30 87 FEDERAL SUPPLEMENT, 2d SERIES · edge that competitor’s acquiescence in market allocation scheme would endow de-fendant with de facto monopoly power in browser market, after

30 87 FEDERAL SUPPLEMENT, 2d SERIES

court concludes: (1) IRS’s motion for pro-tective order preventing Landmark fromtaking the deposition of Harold Toppallshould be denied; (2) IRS’s motions forprotective orders preventing Landmarkfrom taking a 30(b)(6) deposition and thedepositions of Thomas Miller and DonaldSquires should be granted; and (3) Land-mark’s motion to compel production of doc-uments and for costs should be denied.

Accordingly, it is, this 9th day of March2000, hereby

ORDERED that the IRS’s motion forprotective order to prevent Landmarkfrom taking the deposition of Harold Top-pall (Doc. # 82) is DENIED; it is further

ORDERED that the deposition of Ha-rold Toppall shall be completed within 4hours; it is further

ORDERED that the IRS’s motions forprotective orders to prevent Landmarkfrom taking the deposition of its 30(b)(6)deponent(s) (Doc. # 83) and the deposi-tions of Thomas Miller and Donald Squires(Doc. # 82) are GRANTED; and it is fur-ther

ORDERED that Landmark’s motion tocompel production of documents and forcosts (Doc. # 85) is DENIED.

,

UNITED STATES of America,Plaintiff,

v.

MICROSOFT CORPORATION,Defendant.

State of New York, et al., Plaintiffs,

v.

Microsoft Corporation, Defendant.

Microsoft Corporation, Counterclaim–Plaintiff,

Eliot Spitzer, attorney general of theState of New York, in his official ca-pacity, et al., Counterclaim–Defen-dants.

Civil Action Nos. 98–1232 (TPJ),98–1233 (TPJ).

United States District Court,District of Columbia.

April 3, 2000.

Bench trial was held in consolidatedstate and federal civil antitrust actionagainst manufacturer of personal computer(PC) operating system (OS) and Internetweb browser. After issuing its findings offact, 84 F.Supp.2d 9, the District Court,Jackson, J., held that: (1) defendant main-tained its monopoly power in OS marketby anticompetitive means; (2) defendantattempted to monopolize web browsermarket; (3) defendant’s bundling of its OSand web browser constituted illegal tyingarrangement; but (4) defendant’s agree-ments with Internet service providers(ISPs), Internet content providers (ICPs),independent software developers, and PCmanufacturers to distribute and promotedefendant’s web browser to exclusion ofcompeting browser did not constitute un-lawful exclusive dealing arrangements.

So ordered.

31U.S. v. MICROSOFT CORP.Cite as 87 F.Supp.2d 30 (D.D.C. 2000)

1. Monopolies O12(1.3)A firm violates § 2 of the Sherman

Act if it attains or preserves monopolypower through anticompetitive means; thisrequires a court to ascertain the bound-aries of the commercial activity that can betermed the ‘‘relevant market’’ and thenassess the defendant’s actual power to con-trol prices in, or to exclude competitionfrom, that market. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.

2. Monopolies O12(1.3)The determination of whether a zone

of commercial activity actually qualifies asa relevant market, the monopolization ofwhich might be illegal, depends on wheth-er that zone includes all products reason-ably interchangeable by consumers for thesame purposes.

3. Monopolies O28(7.1)Proof of manufacturer’s dominant

market share in personal computer (PC)operating system (OS) market togetherwith proof of substantial barriers to effec-tive entry into market created presump-tion that manufacturer enjoyed monopolypower in PC OS market. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.

4. Monopolies O28(7.5)Even if manufacturer of personal

computer (PC) operating system (OS) re-butted presumption of monopoly powerthat arose from its dominant market shareand existence of substantial barriers toentry, evidence that original equipmentmanufacturers (OEMs) had no commer-cially alternative to licensing defendant’sOS for pre-installation on their PCs, andevidence of behavior on part of defendantthat would be rational for profit-maximiz-ing firm only if it knew it possessed mo-nopoly power was sufficient to establishthat manufacturer enjoyed monopoly pow-er in relevant market. Sherman Act, § 2,as amended, 15 U.S.C.A. § 2.

5. Monopolies O12(1.2)Threshold question in determining

whether conduct used by firm to maintain

monopoly power was ‘‘anticompetitive’’ iswhether firm’s conduct was exclusionaryin that it restricted significantly, or threat-ened to restrict significantly, ability of oth-er firms to compete in relevant market onmerits of what they offered to customers;if evidence reveals significant exclusionaryimpact in relevant market, then defen-dant’s conduct will be labeled ‘‘anticompet-itive’’ and liability will attach, unless de-fendant comes forward with specific, pro-competitive business motivations that ex-plain full extent of its exclusionary con-duct. Sherman Act, § 2, as amended, 15U.S.C.A. § 2.

See publication Words and Phras-es for other judicial constructionsand definitions.

6. Monopolies O12(1.6)

Proof that an antitrust defendant’sconduct was motivated by a desire to pre-vent other firms from competing in therelevant market based on the merits oftheir product can contribute to a findingthat the conduct had, or would have, theintended, exclusionary or anticompetitiveeffect, for purposes of determining wheth-er the defendant used anticompetitivemeans to maintain monopoly power.Sherman Act, § 2, as amended, 15U.S.C.A. § 2.

7. Monopolies O12(1.6)

If a firm with monopoly power con-sciously antagonizes its customers by mak-ing its products less attractive to them, orif it incurs other costs, such as large out-lays of development capital and forfeitedopportunities to derive revenue from it,with no prospect of compensation otherthan the erection or preservation of barri-ers against competition by equally efficientfirms, that conduct may be deemed ‘‘pred-atory.’’ Sherman Act, § 2, as amended, 15U.S.C.A. § 2.



8. Monopolies O12(1.2)Predatory behavior is patently anti-

competitive, and proof that a firm withmonopoly power engaged in such behaviornecessitates a finding of liability under § 2of the Sherman Act. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.

9. Monopolies O12(1.3, 2)Manufacturer of personal computer

(PC) operating system (OS) and Internetweb browser maintained its monopolypower in OS market through anticompeti-tive means by preventing middleware tech-nologies, in form of competing web brow-ser and ‘‘Java’’ programming language,from fostering development of cross-plat-form and network-centric applications thatwould run on variety of OSs, not justdefendant’s OS, and thereby erode barri-ers to entry in OS market; defendant actedto decrease competing web browser’s mar-ket share, making it less likely that devel-opers would use competing browser plat-form to write cross-platform applications,by refusing to license its OS to originalequipment manufacturers (OEMs) withoutits web browser, prohibiting OEMs frommodifying its OS to allow installation ofcompeting browser, entering into agree-ments with Internet service providers(ISPs), Internet content providers (ICP),independent software developers, and com-puter manufacturers requiring them todistribute and promote defendant’s brow-ser to exclusion of competing browser, anddefendant thwarted development of cross-platform applications based on ‘‘Java’’ pro-gramming language by creating its ownversion of language, for use with its OS,that undermined portability of languageand was incompatible with other imple-mentations of language. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.

10. Monopolies O12(5)Personal computer (PC) operating

system (OS) and Internet web browsermanufacturer’s copyright in its OS did notimmunize it from antitrust liability arisingfrom restriction it placed on original equip-

ment manufacturers (OEMs) that prevent-ed them from reconfiguring or modifyingdefendant’s OS, which was bundled withdefendant’s browser, so that competingbrowser could be installed; true impetusbehind restriction was not desire to main-tain integrity of OS, and modificationsOEMs desired to make would not havealtered any of defendant’s application pro-gramming interfaces (APIs) nor disruptedany of OS’s functionalities. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.

11. Monopolies O12(5)A copyright holder is not by reason

thereof entitled to employ the perquisitesin ways that directly threaten competition.

12. Monopolies O12(1.3, 1.6)In order for liability to attach for at-

tempted monopolization, the plaintiff gen-erally must prove that: (1) the defendantengaged in predatory or anticompetitiveconduct; (2) the defendant engaged in theconduct with a specific intent to monopo-lize; and (3) there was a dangerous proba-bility that the defendant would succeed inachieving monopoly power. Sherman Act,§ 2, as amended, 15 U.S.C.A. § 2.

13. Monopolies O12(1.8)Defendant manufacturer of personal

computer (PC) operating system (OS) andInternet web browser was liable for at-tempting to monopolize web browser mar-ket, even though defendant sought to mini-mize competing browser’s market share inorder to maintain its monopoly power inOS market by preventing development ofcross-platform applications; defendantasked competitor to stop developing plat-form-level browser software for 32-bit ver-sions of defendant’s OS with full knowl-edge that competitor’s acquiescence inmarket allocation scheme would endow de-fendant with de facto monopoly power inbrowser market, after competitor refusedto abandon development of 32-bit browser,defendant sought to minimize competitor’smarket share by maximizing its own shareof browser market, and, at time defendantproposed market allocation scheme, there


was dangerous probability of achievingmonopoly power, since nearly all of com-petitor’s 70% market share would havedevolved to defendant and, in time it wouldhave taken new competitor to enter brow-ser market, defendant could have erectedbarriers to entry. Sherman Act, § 2, asamended, 15 U.S.C.A. § 2.

14. Monopolies O12(1.3, 2)

Anticompetitive conduct used by man-ufacturer of Internet web browser to in-crease its market share to over 50% ofbrowser market satisfied requirement, forimposing liability for attempted monopoli-zation, that there was dangerous possibili-ty that defendant would succeed in achiev-ing monopoly power. Sherman Act, § 2,as amended, 15 U.S.C.A. § 2.

15. Monopolies O17.5(2)

An antitrust defendant will be liablebased on a tying arrangement if: (1) twoseparate products are involved; (2) the de-fendant affords its customers no choice butto take the tied product in order to obtainthe tying product; (3) the arrangementaffects a substantial volume of interstatecommerce; and (4) the defendant has mar-ket power in the tying product market.Sherman Act, § 1, as amended, 15U.S.C.A. § 1.

16. Monopolies O17.5(13)

A software manufacturer’s personalcomputer (PC) operating system (OS) andInternet web browser were separate prod-ucts, for purposes of determining whethertheir bundling by the manufacturer consti-tuted an illegal tying arrangement, eventhough the software code supplying theirdiscrete functionalities could be commin-gled in virtually infinite combinations, ren-dering each indistinguishable from thewhole in terms of files of code or any othertaxonomy; the commercial reality was thatconsumers perceived OSs and browsers asseparate products for which there was sep-arate demand. Sherman Act, § 1, asamended, 15 U.S.C.A. § 1.

