002. CCIA and SIIA

subsequently moved to intervene for purposes of appealing entry of the Consent Decree. The

District Court denied their motion, 2003 WL 262324 (D.D.C. Jan. 11, 2003), and this appeal

followed. Microsoft filed a motion for summary affirmance of the District Court’s intervention

decision on February 24, 2003.

STANDARD OF REVIEW

CCIA and SIIA contend that the District Court erred in denying their request for

permissive intervention to appeal the determination that the Consent Decree is in the “public

interest.” CCIA/SIIA Br. at 19-20. Recognizing the “wide latitude” afforded by Federal Rule of

Civil Procedure 24(b), this Court “review[s] the denial of a motion for permissive intervention

under the abuse of discretion standard.” EEOC v. Nat’l Children’s Ctr., Inc., 146 F.3d 1042,

1046 (D.C. Cir. 1998); accord United States v. LTV Corp., 746 F.2d 51, 54 (D.C. Cir. 1984).

Even if the Court concludes that CCIA and SIIA are proper intervenors, the Consent

Decree should not be overturned unless it makes a “‘mockery of judicial power’” or results from

a “sell-out by the Department [of Justice].” Mass. Sch. of Law at Andover, Inc. v. United States,

118 F.3d 776, 783-84 (D.C. Cir. 1997) (“MSL”) (quoting United States v. Microsoft Corp., 56

F.3d 1448, 1462 (D.C. Cir. 1995)).

SUMMARY OF ARGUMENT

The District Court did not abuse its discretion in denying the request for permissive

intervention. CCIA and SIIA failed to establish the requisite commonality between any issues

that remain in this litigation and any antitrust claims their members may have against Microsoft.

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They also failed to comply with Rule 24(c)’s requirement that they file a pleading setting forth

the claim or defense for which they sought intervention. With regard to intervention as of right—

which they pursue on appeal only in a footnote in connection with their challenge to the parties’

compliance with the Tunney Act’s procedural requirements—CCIA and SIIA did not identify a

legally protectable interest sufficient to give them standing to intervene. This Court thus should

affirm the District Court’s denial of intervention and dismiss the remainder of this appeal.

CCIA and SIIA argue that the Consent Decree does not address this Court’s liability

determinations regarding commingling and Java. The District Court ruled, however, that the

Consent Decree provides effective relief for these liability determinations and that the severe

measures advocated by CCIA and SIIA would harm consumers and the PC industry. There is no

basis for overturning those rulings. CCIA and SIIA also complain that the Consent Decree does

not “terminate” Microsoft’s monopoly or deprive Microsoft of the “fruits” of its statutory

violations. Yet Microsoft acquired its monopoly lawfully, and there is no finding that Microsoft

would have lost its monopoly but for the conduct held to be anticompetitive in this case. Nor is

there a basis to conclude that the additional remedies proposed by CCIA and SIIA are necessary

to deny Microsoft the “fruits” of its anticompetitive conduct.

CCIA and SIIA also assert that Section 16(g) of the Tunney Act required Microsoft to

disclose communications with the United States concerning the Consent Decree going back to

1998, when the case was filed. The United States and Microsoft did not begin negotiating the

Consent Decree until September 2001. Microsoft’s disclosures thus properly covered the period

commencing with the issuance of this Court’s mandate on August 24, 2001.

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ARGUMENT

The Consent Decree is “a negotiated settlement” that does not implicate the interests of

CCIA and SIIA to a degree that permits them to intervene in this action. Microsoft, 56 F.3d

at 1456. Nor do their substantive complaints about the decree give the Court “reason to infer a

sell-out” by the United States. MSL, 118 F.3d at 784.

I.

This Appeal Should Be Dismissed Because CCIA and SIIA Are Not Proper Intervenors.

Notwithstanding their claimed entitlement to “rigorous appellate review,” CCIA/SIIA Br.

at 18, CCIA and SIIA are not “automatically entitled to an appeal on the merits,” MSL, 118 F.3d

at 779 n.1. They instead must satisfy the requirements for intervention “as a condition of taking

an appeal.” LTV, 746 F.2d at 54. Rule 24 governs both intervention in the district court and

“intervention[] solely for purposes of appeal.” MSL, 118 F.3d at 779. “Because the district court

correctly denied intervention,” CCIA and SIIA do “not have standing to appeal from” the

Consent Decree. Alternative Research & Dev. Found. v. Veneman, 262 F.3d 406, 411 (D.C. Cir.

2001).

