WinInfo Daily UPDATE, December 26, 2002

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December 26, 2002—In this issue:

1. NEWS AND VIEWS

  • Judge Grants Sun Injunction in Case Against Microsoft
  • Former Smartphone Maker Sues Microsoft

2. ANNOUNCEMENTS

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3. CONTACT US

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1. NEWS AND VIEWS
(contributed by Paul Thurrott, [email protected])

  • JUDGE GRANTS SUN INJUNCTION IN CASE AGAINST MICROSOFT

  • On Monday, US District Judge J. Frederick Motz granted Sun Microsystems a preliminary injunction in its antitrust lawsuit against software giant Microsoft. The ruling will require Microsoft to begin bundling Sun's Java technology in Windows starting in early 2003. The preliminary injunction is significant because Judge Motz must believe both that Sun is likely to win its lawsuit and that the company would face irreparable harm if he didn't issue the injunction. Tuesday morning, Microsoft said it would appeal the ruling and ask the US Court of Appeals to expedite proceedings.

    The ruling is temporary, however, and applies only until the court can complete a full trial to determine whether Microsoft must permanently offer Java in Windows. In the meantime, Microsoft faces a harsh reality that Chairman and Chief Software Architect Bill Gates once described as the equivalent of requiring Coca-Cola to carry a can of Pepsi-Cola in every six-pack.

    "Today the court granted both Sun's copyright infringement and Java-Must-Carry motions for preliminary injunction in Sun versus Microsoft," said Mike Morris, senior vice president and special counsel at Sun. "We are very gratified by the Court's decision, and we are thankful for the opportunity to be heard and for the promptness of the court's ruling. The preliminary injunctions we sought are intended to temporarily address some of the damage that Microsoft has inflicted until a full trial can be conducted. The full trial will include this and all of the other antitrust claims that Sun has brought against Microsoft."

    How did this happen? WinInfo Daily UPDATE readers might recall that Microsoft first licensed Java in March 1996, and the company began distributing its own version of the technology in its Internet Explorer (IE) and Windows products later that year. As later revealed during Microsoft's federal antitrust trial, Microsoft executives feared that Java had the potential to diminish Windows' market power, so the company implemented a strategy to "wrest control of Java away from Sun" by creating a unique Java version that worked only on Windows. In the meantime, the company fragmented the market by tricking developers into believing that its "polluted" Java version was cross-platform-compatible, as Sun's version was. Microsoft also sought to destroy the number-one way Sun distributed its Java version—through its inclusion in Netscape Navigator—by undertaking "a number of anticompetitive actions that seriously impeded distribution of Navigator," court documents read. Microsoft also required its hardware and software partners that licensed Windows to promote Microsoft's Java version exclusively.

    Because of these actions, Sun sued Microsoft in March 1998. The lawsuit charged Microsoft with unfair competition, infringing on Sun's intellectual property and violating its Java trademark. Sun and Microsoft eventually settled the case in January 2001; Microsoft paid Sun $20 million. Since then, Microsoft's new alternative to Java, Microsoft .NET, began shipping with Windows and in other products.

    After Microsoft lost its federal antitrust case, Sun sued Microsoft again because the US District Court for the District of Columbia proved that Microsoft acted illegally toward Sun and hindered the distribution and acceptance of Java. As part of this more recent lawsuit, Sun asked the court to require Microsoft to bundle Sun's Java technology with Windows and IE, in the way Microsoft bundles .NET (Sun is also seeking more than $1 billion in damages). Sun argued that because Microsoft acted illegally to destroy Java's distribution and market, giving the company an unfair advantage in foisting its own similar technology on users, the court should force Microsoft to provide Java with the same ubiquitous distribution and user access it affords .NET. Judge Motz essentially granted that request Monday night.

    "I find Sun's theory \[about requiring Microsoft to afford Java the same distribution as .NET\] is sound and its proposed remedy appropriate," Judge Motz wrote in his ruling. Motz then explained that he wouldn't have granted Sun the injunction unless the company could prove that not bundling Java in Windows would "irretrievably tip the market for general-purpose, Internet-enabled distributed computing in favor of .NET," driving Java to extinction. Judge Motz noted that Sun makes a strong case, and he cited legal precedent for requiring Microsoft to bundle the competing technology in Windows.

    Motz also considered how the bundling requirement might harm Microsoft. But despite protests from the company, Motz ultimately decided that bundling Java with Windows would be a relatively simple feat. "The problems identified by \[Microsoft\] are either ephemeral or easily remediable," the judge wrote. "The must-carry provision of Sun's proposed injunction does not become effective for 90 days. That period of time appears fully sufficient to cure any ... problems Microsoft envisions."

    Motz justifies his decision again and again in his ruling, often using quotes from Microsoft executives or examples of the company's actions. But the most succinct explanation for his ruling is toward the end of the 42-page document. "Confronted with an innovative product for which it had no substitute (even on the drawing board) and which threatened its monopoly in the \[OS\] market, Microsoft devised and implemented a strategy to deprive Sun of the benefits of Sun's ingenuity and to deprive the consuming public of the full benefits of Sun's invention," Motz wrote. "Microsoft embraced Java for the purpose of destroying it. At the least, Microsoft bought itself time (seven years, as it turned out) to develop its own competitive product, and it is now bringing that product to a market its own antitrust violations have substantially distorted. This conduct may well not have justified breaking up Microsoft, as the government was seeking to do at the time of the D.C. Circuit's decision. But it fully justifies denying Microsoft a competitive advantage obtained by its antitrust violations."

  • FORMER SMARTPHONE MAKER SUES MICROSOFT

  • British mobile phone maker Sendo, which Microsoft once touted as the premier maker of Pocket PC-based Windows Powered Smartphones, is suing the software giant for stealing its trade secrets and proprietary technology. Because Sendo filed the case in a US District Court in Texas, Microsoft has 20 days to respond to the complaint. A trial could begin within a year.

    Just weeks ago, Sendo announced that it was dropping the Smartphone and moving to rival technology from Nokia and Symbian. The decision was a complete surprise to Microsoft, which had been using Sendo's Z100 Stinger phone as a reference design of sorts. Now the rift between the companies appears to be greater than previously imagined.

    Sendo is seeking "hundreds of millions of dollars" in damages from Microsoft, which it has charged with 13 violations, including breach of contract, civil conspiracy, fraud, and negligent misrepresentation. "We believe the allegations are serious and substantial," said Sendo spokesperson Marijke van Hooren, who noted that Sendo believes Microsoft offered them false promises of industry partnerships in return for access to Sendo's mobile phone experts. Microsoft has been trying to move into the mobile phone market for more than 2 years but has faced product delays and resistance from the cell phone industry.

    Sendo's complaint mentions Microsoft's "secret plan" to steal Sendo's technologies and business partners. Specifically, Sendo says Microsoft overstated the readiness of its Smartphone software when the two companies formed their partnership almost 3 years ago and downplayed incompatibility with Sendo's hardware. Microsoft then repeatedly withheld cash payments, which hurt Sendo's cash flow. All the while, Microsoft had access to Sendo's sensitive technologies and key employees, and the company accompanied Sendo on meetings with its partners. Sendo says that Microsoft then decided to forgo Sendo's hardware and struck its own relationships with Sendo's partners, effectively cutting Sendo out of the picture. Microsoft also shared Sendo's proprietary technology with those partners, Sendo says.

    2. ANNOUNCEMENTS
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