17. Monopolies O17.5(13)Defendant software manufacturer’s

bundling of its operating system (OS) andInternet web browser constituted illegaltying arrangement, even though defendantostensibly did not charge for browser; de-fendant had monopoly power in OS mar-ket, bundling caused manufacturer of com-peting browser, which had the potential toopen OS market to competition by allowingdevelopment of cross-platform applica-tions, to incur severe drop in marketshare, defendant prohibited original equip-ment manufacturers (OEMs) from modify-ing or deleting any part of its OS in orderto install competing browser, defendantstopped including its browser on list ofprograms subject to add/remove functionof OS, browser and OS were separateproducts in that they were distinguishablein eyes of consumers, and defendant’s deci-sion to offer only bundled OS and browserresulted from intent to quell competitionrather than technical necessity or businessefficiency. Sherman Act, § 1, as amended,15 U.S.C.A. § 1.

18. Monopolies O17.5(7)Contractual agreements between de-

fendant Internet web browser manufactur-er and Internet service providers (ISPs),Internet content providers (ICPs), inde-pendent software vendors, and computermanufacturers, which required distributionand promotion of defendant’s browser topartial or complete exclusion of competingweb browser, were vertical restrictionsthat would be subject to rule of reasonanalysis. Sherman Act, § 1, as amended,15 U.S.C.A. § 1.

19. Monopolies O17(2.2)Contractual agreements between de-

fendant Internet web browser manufactur-er and largest Internet service provider(ISP), 34 most popular Internet contentproviders (ICPs), dozens of leading inde-pendent software vendors, and one oflargest computer manufacturers, which re-quired distribution and promotion of de-fendant’s browser to exclusion of compet-


ing web browser, did not constitute illegalexclusive dealing arrangements, even ifthey preempted the most efficient chan-nels for competitor to distribute its brow-ser; competitor still had ability to accessevery PC user by allowing browser to bedownloaded from Internet sites andthrough retail channels, and by mailingbrowser directly to users. Sherman Act,§ 1, as amended, 15 U.S.C.A. § 1.

20. Monopolies O28(7.5)Even if application of antitrust laws of

California, Louisiana, Maryland, NewYork, Ohio, and Wisconsin were limited toactivity that had significant, adverse effecton competition within state or was other-wise contrary to state interests, that ele-ment was manifestly proven in actionagainst leading supplier of personal com-puter (PC) operating system (OSs) thatmaintained its monopoly power in OS mar-ket through anticompetitive means; defen-dant did business in all 50 states, it wascommon and universal knowledge that mil-lions of citizens of, and hundreds or thou-sands of enterprises in, each of the UnitedStates used defendant’s OS, and companiesadversely affected by defendant’s anticom-petitive conduct transacted business in andemployed citizens of each of the plaintiffstates.

Dennis C. Vacco, Attorney General ofthe State of New York, New York, NY,Christopher Crook, U.S. Dept. of Justice,San Francisco, CA, A. Douglas Melamed,U.S. Dept. of Justice, Washington DC, forplaintiff United States in case 1:98cv01232.

Alan R. Kusinitz, Attorney General ofthe State of New York, New York, NY, forplaintiffs in case 1:98cv01233.

David Paul Murray, Willkie Farr &Gallagher, Washington, DC, for movantBloomberg News.

Daryl Andrew Libow, Sullivan & Crom-well, Washington, DC, John Lehman War-den, Sullivan & Cromwell, New York, NY,for defendant Microsoft Corp.

Donald Manwell Falk, Mayer, Brown &Platt, Washington, DC for Network Com-puter Inc.

Joseph Jay Simons, Rogers & Wells,L.L.P., Washington, DC for Sun Microsys-tems, Inc.

Samuel R. Miller, Folger, Levin &Kahn, L.L.P., San Francisco, CA, and Tri-sa Jean Thompson, Dell Computer Corpo-ration, Round Rock, TX, for Dell Comput-er Corporation.

Junius Carlisle McElveen, Jr., Jones,Day, Reavis & Pogue, Washington, DC forIBM.

Allen Roger Snyder, Hogan & Hartson,L.L.P., Washington, DC for movant Net-scape Communications Corp.

Lee J. Levine, Levine Sullivan & Koch,LLP, Washington, DC, for movants Se-attle Times, ZDTV, ZDNET, The Wash-ington Post Co., Associated Press, DowJones & Co., New York Times Co., Ameri-can Lawyer Media, and USA Today.

Niki Kuckes, Miller, Cassidy, Larroca &Lewin, L.L.P., Washington DC for movantReuter America, Inc.

Robert A. Gutkin, Pillsbury, Madison &Sutro, L.L.P., Washington, DC for movantSan Jose Mercury News, Inc.

Jerry L. Robinett and Roy A. Day, mov-ants pro se.

Richard Joseph Favretto, Mayer, Brown& Platt, Washington, DC for movant Ora-cle Corp.

William Dean Coston, Venable, Baetjer,Howard & Civiletti, L.L.P., Washington,DC for movant Compaq Computer Corp.

Benjamin S. Sharp, Perkins, Cote,L.L.P., Washington DC for movant BoeingCo.

Jay Ward Brown, Levine Sullivan &Koch, L.L.P., Washington, DC for movantAssociated Press.

Carl Richard Schenker, Jr., O’Melveny& Myers, L.L.P., Washingotn, DC formovant Bristol Technology Inc.


Robert Stephen Berry, Berry & Left-wich, Washington, DC for movant Gravity,Inc.

CONCLUSIONS OF LAW

JACKSON, District Judge.

The United States, nineteen individualstates, and the District of Columbia (‘‘theplaintiffs’’) bring these consolidated civilenforcement actions against defendant Mi-crosoft Corporation (‘‘Microsoft’’) underthe Sherman Antitrust Act, 15 U.S.C. §§ 1and 2. The plaintiffs charge, in essence,that Microsoft has waged an unlawful cam-paign in defense of its monopoly position inthe market for operating systems designedto run on Intel-compatible personal com-puters (‘‘PCs’’). Specifically, the plaintiffscontend that Microsoft violated § 2 of theSherman Act by engaging in a series ofexclusionary, anticompetitive, and predato-ry acts to maintain its monopoly power.They also assert that Microsoft attempted,albeit unsuccessfully to date, to monopolizethe Web browser market, likewise in viola-tion of § 2. Finally, they contend thatcertain steps taken by Microsoft as part ofits campaign to protect its monopoly pow-er, namely tying its browser to its operat-ing system and entering into exclusivedealing arrangements, violated § 1 of theAct.

Upon consideration of the Court’s Find-ings of Fact (‘‘Findings’’), filed herein onNovember 5, 1999, as amended on Decem-ber 21, 1999, the proposed conclusions oflaw submitted by the parties, the briefs ofamici curiae, and the argument of counselthereon, the Court concludes that Micro-soft maintained its monopoly power byanticompetitive means and attempted tomonopolize the Web browser market, bothin violation of § 2. Microsoft also violated§ 1 of the Sherman Act by unlawfully ty-ing its Web browser to its operating sys-tem. The facts found do not support theconclusion, however, that the effect of Mi-crosoft’s marketing arrangements withother companies constituted unlawful ex-

clusive dealing under criteria establishedby leading decisions under § 1.

The nineteen states and the District ofColumbia (‘‘the plaintiff states’’) seek toground liability additionally under their re-spective antitrust laws. The Court is per-suaded that the evidence in the recordproving violations of the Sherman Act alsosatisfies the elements of analogous causesof action arising under the laws of eachplaintiff state. For this reason, and forothers stated below, the Court holds Mi-crosoft liable under those particular statelaws as well.

I. SECTION TWO OF THE SHER-MAN ACT

A. Maintenance of Monopoly Power byAnticompetitive Means

[1] Section 2 of the Sherman Act de-clares that it is unlawful for a person orfirm to ‘‘monopolize TTT any part of thetrade or commerce among the severalStates, or with foreign nationsTTTT’’ 15U.S.C. § 2. This language operates tolimit the means by which a firm may law-fully either acquire or perpetuate monopo-ly power. Specifically, a firm violates § 2if it attains or preserves monopoly powerthrough anticompetitive acts. See UnitedStates v. Grinnell Corp., 384 U.S. 563,570–71, 86 S.Ct. 1698, 16 L.Ed.2d 778(1966) (‘‘The offense of monopoly powerunder § 2 of the Sherman Act has twoelements: (1) the possession of monopolypower in the relevant market and (2) thewillful acquisition or maintenance of thatpower as distinguished from growth ordevelopment as a consequence of a superi-or product, business acumen, or historicaccident.’’); Eastman Kodak Co. v. ImageTechnical Services, Inc., 504 U.S. 451, 488,112 S.Ct. 2072, 119 L.Ed.2d 265 (1992)(Scalia, J., dissenting) (‘‘Our § 2 monopoli-zation doctrines are TTT directed to dis-crete situations in which a defendant’spossession of substantial market power,combined with his exclusionary or anti-competitive behavior, threatens to defeator forestall the corrective forces of compe-


tition and thereby sustain or extend thedefendant’s agglomeration of power.’’).

1. Monopoly Power

The threshold element of a § 2 monopo-lization offense being ‘‘the possession ofmonopoly power in the relevant market,’’Grinnell, 384 U.S. at 570, 86 S.Ct. 1698,the Court must first ascertain the bound-aries of the commercial activity that can betermed the ‘‘relevant market.’’ See Walk-er Process Equip., Inc. v. Food Mach. &Chem. Corp., 382 U.S. 172, 177, 86 S.Ct.347, 15 L.Ed.2d 247 (1965) (‘‘Without adefinition of [the relevant] market there isno way to measure [defendant’s] ability tolessen or destroy competition.’’). Next,the Court must assess the defendant’s ac-tual power to control prices in—or to ex-clude competition from—that market. SeeUnited States v. E.I. du Pont de Nemours& Co., 351 U.S. 377, 391, 76 S.Ct. 994, 100L.Ed. 1264 (1956) (‘‘Monopoly power is thepower to control prices or exclude competi-tion.’’).

[2] In this case, the plaintiffs postulat-ed the relevant market as being the world-wide licensing of Intel-compatible PC op-erating systems. Whether this zone ofcommercial activity actually qualifies as amarket, ‘‘monopolization of which may beillegal,’’ depends on whether it includes allproducts ‘‘reasonably interchangeable byconsumers for the same purposes.’’ duPont, 351 U.S. at 395, 76 S.Ct. 994. SeeRothery Storage & Van Co. v. Atlas VanLines, Inc., 792 F.2d 210, 218 (D.C.Cir.1986) (‘‘Because the ability of consumers toturn to other suppliers restrains a firmfrom raising prices above the competitivelevel, the definition of the ‘relevant market’rests on a determination of available sub-stitutes.’’).