In the District Court, CCIA and SIIA sought to intervene as of right pursuant to

Rule 24(a) or, alternatively, by permission pursuant to Rule 24(b). In challenging on appeal the

District Court’s determination that the Consent Decree is in the public interest, however, CCIA

and SIIA argue solely that they are entitled to permissive intervention. CCIA/SIIA Br. at 18-20.

Only in a footnote do they assert that they are entitled to intervene as of right to enforce the

Tunney Act’s procedural requirements. Id. at 52 & n.16. Neither argument has merit.

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A. CCIA and SIIA Are Not Entitled to Permissive Intervention.

To intervene by permission, CCIA and SIIA must demonstrate that (i) their “claim or

defense and the main action have a question of law or fact in common” and (ii) intervention will

not “unduly delay or prejudice the adjudication of the rights of the original parties.” FED. R. CIV.

P. 24(b).

As to the first requirement, CCIA and SIIA do not identify what claims their members

purportedly have against Microsoft. They simply assert that there are such claims and that they

“parallel” claims in this action. CCIA/SIIA Br. at 20. That assertion is inadequate on its face.

Moreover, even if the Court were to reject the Consent Decree, that decision would not lead to

another trial on the merits that might provide support for private antitrust claims. That fact

distinguishes this case from MSL, where “at least some prospect of [a] trial on the merits”

remained. 118 F.3d at 782. Here, no conceivable overlap exists between (i) the remedy-specific

issues CCIA and SIIA seek to present on appeal and (ii) the substantive antitrust claims CCIA

and SIIA contend their members may have against Microsoft. Finally, CCIA and SIIA failed to

comply with Rule 24(c)’s requirement that their motion to intervene “be accompanied by a

pleading setting forth the claim or defense for which intervention is sought,” which by itself

provided ample ground for the District Court to deny their motion. See Tripp v. Executive Office

of the President, 194 F.R.D. 344, 347 n.1 (D.D.C. 2000); Dillard v. City of Foley, 166 F.R.D.

503, 506 (M.D. Ala. 1996).

As to the second requirement, this Court can “take a peek at the merits” to determine

whether permitting CCIA and SIIA to intervene would result in undue delay. MSL, 118 F.3d at

782-83 (internal quotation omitted). The issues they seek to raise fall well short of demonstrating

that the Consent Decree makes a “mockery of judicial power.” Id. at 783-84. As the District

Court correctly concluded, none of the objections raised by CCIA and SIIA establishes “that the

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Government failed to vigorously and faithfully represent[] the public interest.” 2003 WL 262324,

at *4 (internal quotation omitted).

B. CCIA and SIIA Are Not Entitled To Intervene as of Right To Enforce the Tunney Act’s Procedural Requirements.

CCIA and SIIA assert in a footnote that they may intervene as of right to challenge the

parties’ disclosures under the Tunney Act. CCIA/SIIA Br. at 52 n.16. To do so, CCIA and SIIA

must demonstrate that they possess “an interest relating to the property or transaction which is

the subject of the action.” FED. R. CIV. P. 24(a)(2). The District Court ruled that CCIA and SIIA

provided “little information” demonstrating that they had a cognizable interest in this case. 2003

WL 262324, at *3. That decision was not an abuse of discretion. See Mova Pharm. Corp. v.

Shalala, 140 F.3d 1060, 1074 (D.C. Cir. 1998).

Unlike the intervenor in MSL, CCIA and SIIA have not even attempted to identify a

particularized need for any additional disclosures, nor do they differentiate their supposed

interest in the parties’ Tunney Act disclosures from that “shared generally with the public at

large.” Arizonans for Official English v. Arizona, 520 U.S. 43, 64 (1997). They thus have not

identified “a legally protected interest” of their own that could support intervention as of right.

Id.; accord S. Christian Leadership Conference v. Kelley, 747 F.2d 777, 779 (D.C. Cir. 1984)

(Rule 24(a)(2) “impliedly refers not to any interest the applicant can put forward, but only to a

legally protectable one.”) (emphasis in original).

More fundamentally, allowing CCIA and SIIA to intervene would encourage

disappointed bystanders in future antitrust enforcement actions to drag the parties through an

unnecessary appeal by alleging non-compliance with the Tunney Act—a result that would

frustrate the ability of the United States to exercise “prosecutorial discretion” in reaching

“negotiated settlement[s]” of complex antitrust cases. Microsoft, 56 F.3d at 1456, 1460. The

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legislative history of the Tunney Act “reveals that the main purpose of the bill was ‘to encourage

additional comments and response by more adequate notice to the public,’ and not to invite

intervention with all of the attendant problems, complexities and delays that such participation

would inevitably involve.” United States v. G. Heileman Brewing Co., 563 F. Supp. 642, 652-53

(D. Del. 1983) (quoting S. REP. NO. 298, at 5 (1973)). CCIA and SIIA received notice of the

Consent Decree and commented on it extensively, thereby participating in the Tunney Act

review process in the manner Congress intended.