The Court has already found, based onthe evidence in this record, that there arecurrently no products—and that there arenot likely to be any in the near future—that a significant percentage of computerusers worldwide could substitute for Intel-compatible PC operating systems without

incurring substantial costs. Findings¶¶ 18–29. The Court has further foundthat no firm not currently marketing Intel-compatible PC operating systems couldstart doing so in a way that would, within areasonably short period of time, present asignificant percentage of such consumerswith a viable alternative to existing Intel-compatible PC operating systems. Id.¶¶ 18, 30–32. From these facts, the Courthas inferred that if a single firm or cartelcontrolled the licensing of all Intel-compat-ible PC operating systems worldwide, itcould set the price of a license substantial-ly above that which would be charged in acompetitive market—and leave the pricethere for a significant period of time—without losing so many customers as tomake the action unprofitable. Id. ¶ 18.This inference, in turn, has led the Courtto find that the licensing of all Intel-com-patible PC operating systems worldwidedoes in fact constitute the relevant marketin the context of the plaintiffs’ monopolymaintenance claim. Id.

[3] The plaintiffs proved at trial thatMicrosoft possesses a dominant, persis-tent, and increasing share of the relevantmarket. Microsoft’s share of the world-wide market for Intel-compatible PC oper-ating systems currently exceeds ninety-five percent, and the firm’s share wouldstand well above eighty percent even if theMac OS were included in the market. Id.¶ 35. The plaintiffs also proved that theapplications barrier to entry protects Mi-crosoft’s dominant market share. Id.¶¶ 36–52. This barrier ensures that noIntel-compatible PC operating system oth-er than Windows can attract significantconsumer demand, and the barrier wouldoperate to the same effect even if Micro-soft held its prices substantially above thecompetitive level for a protracted period oftime. Id. Together, the proof of dominantmarket share and the existence of a sub-stantial barrier to effective entry createthe presumption that Microsoft enjoys mo-nopoly power. See United States v. AT &T Co., 524 F.Supp. 1336, 1347–48 (D.D.C.


1981) (‘‘a persuasive showing TTT that de-fendants have monopoly power TTT

through various barriers to entry, TTT incombination with the evidence of marketshares, suffice[s] at least to meet the gov-ernment’s initial burden, and the burden isthen appropriately placed upon defendantsto rebut the existence and significance ofbarriers to entry’’), quoted with approvalin Southern Pac. Communications Co. v.AT & T Co., 740 F.2d 980, 1001–02(D.C.Cir.1984).

At trial, Microsoft attempted to rebutthe presumption of monopoly power withevidence of both putative constraints on itsability to exercise such power and behaviorof its own that is supposedly inconsistentwith the possession of monopoly power.None of the purported constraints, howev-er, actually deprive Microsoft of ‘‘the abili-ty (1) to price substantially above the com-petitive level and (2) to persist in doing sofor a significant period without erosion bynew entry or expansion.’’ IIA Phillip E.Areeda, Herbert Hovenkamp & John L.Solow, Antitrust Law ¶ 501, at 86 (1995)(emphasis in original); see Findings ¶¶ 57–60. Furthermore, neither Microsoft’s ef-forts at technical innovation nor its pricingbehavior is inconsistent with the posses-sion of monopoly power. Id. ¶¶ 61–66.

[4] Even if Microsoft’s rebuttal had at-tenuated the presumption created by theprima facie showing of monopoly power,corroborative evidence of monopoly powerabounds in this record: Neither Microsoftnor its OEM customers believe that thelatter have—or will have anytime soon—even a single, commercially viable alterna-tive to licensing Windows for pre-installa-tion on their PCs. Id. ¶¶ 53–55; cf. Roth-ery, 792 F.2d at 219 n. 4 (‘‘we assume thateconomic actors usually have accurate per-ceptions of economic realities’’). More-over, over the past several years, Micro-soft has comported itself in a way thatcould only be consistent with rational be-havior for a profit-maximizing firm if thefirm knew that it possessed monopoly pow-

er, and if it was motivated by a desire topreserve the barrier to entry protectingthat power. Findings ¶¶ 67, 99, 136, 141,215–16, 241, 261–62, 286, 291, 330, 355, 393,407.

In short, the proof of Microsoft’s domi-nant, persistent market share protected bya substantial barrier to entry, togetherwith Microsoft’s failure to rebut that pri-ma facie showing effectively and the addi-tional indicia of monopoly power, havecompelled the Court to find as fact thatMicrosoft enjoys monopoly power in therelevant market. Id. ¶ 33.

2. Maintenance of Monopoly Power byAnticompetitive Means

[5, 6] In a § 2 case, once it is provedthat the defendant possesses monopolypower in a relevant market, liability formonopolization depends on a showing thatthe defendant used anticompetitive meth-ods to achieve or maintain its position.See United States v. Grinnell, 384 U.S.563, 570–71, 86 S.Ct. 1698, 16 L.Ed.2d 778(1966); Eastman Kodak Co. v. ImageTechnical Services, Inc., 504 U.S. 451, 488,112 S.Ct. 2072, 119 L.Ed.2d 265 (1992)(Scalia, J., dissenting); Intergraph Corp. v.Intel Corp., 195 F.3d 1346, 1353 (Fed.Cir.1999). Prior cases have established ananalytical approach to determining wheth-er challenged conduct should be deemedanticompetitive in the context of a monopo-ly maintenance claim. The thresholdquestion in this analysis is whether thedefendant’s conduct is ‘‘exclusionary’’—that is, whether it has restricted signifi-cantly, or threatens to restrict significant-ly, the ability of other firms to compete inthe relevant market on the merits of whatthey offer customers. See Eastman Ko-dak, 504 U.S. at 488, 112 S.Ct. 2072 (Sca-lia, J., dissenting) (§ 2 is ‘‘directed to dis-crete situations’’ in which the behavior offirms with monopoly power ‘‘threatens todefeat or forestall the corrective forces ofcompetition’’).1

1. Proof that the defendant’s conduct was motivated by a desire to prevent other firms from


If the evidence reveals a significant ex-clusionary impact in the relevant market,the defendant’s conduct will be labeled‘‘anticompetitive’’—and liability will at-tach—unless the defendant comes forwardwith specific, procompetitive business mo-tivations that explain the full extent of itsexclusionary conduct. See Eastman Ko-dak, 504 U.S. at 483, 112 S.Ct. 2072 (de-clining to grant defendant’s motion forsummary judgment because factual ques-tions remained as to whether defendant’sasserted justifications were sufficient toexplain the exclusionary conduct or wereinstead merely pretextual); see also AspenSkiing Co. v. Aspen Highlands SkiingCorp., 472 U.S. 585, 605 n. 32, 105 S.Ct.2847, 86 L.Ed.2d 467 (1985) (holding thatthe second element of a monopoly mainte-nance claim is satisfied by proof of ‘‘ ‘be-havior that not only (1) tends to impair theopportunities of rivals, but also (2) eitherdoes not further competition on the meritsor does so in an unnecessarily restrictiveway’ ’’) (quoting III Phillip E. Areeda &Donald F. Turner, Antitrust Law ¶ 626b,at 78 (1978)).

[7] If the defendant with monopolypower consciously antagonized its custom-ers by making its products less attractiveto them—or if it incurred other costs, suchas large outlays of development capital andforfeited opportunities to derive revenuefrom it—with no prospect of compensationother than the erection or preservation ofbarriers against competition by equally ef-ficient firms, the Court may deem thedefendant’s conduct ‘‘predatory.’’ As theD.C. Circuit stated in Neumann v. Rein-forced Earth Co.,

[P]redation involves aggression againstbusiness rivals through the use of busi-ness practices that would not be consid-ered profit maximizing except for theexpectation that (1) actual rivals will bedriven from the market, or the entry of

potential rivals blocked or delayed, sothat the predator will gain or retain amarket share sufficient to commandmonopoly profits, or (2) rivals will bechastened sufficiently to abandon com-petitive behavior the predator findsthreatening to its realization of monopo-ly profits.

786 F.2d 424, 427 (D.C.Cir.1986).

[8] Proof that a profit-maximizing firmtook predatory action should suffice todemonstrate the threat of substantial ex-clusionary effect; to hold otherwise wouldbe to ascribe irrational behavior to thedefendant. Moreover, predatory conduct,by definition as well as by nature, lacksprocompetitive business motivation. SeeAspen Skiing, 472 U.S. at 610–11, 105S.Ct. 2847 (evidence indicating that defen-dant’s conduct was ‘‘motivated entirely bya decision to avoid providing any benefits’’to a rival supported the inference thatdefendant’s conduct ‘‘was not motivated byefficiency concerns’’). In other words,predatory behavior is patently anticompet-itive. Proof that a firm with monopolypower engaged in such behavior thus ne-cessitates a finding of liability under § 2.

[9] In this case, Microsoft early onrecognized middleware as the Trojanhorse that, once having, in effect, infiltrat-ed the applications barrier, could enablerival operating systems to enter the mar-ket for Intel-compatible PC operating sys-tems unimpeded. Simply put, middlewarethreatened to demolish Microsoft’s covetedmonopoly power. Alerted to the threat,Microsoft strove over a period of approxi-mately four years to prevent middlewaretechnologies from fostering the develop-ment of enough full-featured, cross-plat-form applications to erode the applicationsbarrier. In pursuit of this goal, Microsoftsought to convince developers to concen-

competing on the merits can contribute to afinding that the conduct has had, or will have,the intended, exclusionary effect. See UnitedStates v. United States Gypsum Co., 438 U.S.422, 436 n. 13, 98 S.Ct. 2864, 57 L.Ed.2d 854

(1978) (‘‘consideration of intent may play animportant role in divining the actual natureand effect of the alleged anticompetitive con-duct’’).


trate on Windows-specific APIs and ignoreinterfaces exposed by the two incarnationsof middleware that posed the greatestthreat, namely, Netscape’s Navigator Webbrowser and Sun’s implementation of theJava technology. Microsoft’s campaignsucceeded in preventing—for severalyears, and perhaps permanently—Naviga-tor and Java from fulfilling their potentialto open the market for Intel-compatiblePC operating systems to competition onthe merits. Findings ¶¶ 133, 378. Be-cause Microsoft achieved this resultthrough exclusionary acts that lacked pro-competitive justification, the Court deemsMicrosoft’s conduct the maintenance ofmonopoly power by anticompetitive means.

a. Combating the Browser Threat

The same ambition that inspired Micro-soft’s efforts to induce Intel, Apple, Real-Networks and IBM to desist from certaintechnological innovations and business ini-tiatives—namely, the desire to preservethe applications barrier—motivated thefirm’s June 1995 proposal that Netscapeabstain from releasing platform-levelbrowsing software for 32–bit versions ofWindows. See id. ¶¶ 79–80, 93–132. Thisproposal, together with the punitive mea-sures that Microsoft inflicted on Netscapewhen it rebuffed the overture, illuminatesthe context in which Microsoft’s subse-quent behavior toward PC manufacturers(‘‘OEMs’’), Internet access providers(‘‘IAPs’’), and other firms must be viewed.