II.

The Consent Decree Is in the Public Interest.

“The Tunney Act was not intended to create a disincentive to the use of the consent

decree.” Microsoft, 56 F.3d at 1456. Accordingly, although a proposed consent decree must

comport with the public interest, this Court “construe[s] the public interest inquiry narrowly.”

MSL, 118 F.3d at 783.

CCIA and SIIA argue that the Consent Decree (i) does not adequately address all of this

Court’s liability determinations, (ii) does not terminate Microsoft’s monopoly or deny Microsoft

the “fruits” of its violations, and (iii) contains ineffective compliance provisions. These

criticisms are unfounded.

A. The Consent Decree Properly Addresses This Court’s Liability Determinations.

CCIA and SIIA argue that the Consent Decree should be overturned because it does not

require the removal of software code from Windows as a remedy for this Court’s ruling that

Microsoft violated the Sherman Act by “commingling code related to browsing and other code in

the same files” and by “excluding IE from the ‘Add/Remove Programs’ utility.” CCIA/SIIA Br.

at 25 (quoting United States v. Microsoft Corp., 253 F.3d 34, 64-65 (D.C. Cir.), cert. denied, 534

U.S. 952 (2001)). They also assert that the Consent Decree does not (i) “provide any remedy for

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Microsoft’s illegal conduct against Java” or (ii) adequately protect the ability of OEMs to make

modifications to Windows. CCIA/SIIA Br. at 29-34, 40-41. The United States and the District

Court considered all of these arguments, and properly rejected them.

1. Commingling

“The United States has, throughout the remedy phases of this case (including before the

District Court in June 2000), stated consistently that it did not seek to require Microsoft to

remove commingled code from Windows.” J.A. 1250. Consistent with that position, the Consent

Decree does not require removal of software code from Windows, but rather requires Microsoft

to allow OEMs and end users “‘to remove access’” to certain features of Windows defined as

“Microsoft Middleware Products.” 231 F. Supp. 2d at 179 (quoting J.A. 1248).

The District Court concluded that this remedy for “commingling” serves the public

interest for two principal reasons. First, the Consent Decree’s “focus on end-user access, rather

than [on] code removal or redesign,” addresses the anticompetitive effect of commingling by

removing the “disincentive to OEMs to install non-Microsoft middleware products.” Id. at 180,

181. In this regard, the District Court credited the prediction of the United States that the Consent

Decree “will enhance competition between Microsoft middleware and non-Microsoft

middleware.” Id. at 181. Second, the District Court concurred with the United States that

requiring Microsoft to remove software code from Windows would affirmatively injure both

consumers and third-party software developers. Id. at 181. The United States explained:

[A] ban on commingling without regard to its competitive significance . . . would impose a wholly unnecessary and artificial constraint on software design that could have adverse implications for consumers. Moreover, changes to the operating system that would be required to implement such a blanket prohibition likely would have adverse effects not only upon Microsoft and its customers but also upon third parties that already have designed software to rely on the present operating system code.

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J.A. 1253-54. CCIA and SIIA do not accuse the United States of acting in bad faith in

negotiating this aspect of the Consent Decree, and thus they provide no basis to question the

District Court’s deference to the United States’ “‘predictive judgment[]’” concerning the

appropriate remedy for commingling. Microsoft, 56 F.3d at 1460 (quoting United States v. W.

Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993)).

2. Add/Remove Programs Utility

CCIA and SIIA assert that the Consent Decree does not address this Court’s

determination that Microsoft unlawfully excluded IE from the Add/Remove Programs utility in

Windows 98. CCIA/SIIA Br. at 25, 28-29. They are wrong. Section III.H.1 of the decree

explicitly requires that Microsoft provide a “mechanism . . . such as an Add/Remove icon” that

end users can invoke “to enable or remove access” to IE and other features of Windows defined

as “Microsoft Middleware Products.” 2002 WL 31654530, at *4 (D.D.C. Nov. 12, 2002). CCIA

and SIIA are also wrong in suggesting that the Add/Remove Programs utility at one time allowed

users to remove the software code that comprises IE. CCIA/SIIA Br. at 29. The Add/Remove

Programs utility removed only the software code that provided access to Web browsing

functionality—it did not remove IE itself. See United States v. Microsoft Corp., 84 F. Supp. 2d 9,

50-51 (D.D.C. 1999) (FF 165).