When Netscape refused to abandon itsefforts to develop Navigator into a sub-stantial platform for applications develop-ment, Microsoft focused its efforts on mini-mizing the extent to which developerswould avail themselves of interfaces ex-posed by that nascent platform. Microsoftrealized that the extent of developers’ reli-ance on Netscape’s browser platformwould depend largely on the size and tra-jectory of Navigator’s share of browserusage. Microsoft thus set out to maximizeInternet Explorer’s share of browser us-age at Navigator’s expense. Id. ¶¶ 133,

359–61. The core of this strategy wasensuring that the firms comprising themost effective channels for the generationof browser usage would devote their distri-butional and promotional efforts to Inter-net Explorer rather than Navigator.Recognizing that pre-installation by OEMsand bundling with the proprietary soft-ware of IAPs led more directly and effi-ciently to browser usage than any otherpractices in the industry, Microsoft devot-ed major efforts to usurping those twochannels. Id. ¶ 143.

i. The OEM Channel

With respect to OEMs, Microsoft’s cam-paign proceeded on three fronts. First,Microsoft bound Internet Explorer toWindows with contractual and, later, tech-nological shackles in order to ensure theprominent (and ultimately permanent)presence of Internet Explorer on everyWindows user’s PC system, and to in-crease the costs attendant to installingand using Navigator on any PCs runningWindows. Id. ¶¶ 155–74. Second, Micro-soft imposed stringent limits on the free-dom of OEMs to reconfigure or modifyWindows 95 and Windows 98 in ways thatmight enable OEMs to generate usage forNavigator in spite of the contractual andtechnological devices that Microsoft hademployed to bind Internet Explorer toWindows. Id. ¶¶ 202–29. Finally, Micro-soft used incentives and threats to induceespecially important OEMs to design theirdistributional, promotional and technicalefforts to favor Internet Explorer to theexclusion of Navigator. Id. ¶¶ 230–38.

Microsoft’s actions increased the likeli-hood that pre-installation of Navigatoronto Windows would cause user confusionand system degradation, and thereforelead to higher support costs and reducedsales for the OEMs. Id. ¶¶ 159, 172. Notwilling to take actions that would jeopard-ize their already slender profit margins,OEMs felt compelled by Microsoft’s ac-tions to reduce drastically their distribu-tion and promotion of Navigator. Id.


¶¶ 239, 241. The substantial inducementsthat Microsoft held out to the largestOEMs only further reduced the distribu-tion and promotion of Navigator in theOEM channel. Id. ¶¶ 230, 233. The re-sponse of OEMs to Microsoft’s efforts hada dramatic, negative impact on Navigator’susage share. Id. ¶ 376. The drop in us-age share, in turn, has prevented Naviga-tor from being the vehicle to open therelevant market to competition on themerits. Id. ¶¶ 377–78, 383.

Microsoft fails to advance any legitimatebusiness objectives that actually explainthe full extent of this significant exclusion-ary impact. The Court has already foundthat no quality-related or technical justifi-cations fully explain Microsoft’s refusal tolicense Windows 95 to OEMs without ver-sion 1.0 through 4.0 of Internet Explorer,or its refusal to permit them to uninstallversions 3.0 and 4.0. Id. ¶¶ 175–76. Thesame lack of justification applies to Micro-soft’s decision not to offer a browserlessversion of Windows 98 to consumers andOEMs, id. ¶ 177, as well as to its claimthat it could offer ‘‘best of breed’’ imple-mentations of functionalities in Web brow-sers. With respect to the latter assertion,Internet Explorer is not demonstrably thecurrent ‘‘best of breed’’ Web browser, noris it likely to be so at any time in theimmediate future. The fact that Microsoftitself was aware of this reality only furtherstrengthens the conclusion that Microsoft’sdecision to tie Internet Explorer to Win-dows cannot truly be explained as an at-tempt to benefit consumers and improvethe efficiency of the software market gen-erally, but rather as part of a larger cam-paign to quash innovation that threatenedits monopoly position. Id. ¶¶ 195, 198.

To the extent that Microsoft still assertsa copyright defense, relying upon federalcopyright law as a justification for its vari-

ous restrictions on OEMs, that defenseneither explains nor operates to immunizeMicrosoft’s conduct under the ShermanAct. As a general proposition, Microsoftargues that the federal Copyright Act, 17U.S.C. § 101 et seq., endows the holder ofa valid copyright in software with an abso-lute right to prevent licensees, in this casethe OEMs, from shipping modified ver-sions of its product without its expresspermission. In truth, Windows 95 andWindows 98 are covered by copyright reg-istrations, Findings ¶ 228, that ‘‘constituteprima facie evidence of the validity of thecopyright.’’ 17 U.S.C. § 410(c). But thevalidity of Microsoft’s copyrights has nev-er been in doubt; the issue is what, pre-cisely, they protect.

[10] Microsoft has presented no evi-dence that the contractual (or the techno-logical) restrictions it placed on OEMs’ability to alter Windows derive from any ofthe enumerated rights explicitly granted toa copyright holder under the CopyrightAct. Instead, Microsoft argues that therestrictions ‘‘simply restate’’ an expansiveright to preserve the ‘‘integrity’’ of itscopyrighted software against any ‘‘distor-tion,’’ ‘‘truncation,’’ or ‘‘alteration,’’ a rightnowhere mentioned among the CopyrightAct’s list of exclusive rights, 17 U.S.C.§ 106, thus raising some doubt as to itsexistence. See Twentieth Century MusicCorp. v. Aiken, 422 U.S. 151, 155, 95 S.Ct.2040, 45 L.Ed.2d 84 (1975) (not all uses ofa work are within copyright holder’s con-trol; rights limited to specifically granted‘‘exclusive rights’’); cf. 17 U.S.C. § 501(a)(infringement means violating specificallyenumerated rights).2

[11] It is also well settled that a copy-right holder is not by reason thereof enti-tled to employ the perquisites in ways thatdirectly threaten competition. See, e.g.,

2. While Microsoft is correct that some courtshave also recognized the right of a copyrightholder to preserve the ‘‘integrity’’ of artisticworks in addition to those rights enumeratedin the Copyright Act, the Court neverthelessconcludes that those cases, being actions for

infringement without antitrust implications,are inapposite to the one currently before it.See, e.g., WGN Continental Broadcasting Co. v.United Video, Inc., 693 F.2d 622 (7th Cir.1982); Gilliam v. ABC, Inc., 538 F.2d 14 (2dCir.1976).


Eastman Kodak, 504 U.S. at 479 n. 29, 112S.Ct. 2072 (‘‘The Court has held manytimes that power gained through some nat-ural and legal advantage such as a TTT

copyright, TTT can give rise to liability if ‘aseller exploits his dominant position in onemarket to expand his empire into thenext.’ ’’) (quoting Times–Picayune Pub.Co. v. United States, 345 U.S. 594, 611, 73S.Ct. 872, 97 L.Ed. 1277 (1953)); Square DCo. v. Niagara Frontier Tariff Bureau,Inc., 476 U.S. 409, 421, 106 S.Ct. 1922, 90L.Ed.2d 413 (1986); Data General Corp. v.Grumman Systems Support Corp., 36F.3d 1147, 1186 n. 63 (1st Cir.1994) (acopyright does not exempt its holder fromantitrust inquiry where the copyright isused as part of a scheme to monopolize);see also Image Technical Services, Inc. v.Eastman Kodak Co., 125 F.3d 1195, 1219(9th Cir.1997), cert. denied, 523 U.S. 1094,118 S.Ct. 1560, 140 L.Ed.2d 792 (1998)(‘‘Neither the aims of intellectual propertylaw, nor the antitrust laws justify allowinga monopolist to rely upon a pretextualbusiness justification to mask anticompeti-tive conduct.’’). Even constitutional privi-leges confer no immunity when they areabused for anticompetitive purposes. SeeLorain Journal Co. v. United States, 342U.S. 143, 155–56, 72 S.Ct. 181, 96 L.Ed.162 (1951).

The Court has already found that thetrue impetus behind Microsoft’s restric-tions on OEMs was not its desire to main-tain a somewhat amorphous quality it re-fers to as the ‘‘integrity’’ of the Windowsplatform, nor even to ensure that Windowsafforded a uniform and stable platform forapplications development. Microsoft itselfengendered, or at least countenanced, in-stability and inconsistency by permittingMicrosoft-friendly modifications to thedesktop and boot sequence, and by releas-ing updates to Internet Explorer morefrequently than it released new versions ofWindows. Findings ¶ 226. Add to thisthe fact that the modifications OEMs de-sired to make would not have removed oraltered any Windows APIs, and thus wouldnot have disrupted any of Windows’ func-tionalities, and it is apparent that Micro-

soft’s conduct is effectively explained by itsforeboding that OEMs would pre-installand give prominent placement to middle-ware like Navigator that could attractenough developer attention to weaken theapplications barrier to entry. Id. ¶ 227.In short, if Microsoft was truly inspired bya genuine concern for maximizing consum-er satisfaction, as well as preserving itssubstantial investment in a worthy prod-uct, then it would have relied more on thepower of the very competitive PC market,and less on its own market power, to pre-vent OEMs from making modificationsthat consumers did not want. Id. ¶¶ 225,228–29.

ii. The IAP Channel

Microsoft adopted similarly aggressivemeasures to ensure that the IAP channelwould generate browser usage share forInternet Explorer rather than Navigator.To begin with, Microsoft licensed InternetExplorer and the Internet Explorer Ac-cess Kit to hundreds of IAPs for nocharge. Id. ¶¶ 250–51. Then, Microsoftextended valuable promotional treatmentto the ten most important IAPs in ex-change for their commitment to promoteand distribute Internet Explorer and toexile Navigator from the desktop. Id.¶¶ 255–58, 261, 272, 288–90, 305–06. Final-ly, in exchange for efforts to upgrade ex-isting subscribers to client software thatcame bundled with Internet Explorer in-stead of Navigator, Microsoft granted re-bates—and in some cases made outrightpayments—to those same IAPs. Id.¶¶ 259–60, 295. Given the importance ofthe IAP channel to browser usage share, itis fair to conclude that these inducementsand restrictions contributed significantly tothe drastic changes that have in fact oc-curred in Internet Explorer’s and Naviga-tor’s respective usage shares. Id. ¶¶ 144–47, 309–10. Microsoft’s actions in the IAPchannel thereby contributed significantlyto preserving the applications barrier toentry.


There are no valid reasons to justify thefull extent of Microsoft’s exclusionary be-havior in the IAP channel. A desire tolimit free riding on the firm’s investmentin consumer-oriented features, such as theReferral Server and the Online ServicesFolder, can, in some circumstances, qualifyas a procompetitive business motivation;but that motivation does not explain thefull extent of the restrictions that Micro-soft actually imposed upon IAPs. Underthe terms of the agreements, an IAP’sfailure to keep Navigator shipments belowthe specified percentage primed Micro-soft’s contractual right to dismiss the IAPfrom its own favored position in the Refer-ral Server or the Online Services Folder.This was true even if the IAP had re-frained from promoting Navigator in itsclient software included with Windows,had purged all mention of Navigator fromany Web site directly connected to theReferral Server, and had distributed nobrowser other than Internet Explorer tothe new subscribers it gleaned from theWindows desktop. Id. ¶¶ 258, 262, 289.Thus, Microsoft’s restrictions closed off asubstantial amount of distribution thatwould not have constituted a free ride toNavigator.

Nor can an ostensibly procompetitivedesire to ‘‘foster brand association’’ explainthe full extent of Microsoft’s restrictions.If Microsoft’s only concern had been brandassociation, restrictions on the ability ofIAPs to promote Navigator likely wouldhave sufficed. It is doubtful that Micro-soft would have paid IAPs to induce theirexisting subscribers to drop Navigator infavor of Internet Explorer unless it wasmotivated by a desire to extinguish Navi-gator as a threat. See id. ¶¶ 259, 295.More generally, it is crucial to an under-standing of Microsoft’s intentions to recog-nize that Microsoft paid for the fealty ofIAPs with large investments in softwaredevelopment for their benefit, concededopportunities to take a profit, sufferedcompetitive disadvantage to Microsoft’sown OLS, and gave outright bounties. Id.¶¶ 259–60, 277, 284–86, 295. Considering

that Microsoft never intended to deriveappreciable revenue from Internet Explor-er directly, id. ¶¶ 136–37, these sacrificescould only have represented rational busi-ness judgments to the extent that theypromised to diminish Navigator’s share ofbrowser usage and thereby contribute sig-nificantly to eliminating a threat to theapplications barrier to entry. Id. ¶ 291.Because the full extent of Microsoft’s ex-clusionary initiatives in the IAP channelcan only be explained by the desire tohinder competition on the merits in therelevant market, those initiatives must belabeled anticompetitive.

In sum, the efforts Microsoft directed atOEMs and IAPs successfully ostracizedNavigator as a practical matter from thetwo channels that lead most efficiently tobrowser usage. Even when viewed inde-pendently, these two prongs of Microsoft’scampaign threatened to ‘‘forestall the cor-rective forces of competition’’ and therebyperpetuate Microsoft’s monopoly power inthe relevant market. Eastman Kodak Co.v. Image Technical Services, Inc., 504 U.S.451, 488, 112 S.Ct. 2072, 119 L.Ed.2d 265(1992) (Scalia, J., dissenting). Therefore,whether they are viewed separately or to-gether, the OEM and IAP components ofMicrosoft’s anticompetitive campaign merita finding of liability under § 2.

iii. ICPs, ISVs and Apple

No other distribution channels forbrowsing software approach the efficiencyof OEM pre-installation and IAP bundling.Findings ¶¶ 144–47. Nevertheless, pro-tecting the applications barrier to entrywas so critical to Microsoft that the firmwas willing to invest substantial resourcesto enlist ICPs, ISVs, and Apple in itscampaign against the browser threat. Byextracting from Apple terms that signifi-cantly diminished the usage of Navigatoron the Mac OS, Microsoft helped to ensurethat developers would not view Navigatoras truly cross-platform middleware. Id.¶ 356. By granting ICPs and ISVs free


licenses to bundle Internet Explorer withtheir offerings, and by exchanging othervaluable inducements for their agreementto distribute, promote and rely on InternetExplorer rather than Navigator, Microsoftdirectly induced developers to focus on itsown APIs rather than ones exposed byNavigator. Id. ¶¶ 334–35, 340. Thesemeasures supplemented Microsoft’s effortsin the OEM and IAP channels.

Just as they fail to account for the mea-sures that Microsoft took in the IAP chan-nel, the goals of preventing free riding andpreserving brand association fail to explainthe full extent of Microsoft’s actions in theICP channel. Id. ¶¶ 329–30. With respectto the ISV agreements, Microsoft has putforward no procompetitive business endswhatsoever to justify their exclusionaryterms. See id. ¶¶ 339–40. Finally, Micro-soft’s willingness to make the sacrificesinvolved in cancelling Mac Office, and theconcessions relating to browsing softwarethat it demanded from Apple, can only beexplained by Microsoft’s desire to protectthe applications barrier to entry from thethreat posed by Navigator. Id. ¶ 355.Thus, once again, Microsoft is unable tojustify the full extent of its restrictive be-havior.

b. Combating the Java Threat

As part of its grand strategy to protectthe applications barrier, Microsoft em-ployed an array of tactics designed to max-imize the difficulty with which applicationswritten in Java could be ported from Win-dows to other platforms, and vice versa.The first of these measures was the cre-ation of a Java implementation for Win-dows that undermined portability and wasincompatible with other implementations.Id. ¶¶ 387–93. Microsoft then induced de-velopers to use its implementation of Javarather than Sun-compliant ones. It pur-sued this tactic directly, by means of sub-terfuge and barter, and indirectly, throughits campaign to minimize Navigator’s us-age share. Id. ¶¶ 394, 396–97, 399–400,401–03. In a separate effort to prevent

the development of easily portable Javaapplications, Microsoft used its monopolypower to prevent firms such as Intel fromaiding in the creation of cross-platforminterfaces. Id. ¶¶ 404–06.

Microsoft’s tactics induced many Javadevelopers to write their applications usingMicrosoft’s developer tools and to refrainfrom distributing Sun-compliant JVMs toWindows users. This stratagem has effec-tively resulted in fewer applications thatare easily portable. Id. ¶ 398. What ismore, Microsoft’s actions interfered withthe development of new cross-platformJava interfaces. Id. ¶ 406. It is not clearwhether, absent Microsoft’s machinations,Sun’s Java efforts would by now have facil-itated porting between Windows and otherplatforms to a degree sufficient to renderthe applications barrier to entry vulnera-ble. It is clear, however, that Microsoft’sactions markedly impeded Java’s progressto that end. Id. ¶ 407. The evidence thuscompels the conclusion that Microsoft’s ac-tions with respect to Java have restrictedsignificantly the ability of other firms tocompete on the merits in the market forIntel-compatible PC operating systems.

Microsoft’s actions to counter the Javathreat went far beyond the development ofan attractive alternative to Sun’s imple-mentation of the technology. Specifically,Microsoft successfully pressured Intel,which was dependent in many ways onMicrosoft’s good graces, to abstain fromaiding in Sun’s and Netscape’s Java devel-opment work. Id. ¶¶ 396, 406. Microsoftalso deliberately designed its Java devel-opment tools so that developers who wereopting for portability over performancewould nevertheless unwittingly write Javaapplications that would run only on Win-dows. Id. ¶ 394. Moreover, Microsoft’smeans of luring developers to its Javaimplementation included maximizing Inter-net Explorer’s share of browser usage atNavigator’s expense in ways the Court hasalready held to be anticompetitive. Seesupra, § I.A.2.a. Finally, Microsoft im-pelled ISVs, which are dependent upon


Microsoft for technical information andcertifications relating to Windows, to useand distribute Microsoft’s version of theWindows JVM rather than any Sun-com-pliant version. Id. ¶¶ 401–03.

These actions cannot be described ascompetition on the merits, and they did notbenefit consumers. In fact, Microsoft’s ac-tions did not even benefit Microsoft in theshort run, for the firm’s efforts to createincompatibility between its JVM for Win-dows and others’ JVMs for Windows re-sulted in fewer total applications beingable to run on Windows than otherwisewould have been written. Microsoft waswilling nevertheless to obstruct the devel-opment of Windows-compatible applica-tions if they would be easy to port to otherplatforms and would thus diminish the ap-plications barrier to entry. Id. ¶ 407.

c. Microsoft’s Conduct Taken As aWhole

As the foregoing discussion illustrates,Microsoft’s campaign to protect the appli-cations barrier from erosion by network-centric middleware can be broken downinto discrete categories of activity, severalof which on their own independently satis-fy the second element of a § 2 monopolymaintenance claim. But only when theseparate categories of conduct are viewed,as they should be, as a single, well-coordi-nated course of action does the full extentof the violence that Microsoft has done tothe competitive process reveal itself. SeeContinental Ore Co. v. Union Carbide &Carbon Corp., 370 U.S. 690, 699, 82 S.Ct.1404, 8 L.Ed.2d 777 (1962) (counseling thatin Sherman Act cases ‘‘plaintiffs should begiven the full benefit of their proof withouttightly compartmentalizing the various fac-tual components and wiping the slate cleanafter scrutiny of each’’). In essence, Mi-crosoft mounted a deliberate assault uponentrepreneurial efforts that, left to rise orfall on their own merits, could well haveenabled the introduction of competitioninto the market for Intel-compatible PCoperating systems. Id. ¶ 411. While the

evidence does not prove that they wouldhave succeeded absent Microsoft’s actions,it does reveal that Microsoft placed anoppressive thumb on the scale of competi-tive fortune, thereby effectively guarantee-ing its continued dominance in the relevantmarket. More broadly, Microsoft’s anti-competitive actions trammeled the compet-itive process through which the computersoftware industry generally stimulates in-novation and conduces to the optimumbenefit of consumers. Id. ¶ 412.