3. Java

CCIA and SIIA assert that the Consent Decree fails “to provide any remedy for

Microsoft’s illegal conduct against Java.” CCIA/SIIA Br. at 29. This is wrong as well. Under

Section VI.K of the decree, “Microsoft’s Java Virtual Machine” is a “Microsoft Middleware

Product.” 2002 WL 31654530, at *14. As a result, Sections III.F and III.G of the decree prohibit

Microsoft from (i) retaliating against ISVs or IHVs for developing, using, distributing,

promoting or supporting competing Java virtual machines and (ii) entering into agreements with

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any IAP, ICP, ISV, IHV or OEM that require them to distribute, promote, use or support

Microsoft’s Java virtual machine exclusively or in a fixed percentage. See id. at *3-4. The

District Court found that these provisions “prohibit the anticompetitive conduct identified by”

this Court, 231 F. Supp. 2d at 186, and the United States expressly considered and rejected the

alternative remedy proposed by CCIA and SIIA, J.A. 1348-49.

4. OEM Flexibility

CCIA and SIIA criticize Sections III.C.3 and III.C.5 of the Consent Decree on the ground

that these provisions—which require that Microsoft allow OEMs to launch automatically “Non-

Microsoft Middleware” and present their own IAP offers during the initial Windows boot

sequence—contain unreasonable technical limitations. CCIA/SIIA Br. at 40-41.

The United States expressly considered and rejected these criticisms, noting that (i) the

limitations in Sections III.C.3 are designed to enable the computer to “boot up quickly the first

time it is turned on, a characteristic that users value,” and (ii) Section III.C.5 appropriately

accounts for the fact that “absent reasonable technical standards” concerning IAP offers, the

performance of Windows “might be degraded.” J.A. 1228, 1230. In approving the Consent

Decree, the District Court properly recognized that the decree provides OEMs with additional

“freedoms not clearly implicated” by this Court’s rulings, noting that the technical limitations in

Sections III.C.3 and III.C.5 “reflect[] the give and take of a negotiated settlement.” 231 F. Supp.

2d at 174, 175.

B. The District Court Properly Rejected Additional Remedies.

CCIA and SIIA object that the Consent Decree does not “terminate” Microsoft’s

monopoly or deprive it of the “fruits” of its unlawful conduct. CCIA/SIIA Br. at 34. In particular,

they argue that the Consent Decree should have (i) included certain provisions proposed by the

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Litigating States in New York v. Microsoft and (ii) required Microsoft to make more extensive

API and communications protocol disclosures. Id. at 34-40.

The District Court recognized that it would be “incompatible with the facts of this case”

to impose remedies designed to terminate Microsoft’s monopoly, 231 F. Supp. 2d at 153 n.3,

because “plaintiffs never alleged, and neither the District Court nor the Court of Appeals found,

that Microsoft acquired its monopoly unlawfully,” J.A. 1168 n.70 (emphasis in original).

Moreover, “neither the District Court nor the Court of Appeals found [a] direct causal connection

between [Microsoft’s] conduct and the continuance of the monopoly.” J.A. 1168 n.70; see also

231 F. Supp. 2d at 153 n.3. As the United States also explained, the Consent Decree “sufficiently

deprive[s] Microsoft of the fruits of its unlawful conduct” by “restor[ing] the opportunity for

middleware of all types.” J.A. 1147; see also J.A. 1143. For these reasons and others, the

additional remedies advocated by CCIA and SIIA are unwarranted.

1. Remedies Proposed by the Litigating States in New York v. Microsoft

CCIA and SIIA assert that the Consent Decree is “fundamentally flawed” because it does

not include the “Java must-carry injunction” proposed by the Litigating States. CCIA/SIIA Br. at

31. They also argue that the Consent Decree should have required Microsoft to (i) disclose and

license the source code for IE at no charge and (ii) auction the source code for Microsoft Office

to the three highest bidders so that they could “port” Office to non-Microsoft operating systems

such as Linux. Id. at 35-36.

The United States fully addressed these proposals in its response to public comments,

noting that (i) the mandatory distribution of Java represents “the antithesis” of the antitrust goal

of promoting “competition and not specific competitors,” (ii) “open sourcing the Internet

Explorer source code . . . would benefit Microsoft’s competitors rather than ensuring a level

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playing field for all participants in the software industry,” and (iii) the porting requirement for

Office “goes far beyond the violations found by imposing . . . substitutes for competition on the

merits and preordain[ing] the market outcome.” J.A. 1146-47, 1349, 1350-51. CCIA and SIIA

provide no basis to second-guess those determinations.

2. API and Communications Protocol Disclosures

Section III.D of the Consent Decree requires Microsoft to disclose to ISVs, IHVs, IAPs,

ICPs and OEMs the APIs “used by Microsoft Middleware to interoperate with a Windows

Operating System Product.” 2002 WL 31654530, at *3. Section III.E of the decree requires

Microsoft to license the communications protocols that Windows desktop operating systems use

to “interoperate, or communicate, natively . . . with a Microsoft server operating system

product.” Id. CCIA and SIIA argue that both provisions are ambiguous and that the Consent

Decree should require more extensive API and communications protocol disclosures. CCIA/SIIA

Br. at 43-46.

a. No Ambiguities

CCIA and SIIA contend that Sections III.D and III.E of the Consent Decree are

unenforceable because the decree “ambiguously defines, or fails to define at all,” critical terms.

Id. at 43.

First, CCIA and SIIA complain that the definition of “Windows Operating System

Product” is determined by Microsoft “‘in its sole discretion.’” Id. at 44 (quoting 2002 WL

31654530, at *15). There is no ambiguity in this definition—the term is explicitly defined to

encompass the software code “distributed commercially by Microsoft” for use with PCs as a

Windows desktop operating system. 2002 WL 31654530, at *15. As the District Court

explained, the definition “recognizes that Microsoft, as the distributor of a product called

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‘Windows,’ has the discretion to determine which code to include in its distribution of that

product.” 231 F. Supp. 2d at 166; see also J.A. 1199-1200.

Second, CCIA and SIIA assert that the definition of “Microsoft Middleware” is vague.

CCIA/SIIA Br. at 44. The Consent Decree defines “Microsoft Middleware” as the software code

that, among other things, is “distribute[d] separately from a Windows Operating System

Product” and is “Trademarked.” 2002 WL 31654530, at *13. Far from causing confusion, the

“separate distribution requirement” provides “ready means” to distinguish between components

defined as “Microsoft Middleware” and the remainder of Windows. 231 F. Supp. 2d at 187; see

also J.A. 1178. CCIA and SIIA contend that Microsoft can engage in illegal “product

integration” by defining the term “‘Windows Operating System Product’ to include

middleware.” CCIA/SIIA Br. at 44. That is wrong. “Software code can simultaneously” be

distributed as part of Windows and distributed separately as “Microsoft Middleware.” 231 F.

Supp. 2d at 166; see also J.A. 1200.

Third, CCIA and SIIA assert that two terms—“interoperate” and “server operating

system product”—are improperly left undefined. CCIA/SIIA Br. at 45-46. Not every word in a

consent decree must be defined. See Microsoft, 56 F.3d at 1462 (construing term using “the

logical interpretation of the decree”). Here, the District Court concluded that the definition of

“interoperate” is “apparent from its context” in Section III.D. 231 F. Supp. 2d at 191. The

District Court also concluded that the parties “have a common understanding” of the meaning of

“interoperate” in Section III.E and that “the addition of the words ‘or communicate’” further

clarifies its meaning there. Id.; see also J.A. 1298-1300. The term “server operating system

product” also is not vague. As the United States explained, it includes Windows 2000 Server,

Windows 2000 Advanced Server and Windows 2000 Datacenter Server. J.A. 1293-94.

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b. Adequate Disclosures

“Microsoft already discloses thousands of APIs,” J.A. 1274, and “has a clear business

incentive to do so, as it is this disclosure, in part, which makes the Windows platform attractive

to applications developers,” 231 F. Supp. 2d at 189. CCIA and SIIA nevertheless contend that

the Consent Decree should require more extensive disclosures of APIs and communications

protocols. CCIA/SIIA Br. at 11, 38 n.13, 39-40.