Viewing Microsoft’s conduct as a wholealso reinforces the conviction that it waspredacious. Microsoft paid vast sums ofmoney, and renounced many millions morein lost revenue every year, in order toinduce firms to take actions that wouldhelp enhance Internet Explorer’s share ofbrowser usage at Navigator’s expense. Id.¶ 139. These outlays cannot be explainedas subventions to maximize return fromInternet Explorer. Microsoft has no in-tention of ever charging for licenses to useor distribute its browser. Id. ¶¶ 137–38.Moreover, neither the desire to bolsterdemand for Windows nor the prospect ofancillary revenues from Internet Explorercan explain the lengths to which Microsofthas gone. In fact, Microsoft has expendedwealth and foresworn opportunities to re-alize more in a manner and to an extentthat can only represent a rational invest-ment if its purpose was to perpetuate theapplications barrier to entry. Id. ¶¶ 136,139–42. Because Microsoft’s businesspractices ‘‘would not be considered profitmaximizing except for the expectation thatTTT the entry of potential rivals’’ into themarket for Intel-compatible PC operatingsystems will be ‘‘blocked or delayed,’’ Neu-mann v. Reinforced Earth Co., 786 F.2d424, 427 (D.C.Cir.1986), Microsoft’s cam-paign must be termed predatory. Sincethe Court has already found that Microsoftpossesses monopoly power, see supra,§ I.A.1, the predatory nature of the firm’sconduct compels the Court to hold Micro-soft liable under § 2 of the Sherman Act.


B. Attempting to Obtain MonopolyPower in a Second Market by Anti-competitive Means

In addition to condemning actual monop-olization, § 2 of the Sherman Act declaresthat it is unlawful for a person or firm to‘‘attempt to monopolize TTT any part of thetrade or commerce among the severalStates, or with foreign nationsTTTT’’ 15U.S.C. § 2. Relying on this language, theplaintiffs assert that Microsoft’s anticom-petitive efforts to maintain its monopolypower in the market for Intel-compatiblePC operating systems warrant additionalliability as an illegal attempt to amassmonopoly power in ‘‘the browser market.’’The Court agrees.

[12, 13] In order for liability to attachfor attempted monopolization, a plaintiffgenerally must prove ‘‘(1) that the defen-dant has engaged in predatory or anticom-petitive conduct with (2) a specific intent tomonopolize,’’ and (3) that there is a ‘‘dan-gerous probability’’ that the defendant willsucceed in achieving monopoly power.Spectrum Sports, Inc. v. McQuillan, 506U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d247 (1993). Microsoft’s June 1995 propos-al that Netscape abandon the field to Mi-crosoft in the market for browsing technol-ogy for Windows, and its subsequent, well-documented efforts to overwhelm Naviga-tor’s browser usage share with a prolifera-tion of Internet Explorer browsers inextri-cably attached to Windows, clearly meetthe first element of the offense.

The evidence in this record also satisfiesthe requirement of specific intent. Micro-soft’s effort to convince Netscape to stopdeveloping platform-level browsing soft-ware for the 32–bit versions of Windowswas made with full knowledge that Net-scape’s acquiescence in this market alloca-tion scheme would, without more, have leftInternet Explorer with such a large shareof browser usage as to endow Microsoftwith de facto monopoly power in the brow-ser market. Findings ¶¶ 79–89.

When Netscape refused to abandon thedevelopment of browsing software for 32–bit versions of Windows, Microsoft’s strat-egy for protecting the applications barrierbecame one of expanding Internet Explor-er’s share of browser usage—and simulta-neously depressing Navigator’s share—toan extent sufficient to demonstrate to de-velopers that Navigator would neveremerge as the standard software employedto browse the Web. Id. ¶ 133. While Mi-crosoft’s top executives never expresslydeclared acquisition of monopoly power inthe browser market to be the objective,they knew, or should have known, that thetactics they actually employed were likelyto push Internet Explorer’s share to thoseextreme heights. Navigator’s slow demisewould leave a competitive vacuum for onlyInternet Explorer to fill. Yet, there is noevidence that Microsoft tried—or evenconsidered trying—to prevent its anticom-petitive campaign from achieving overkill.Under these circumstances, it is fair topresume that the wrongdoer intended ‘‘theprobable consequences of its acts.’’ IIIAPhillip E. Areeda & Herbert Hovenkamp,Antitrust Law ¶ 805b, at 324 (1996); seealso Spectrum Sports, 506 U.S. at 459, 113S.Ct. 884 (proof of ‘‘ ‘predatory’ tactics TTT

may be sufficient to prove the necessaryintent to monopolize, which is somethingmore than an intent to compete vigorous-ly’’). Therefore, the facts of this case suf-fice to prove the element of specific intent.

Even if the first two elements of theoffense are met, however, a defendant maynot be held liable for attempted monopoli-zation absent proof that its anticompetitiveconduct created a dangerous probability ofachieving the objective of monopoly powerin a relevant market. Id. The evidencesupports the conclusion that Microsoft’sactions did pose such a danger.

At the time Microsoft presented its mar-ket allocation proposal to Netscape, Navi-gator’s share of browser usage stood wellabove seventy percent, and no other brow-ser enjoyed more than a fraction of theremainder. Findings ¶¶ 89, 372. Had


Netscape accepted Microsoft’s offer, near-ly all of its share would have devolvedupon Microsoft, because at that point, nopotential third-party competitor could ei-ther claim to rival Netscape’s stature as abrowser company or match Microsoft’sability to leverage monopoly power in themarket for Intel-compatible PC operatingsystems. In the time it would have takenan aspiring entrant to launch a seriouseffort to compete against Internet Explor-er, Microsoft could have erected the sametype of barrier that protects its existingmonopoly power by adding proprietary ex-tensions to the browsing software underits control and by extracting commitmentsfrom OEMs, IAPs and others similar tothe ones discussed in § I.A.2, supra. Inshort, Netscape’s assent to Microsoft’smarket division proposal would have, in-stanter, resulted in Microsoft’s attainmentof monopoly power in a second market. Itfollows that the proposal itself created adangerous probability of that result. SeeUnited States v. American Airlines, Inc.,743 F.2d 1114, 1118–19 (5th Cir.1984) (factthat two executives ‘‘arguably’’ could haveimplemented market-allocation schemethat would have engendered monopolypower was sufficient for finding of danger-ous probability). Although the dangerousprobability was no longer imminent withNetscape’s rejection of Microsoft’s propos-al, ‘‘the probability of success at the timethe acts occur’’ is the measure by whichliability is determined. Id. at 1118.

[14] This conclusion alone is sufficientto support a finding of liability for at-tempted monopolization. The Court isnonetheless compelled to express its fur-ther conclusion that the predatory courseof conduct Microsoft has pursued sinceJune of 1995 has revived the dangerousprobability that Microsoft will attain mo-nopoly power in a second market. Inter-net Explorer’s share of browser usage hasalready risen above fifty percent, will ex-ceed sixty percent by January 2001, andthe trend continues unabated. Findings¶¶ 372–73; see M & M Medical Supplies

& Serv., Inc. v. Pleasant Valley Hosp.,Inc., 981 F.2d 160, 168 (4th Cir.1992) (enbanc) (‘‘A rising share may show moreprobability of success than a fallingshareTTTT [C]laims involving greater than50% share should be treated as attemptsat monopolization when the other elementsfor attempted monopolization are also sat-isfied.’’) (citations omitted); see also IIIAPhillip E. Areeda & Herbert Hovenkamp,Antitrust Law ¶ 807d, at 354–55 (1996)(acknowledging the significance of a large,rising market share to the dangerousprobability element).

II. SECTION ONE OF THE SHER-MAN ACT

Section 1 of the Sherman Act prohibits‘‘every contract, combination TTT, or con-spiracy, in restraint of trade or com-merceTTTT’’ 15 U.S.C. § 1. Pursuant tothis statute, courts have condemned com-mercial stratagems that constitute unrea-sonable restraints on competition, see Con-tinental T.V., Inc. v. GTE Sylvania Inc.,433 U.S. 36, 49, 97 S.Ct. 2549, 53 L.Ed.2d568 (1977); Chicago Board of Trade v.United States, 246 U.S. 231, 238–39, 38S.Ct. 242, 62 L.Ed. 683 (1918), amongthem ‘‘tying arrangements’’ and ‘‘exclusivedealing’’ contracts. Tying arrangementshave been found unlawful where sellersexploit their market power over one prod-uct to force unwilling buyers into acquiringanother. See Jefferson Parish HospitalDistrict No. 2 v. Hyde, 466 U.S. 2, 12, 104S.Ct. 1551, 80 L.Ed.2d 2 (1984); NorthernPac. Ry. Co. v. United States, 356 U.S. 1,6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958);Times–Picayune Pub. Co. v. UnitedStates, 345 U.S. 594, 605, 73 S.Ct. 872, 97L.Ed. 1277 (1953). Where agreementshave been challenged as unlawful exclusivedealing, the courts have condemned onlythose contractual arrangements that sub-stantially foreclose competition in a rele-vant market by significantly reducing thenumber of outlets available to a competitorto reach prospective consumers of thecompetitor’s product. See Tampa ElectricCo. v. Nashville Coal Co., 365 U.S. 320,


327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961);Roland Machinery Co. v. Dresser Indus-tries, Inc., 749 F.2d 380, 393 (7th Cir.1984).

A. Tying

[15] Liability for tying under § 1 ex-ists where (1) two separate ‘‘products’’ areinvolved; (2) the defendant affords its cus-tomers no choice but to take the tied prod-uct in order to obtain the tying product;(3) the arrangement affects a substantialvolume of interstate commerce; and (4)the defendant has ‘‘market power’’ in thetying product market. Jefferson Parish,466 U.S. at 12–18, 104 S.Ct. 1551. TheSupreme Court has since reaffirmed thistest in Eastman Kodak Co. v. Image Tech-nical Services, Inc., 504 U.S. 451, 461–62,112 S.Ct. 2072, 119 L.Ed.2d 265 (1992).All four elements are required, whetherthe arrangement is subjected to a per se orRule of Reason analysis.

The plaintiffs allege that Microsoft’scombination of Windows and Internet Ex-plorer by contractual and technological ar-tifices constitute unlawful tying to the ex-tent that those actions forced Microsoft’scustomers and consumers to take InternetExplorer as a condition of obtaining Win-dows. While the Court agrees with plain-tiffs, and thus holds that Microsoft is liablefor illegal tying under § 1, this conclusionis arguably at variance with a decision ofthe U.S. Court of Appeals for the D.C.Circuit in a closely related case, and musttherefore be explained in some detail.Whether the decisions are indeed inconsis-tent is not for this Court to say.