First, they argue that Microsoft should be required to disclose information sufficient to

“enable other operating systems to interoperate with the installed base of third party

applications” that have been written for Windows. Id. at 38 n.13 (emphasis added). The violation

in this case, however, did not involve practices directed at “other operating system developers,”

but rather conduct directed at middleware like Netscape Navigator that ran on Windows and

“threatened to lower the applications barrier to entry.” J.A. 1276; see also 231 F. Supp. 2d

at 188. Moreover, the disclosures suggested by CCIA and SIIA would “allow[] competing

operating system vendors to clone Windows APIs” by “requir[ing] Microsoft to provide

information . . . such as how to implement the APIs, not so they can be used by the middleware,

but so that those interfaces can be offered to others.” J.A. 1282. A remedy that facilitates cloning

would range “well beyond” the liability determinations affirmed by this Court. J.A. 1282; see

also J.A. 1273-74.

Second, CCIA and SIIA assert that the Consent Decree does not enable a “nascent

competitor” to offer software that “does more than comparable Microsoft middleware” because

Section III.D requires Microsoft to reveal “only those APIs used by Microsoft Middleware.”

CCIA/SIIA Br. at 39-40. This assertion is wrong. “[T]here is no requirement that any Non-

Microsoft Middleware use the same APIs as the Microsoft Middleware; nor is there any

indication that the only way to accomplish a particular function will be to use the Microsoft

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Middleware APIs.” J.A. 1275. That tens of thousands of programs have been written to run on

Windows demonstrates that the thousands of APIs publicly disclosed by Microsoft are sufficient

to enable ISVs to develop innovative programs that run on Windows.

C. The Consent Decree Includes Appropriate Enforcement Provisions.

The Consent Decree establishes a “Technical Committee” composed of three experts who

are to “assist in enforcement of and compliance with” the decree’s provisions. 231 F. Supp. 2d at

196. The decree also gives the United States independent authority to inspect Microsoft’s

records, interview Microsoft employees and require written reports from Microsoft concerning

its compliance efforts. See id. at 198.

CCIA and SIIA complain that the Technical Committee lacks the “legal expertise to

enforce compliance” with the Consent Decree. CCIA/SIIA Br. at 48. This criticism misses the

point. The Technical Committee “is not intended as a substitute for the enforcement authority of

the United States.” 231 F. Supp. 2d at 199.

This does not mean that the Technical Committee’s work is “meaningless,” as CCIA and

SIIA contend. CCIA/SIIA Br. at 49. Rather, the Technical Committee “exists to assist” the

United States by monitoring Microsoft’s compliance with the Consent Decree and by

investigating complaints. 231 F. Supp. 2d at 199. “As the legal interpretation of the decree is

properly left to the parties, with ultimate authority resting with the [District] Court, the focus on

the technical expertise of the Technical Committee is far from troubling.” Id.

III.

Microsoft Complied with the Tunney Act’s Disclosure Requirements.

Section 16(g) of the Tunney Act required Microsoft to disclose to the District Court its

communications “with any officer or employee of the United States concerning or relevant to”

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the proposed Consent Decree (other than communications by counsel of record with Department

of Justice employees). 15 U.S.C. § 16(g). Microsoft’s disclosures covered the period beginning

on August 24, 2001, when this Court issued its mandate. See 215 F. Supp. 2d 1, 19 (D.D.C.

2002). The District Court concluded that these disclosures satisfied Section 16(g). Id. at 22.

CCIA and SIIA contend that Microsoft improperly “disclosed only meetings that

occurred during the last round of settlement negotiations.” CCIA/SIIA Br. at 58. Yet the Consent

Decree was a direct outgrowth of the intense settlement discussions ordered by the District Court

on September 27, 2001. Any discussions occurring prior to that time period did not concern and

were not relevant to the Consent Decree ultimately agreed to by the parties. Moreover, the

contours of Microsoft’s liability were not determined until this Court issued its decision.

Previous failed settlement discussions are irrelevant to the Consent Decree, which focuses on

remedying the liability determinations affirmed on appeal.

CCIA and SIIA also suggest in passing that Microsoft should have disclosed

communications with “both the legislative and executive branches of the federal government.”

Id. The District Court properly ruled that Microsoft complied with Section 16(g) by disclosing its

“communications with any officer or employee of the Executive Branch.” 215 F. Supp. 2d at 19.

This holding comports with the plain language of the statute. As the District Court noted,

throughout the remainder of the Tunney Act, the term “‘United States’ plainly refers to the

Executive Branch, as it is the body charged with enforcing the antitrust laws.” Id. at 20; see also

15 U.S.C. §§ 16(b)-(f), 16(h)-(i). In any event, Microsoft advised the District Court when this

issue arose that it had not discussed the terms of the Consent Decree with members of Congress

or their staffs. J.A. 1470.

united states court of appeals for oralargument on november 4, 2003 in the united states court of...

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