The decision of the D.C. Circuit in ques-tion is United States v. Microsoft Corp.,147 F.3d 935 (D.C.Cir.1998) (‘‘MicrosoftII’’) which is itself related to an earlierdecision of the same Circuit, United Statesv. Microsoft Corp., 56 F.3d 1448 (D.C.Cir.1995) (‘‘Microsoft I ’’). The history of thecontroversy is sufficiently set forth in theappellate opinions and need not be recapi-tulated here, except to state that thosedecisions anticipated the instant case, and

that Microsoft II sought to guide thisCourt, insofar as practicable, in the furtherproceedings it fully expected to ensue onthe tying issue. Nevertheless, upon re-flection this Court does not believe theD.C. Circuit intended Microsoft II to statea controlling rule of law for purposes ofthis case. As the Microsoft II court itselfacknowledged, the issue before it was theconstruction to be placed upon a singleprovision of a consent decree that, al-though animated by antitrust consider-ations, was nevertheless still primarily amatter of determining contractual intent.The court of appeals’ observations on theextent to which software product designdecisions may be subject to judicial scruti-ny in the course of § 1 tying cases are inthe strictest sense obiter dicta, and arethus not formally binding. Nevertheless,both prudence and the deference thisCourt owes to pronouncements of its ownCircuit oblige that it follow in the directionit is pointed until the trail falters.

The majority opinion in Microsoft IIevinces both an extraordinary degree ofrespect for changes (including ‘‘inte-gration’’) instigated by designers of tech-nological products, such as software, in thename of product ‘‘improvement,’’ and acorresponding lack of confidence in theability of the courts to distinguish betweenimprovements in fact and improvements inname only, made for anticompetitive pur-poses. Read literally, the D.C. Circuit’sopinion appears to immunize any productdesign (or, at least, software product de-sign) from antitrust scrutiny, irrespectiveof its effect upon competition, if the soft-ware developer can postulate any ‘‘plausi-ble claim’’ of advantage to its arrangementof code. 147 F.3d at 950.

This undemanding test appears to thisCourt to be inconsistent with the pertinentSupreme Court precedents in at leastthree respects. First, it views the marketfrom the defendant’s perspective, or, moreprecisely, as the defendant would like tohave the market viewed. Second, it ig-nores reality: The claim of advantage need


only be plausible; it need not be proved.Third, it dispenses with any balancing ofthe hypothetical advantages against anyanticompetitive effects.

The two most recent Supreme Courtcases to have addressed the issue of prod-uct and market definition in the context ofSherman Act tying claims are JeffersonParish, supra, and Eastman Kodak, su-pra. In Jefferson Parish, the SupremeCourt held that a hospital offering hospitalservices and anesthesiology services as apackage could not be found to have violat-ed the anti-tying rules unless the evidenceestablished that patients, i.e. consumers,perceived the services as separate prod-ucts for which they desired a choice, andthat the package had the effect of forcingthe patients to purchase an unwantedproduct. 466 U.S. at 21–24, 28–29, 104S.Ct. 1551. In Eastman Kodak the Su-preme Court held that a manufacturer ofphotocopying and micrographic equipment,in agreeing to sell replacement parts forits machines only to those customers whoalso agreed to purchase repair servicesfrom it as well, would be guilty of tying ifthe evidence at trial established the exis-tence of consumer demand for parts andservices separately. 504 U.S. at 463, 112S.Ct. 2072.

Both defendants asserted, as Microsoftdoes here, that the tied and tying productswere in reality only a single product, orthat every item was traded in a singlemarket.3 In Jefferson Parish, the defen-dant contended that it offered a ‘‘function-ally integrated package of services’’—asingle product—but the Supreme Courtconcluded that the ‘‘character of the de-mand’’ for the constituent components, nottheir functional relationship, determinedwhether separate ‘‘products’’ were actuallyinvolved. 466 U.S. at 19, 104 S.Ct. 1551.

In Eastman Kodak, the defendant postu-lated that effective competition in theequipment market precluded the possibili-ty of the use of market power anticompeti-tively in any after-markets for parts orservices: Sales of machines, parts, andservices were all responsive to the disci-pline of the larger equipment market.The Supreme Court declined to accept thispremise in the absence of evidence of ‘‘ac-tual market realities,’’ 504 U.S. at 466–67,112 S.Ct. 2072, ultimately holding that ‘‘theproper market definition in this case canbe determined only after a factual inquiryinto the ‘commercial realities’ faced byconsumers.’’ Id. at 482, 112 S.Ct. 2072(quoting United States v. Grinnell Corp.,384 U.S. 563, 572, 86 S.Ct. 1698, 16L.Ed.2d 778 (1966)).4

In both Jefferson Parish and EastmanKodak, the Supreme Court also gave con-sideration to certain theoretical ‘‘validbusiness reasons’’ proffered by the defen-dants as to why the arrangements shouldbe deemed benign. In Jefferson Parish,the hospital asserted that the combinationof hospital and anesthesia services elimi-nated multiple problems of scheduling,supply, performance standards, and equip-ment maintenance. 466 U.S. at 43–44, 104S.Ct. 1551. The manufacturer in EastmanKodak contended that quality control, in-ventory management, and the preventionof free riding justified its decision to sellparts only in conjunction with service. 504U.S. at 483, 112 S.Ct. 2072. In neithercase did the Supreme Court find thosejustifications sufficient if anticompetitiveeffects were proved. Id. at 483–86, 112S.Ct. 2072; Jefferson Parish, 466 U.S. at25 n. 42, 104 S.Ct. 1551. Thus, at a mini-mum, the admonition of the D.C. Circuit inMicrosoft II to refrain from any productdesign assessment as to whether the ‘‘inte-gration’’ of Windows and Internet Explor-

3. Microsoft contends that Windows and Inter-net Explorer represent a single ‘‘integratedproduct,’’ and that the relevant market is aunitary market of ‘‘platforms for software ap-plications.’’ Microsoft’s Proposed Conclu-sions of Law at 49 n.28.

4. In Microsoft II the D.C. Circuit acknowl-edged it was without benefit of a completefactual record which might alter its conclu-sion that the ‘‘Windows 95/IE package is agenuine integration.’’ 147 F.3d at 952.


er is a ‘‘net plus,’’ deferring to Microsoft’s‘‘plausible claim’’ that it is of ‘‘some advan-tage’’ to consumers, is at odds with theSupreme Court’s own approach.

[16] The significance of those cases,for this Court’s purposes, is to teach thatresolution of product and market defini-tional problems must depend upon proof ofcommercial reality, as opposed to whatmight appear to be reasonable. In bothcases the Supreme Court instructed thatproduct and market definitions were to beascertained by reference to evidence ofconsumers’ perception of the nature of theproducts and the markets for them, ratherthan to abstract or metaphysical assump-tions as to the configuration of the ‘‘prod-uct’’ and the ‘‘market.’’ Jefferson Parish,466 U.S. at 18, 104 S.Ct. 1551; EastmanKodak, 504 U.S. at 481–82, 112 S.Ct. 2072.In the instant case, the commercial realityis that consumers today perceive operatingsystems and browsers as separate ‘‘prod-ucts,’’ for which there is separate demand.Findings ¶¶ 149–54. This is true notwith-standing the fact that the software codesupplying their discrete functionalities canbe commingled in virtually infinite combi-nations, rendering each indistinguishablefrom the whole in terms of files of code orany other taxonomy. Id. ¶¶ 149–50, 162–63, 187–91.

[17] Proceeding in line with the Su-preme Court cases, which are indisputablycontrolling, this Court first concludes thatMicrosoft possessed ‘‘appreciable economicpower in the tying market,’’ Eastman Ko-dak, 504 U.S. at 464, 112 S.Ct. 2072, whichin this case is the market for Intel-compat-ible PC operating systems. See JeffersonParish, 466 U.S. at 14, 104 S.Ct. 1551(defining market power as ability to forcepurchaser to do something that he wouldnot do in competitive market); see alsoFortner Enterprises, Inc. v. United StatesSteel Corp., 394 U.S. 495, 504, 89 S.Ct.1252, 22 L.Ed.2d 495 (1969) (ability toraise prices or to impose tie-ins on any

appreciable number of buyers within thetying product market is sufficient). Whilecourts typically have not specified a per-centage of the market that creates thepresumption of ‘‘market power,’’ no courthas ever found that the requisite degree ofpower exceeds the amount necessary for afinding of monopoly power. See EastmanKodak, 504 U.S. at 481, 112 S.Ct. 2072.Because this Court has already found thatMicrosoft possesses monopoly power in theworldwide market for Intel-compatible PCoperating systems (i.e., the tying productmarket), Findings ¶¶ 18–67, the thresholdelement of ‘‘appreciable economic power’’is a fortiori met.

Similarly, the Court’s Findings stronglysupport a conclusion that a ‘‘not insubstan-tial’’ amount of commerce was foreclosedto competitors as a result of Microsoft’sdecision to bundle Internet Explorer withWindows. The controlling considerationunder this element is ‘‘simply whether atotal amount of business’’ that is ‘‘substan-tial enough in terms of dollar-volume so asnot to be merely de minimis ’’ is foreclos-ed. Fortner, 394 U.S. at 501, 89 S.Ct.1252; cf. International Salt Co. v. UnitedStates, 332 U.S. 392, 396, 68 S.Ct. 12, 92L.Ed. 20 (1947) (unreasonable per se toforeclose competitors from any substantialmarket by a tying arrangement).

Although the Court’s Findings do notspecify a dollar amount of business thathas been foreclosed to any particular pres-ent or potential competitor of Microsoft inthe relevant market,5 including Netscape,the Court did find that Microsoft’s bun-dling practices caused Navigator’s usageshare to drop substantially from 1995 to1998, and that as a direct result Netscapesuffered a severe drop in revenues fromlost advertisers, Web traffic and purchasesof server products. It is thus obvious thatthe foreclosure achieved by Microsoft’s re-fusal to offer Internet Explorer separatelyfrom Windows exceeds the Supreme

5. Most of the quantitative evidence was pre-sented in units other than monetary, but num-

bered the units in millions, whatever theirnature.


Court’s de minimis threshold. See Digi-dyne Corp. v. Data General Corp., 734F.2d 1336, 1341 (9th Cir.1984) (citing Fort-ner ).

The facts of this case also prove theelements of the forced bundling require-ment. Indeed, the Supreme Court hasstated that the ‘‘essential characteristic’’ ofan illegal tying arrangement is a seller’sdecision to exploit its market power overthe tying product ‘‘to force the buyer intothe purchase of a tied product that thebuyer either did not want at all, or mighthave preferred to purchase elsewhere ondifferent terms.’’ Jefferson Parish, 466U.S. at 12, 104 S.Ct. 1551. In that regard,the Court has found that, beginning withthe early agreements for Windows 95, Mi-crosoft has conditioned the provision of alicense to distribute Windows on theOEMs’ purchase of Internet Explorer.Findings ¶¶ 158–65. The agreements pro-hibited the licensees from ever modifyingor deleting any part of Windows, despitethe OEMs’ expressed desire to be allowedto do so. Id. ¶¶ 158, 164. As a result,OEMs were generally not permitted, withonly one brief exception, to satisfy consum-er demand for a browserless version ofWindows 95 without Internet Explorer.Id. ¶¶ 158, 202. Similarly, Microsoft re-fused to license Windows 98 to OEMsunless they also agreed to abstain fromremoving the icons for Internet Explorerfrom the desktop. Id. ¶ 213. Consumerswere also effectively compelled to purchaseInternet Explorer along with Windows 98by Microsoft’s decision to stop includingInternet Explorer on the list of programssubject to the Add/Remove function andby its decision not to respect their selec-tion of another browser as their default.Id. ¶¶ 170–72.

The fact that Microsoft ostensibly pricedInternet Explorer at zero does not detractfrom the conclusion that consumers wereforced to pay, one way or another, for thebrowser along with Windows. Despite Mi-crosoft’s assertion that the Internet Ex-plorer technologies are not ‘‘purchased’’

since they are included in a single royaltyprice paid by OEMs for Windows 98, seeMicrosoft’s Proposed Conclusions of Lawat 12–13, it is nevertheless clear that licen-sees, including consumers, are forced totake, and pay for, the entire package ofsoftware and that any value to be ascribedto Internet Explorer is built into this sin-gle price. See United States v. MicrosoftCorp., Nos. CIV. A. 98–1232, 98–1233, 1998WL 614485, *12 (D.D.C., Sept. 14, 1998);IIIA Philip E. Areeda & Herbert Hoven-kamp, Antitrust Law ¶ 760b6, at 51 (1996)(‘‘[T]he tie may be obvious, as in the classicform, or somewhat more subtle, as when amachine is sold or leased at a price thatcovers ‘free’ servicing.’’). Moreover, thepurpose of the Supreme Court’s ‘‘forcing’’inquiry is to expose those product bundlesthat raise the cost or difficulty of doingbusiness for would-be competitors to pro-hibitively high levels, thereby deprivingconsumers of the opportunity to evaluate acompeting product on its relative merits.It is not, as Microsoft suggests, simply topunish firms on the basis of an incrementin price attributable to the tied product.See Fortner, 394 U.S. at 512–14, 89 S.Ct.1252; Jefferson Parish, 466 U.S. at 12–13,104 S.Ct. 1551.

As for the crucial requirement that Win-dows and Internet Explorer be deemed‘‘separate products’’ for a finding of tech-nological tying liability, this Court’s Find-ings mandate such a conclusion. Consid-ering the ‘‘character of demand’’ for thetwo products, as opposed to their ‘‘func-tional relation,’’ id. at 19, Web browsersand operating systems are ‘‘distinguishablein the eyes of buyers.’’ Id.; Findings¶¶ 149–54. Consumers often base theirchoice of which browser should reside ontheir operating system on their individualdemand for the specific functionalities orcharacteristics of a particular browser,separate and apart from the functionalitiesafforded by the operating system itself.Id. ¶¶ 149–51. Moreover, the behavior ofother, lesser software vendors confirmsthat it is certainly efficient to provide an


operating system and a browser separate-ly, or at least in separable form. Id. ¶ 153.Microsoft is the only firm to refuse tolicense its operating system without abrowser. Id.; see Berkey Photo, Inc. v.Eastman Kodak Co., 603 F.2d 263, 287 (2dCir.1979). This Court concludes that Mi-crosoft’s decision to offer only the bun-dled—‘‘integrated’’—version of Windowsand Internet Explorer derived not fromtechnical necessity or business efficiencies;rather, it was the result of a deliberate andpurposeful choice to quell incipient compe-tition before it reached truly minatory pro-portions.

The Court is fully mindful of the reasonsfor the admonition of the D.C. Circuit inMicrosoft II of the perils associated with arigid application of the traditional ‘‘sepa-rate products’’ test to computer softwaredesign. Given the virtually infinite mallea-bility of software code, software upgradesand new application features, such as Webbrowsers, could virtually always be config-ured so as to be capable of separate andsubsequent installation by an immediatelicensee or end user. A court mechanical-ly applying a strict ‘‘separate demand’’ testcould improvidently wind up condemning‘‘integrations’’ that represent genuine im-provements to software that are benignfrom the standpoint of consumer welfareand a competitive market. Clearly, this isnot a desirable outcome. Similar concernshave motivated other courts, as well as theD.C. Circuit, to resist a strict applicationof the ‘‘separate products’’ tests to similarquestions of ‘‘technological tying.’’ See,

e.g., Foremost Pro Color, Inc. v. EastmanKodak Co., 703 F.2d 534, 542–43 (9th Cir.1983); Response of Carolina, Inc. v. Leas-co Response, Inc., 537 F.2d 1307, 1330 (5thCir.1976); Telex Corp. v. IBM Corp., 367F.Supp. 258, 347 (N.D.Okla.1973).

To the extent that the Supreme Courthas spoken authoritatively on these issues,however, this Court is bound to follow itsguidance and is not at liberty to extrapo-late a new rule governing the tying ofsoftware products. Nevertheless, theCourt is confident that its conclusion, limit-ed by the unique circumstances of thiscase, is consistent with the SupremeCourt’s teaching to date.6

B. Exclusive Dealing Arrangements

[18] Microsoft’s various contractualagreements with some OLSs, ICPs, ISVs,Compaq and Apple are also called intoquestion by plaintiffs as exclusive dealingarrangements under the language in § 1prohibiting ‘‘contract[s] TTT in restraint oftrade or commerceTTTT’’ 15 U.S.C. § 1.As detailed in § I.A.2, supra, each of theseagreements with Microsoft required theother party to promote and distribute In-ternet Explorer to the partial or completeexclusion of Navigator. In exchange, Mi-crosoft offered, to some or all of theseparties, promotional patronage, substantialfinancial subsidies, technical support, andother valuable consideration. Under theclear standards established by the Su-preme Court, these types of ‘‘vertical re-strictions’’ are subject to a Rule of Reason

6. Amicus curiae Lawrence Lessig has suggest-ed that a corollary concept relating to thebundling of ‘‘partial substitutes’’ in the con-text of software design may be apposite as alimiting principle for courts called upon toassess the compliance of these products withantitrust law. This Court has been at pains topoint out that the true source of the threatposed to the competitive process by Micro-soft’s bundling decisions stems from the factthat a competitor to the tied product bore thepotential, but had not yet matured sufficient-ly, to open up the tying product market tocompetition. Under these conditions, theanticompetitive harm from a software bundle

is much more substantial and pernicious thanthe typical tie. See X Phillip E. Areeda, EinerElhauge & Herbert Hovenkamp, AntitrustLaw ¶ 1747 (1996). A company able to lever-age its substantial power in the tying productmarket in order to force consumers to accepta tie of partial substitutes is thus able tospread inefficiency from one market to thenext, id. at 232, and thereby ‘‘sabotage anascent technology that might compete withthe tying product but for its foreclosure fromthe market.’’ III Phillip E. Areeda & HerbertHovenkamp, Antitrust Law ¶ 1746.1d at 495(Supp.1999).


analysis. See Continental T.V., Inc. v.GTE Sylvania Inc., 433 U.S. 36, 49, 97S.Ct. 2549, 53 L.Ed.2d 568 (1977); Jeffer-son Parish, 466 U.S. at 44–45, 104 S.Ct.1551 (O’Connor, J., concurring); cf. Busi-ness Elecs. Corp. v. Sharp Elecs. Corp.,485 U.S. 717, 724–26, 108 S.Ct. 1515, 99L.Ed.2d 808 (1988) (holding that Rule ofReason analysis presumptively applies tocases brought under § 1 of the ShermanAct).

Acknowledging that some exclusive deal-ing arrangements may have benign objec-tives and may create significant economicbenefits, see Tampa Electric Co. v. Nash-ville Coal Co., 365 U.S. 320, 333–35, 81S.Ct. 623, 5 L.Ed.2d 580 (1961), courtshave tended to condemn under the § 1Rule of Reason test only those agreementsthat have the effect of foreclosing a com-peting manufacturer’s brands from the rel-evant market. More specifically, courtsare concerned with those exclusive dealingarrangements that work to place so muchof a market’s available distribution outletsin the hands of a single firm as to make itdifficult for other firms to continue to com-pete effectively, or even to exist, in therelevant market. See U.S. Healthcare Inc.v. Healthsource, Inc., 986 F.2d 589, 595(1st Cir.1993); Interface Group, Inc. v.Massachusetts Port Authority, 816 F.2d 9,11 (1st Cir.1987) (relying upon III PhillipE. Areeda & Donald F. Turner, AntitrustLaw ¶ 732 (1978), Tampa Electric, 365U.S. at 327–29, 81 S.Ct. 623, and StandardOil Co. v. United States, 337 U.S. 293, 69S.Ct. 1051, 93 L.Ed. 1371 (1949)).

To evaluate an agreement’s likely anti-competitive effects, courts have consistent-ly looked at a variety of factors, including:(1) the degree of exclusivity and the rele-vant line of commerce implicated by theagreements’ terms; (2) whether the per-centage of the market foreclosed by thecontracts is substantial enough to importthat rivals will be largely excluded fromcompetition; (3) the agreements’ actualanticompetitive effect in the relevant lineof commerce; (4) the existence of any le-

gitimate, procompetitive business justifica-tions offered by the defendant; (5) thelength and irrevocability of the agree-ments; and (6) the availability of any lessrestrictive means for achieving the samebenefits. See, e.g., Tampa Electric, 365U.S. at 326–35, 81 S.Ct. 623; Roland Ma-chinery Co. v. Dresser Industries, Inc., 749F.2d 380, 392–95 (7th Cir.1984); see alsoXI Herbert Hovenkamp, Antitrust Law¶ 1820 (1998).

Where courts have found that the agree-ments in question failed to foreclose abso-lutely outlets that together accounted for asubstantial percentage of the total distri-bution of the relevant products, they haveconsistently declined to assign liability.See, e.g., id. ¶ 1821; U.S. Healthcare, 986F.2d at 596–97; Roland Mach. Co., 749F.2d at 394 (failure of plaintiff to meetthreshold burden of proving that exclusivedealing arrangement is likely to keep atleast one significant competitor from doingbusiness in relevant market dictates noliability under § 1). This Court has previ-ously observed that the case law suggeststhat, unless the evidence demonstratesthat Microsoft’s agreements excluded Net-scape altogether from access to roughlyforty percent of the browser market, theCourt should decline to find such agree-ments in violation of § 1. See UnitedStates v. Microsoft Corp., Nos. CIV. A. 98–1232, 98–1233, 1998 WL 614485, at *19(D.D.C. Sept. 14, 1998) (citing cases thattended to converge upon forty percentforeclosure rate for finding of § 1 liability).

[19] The only agreements revealed bythe evidence which could be termed so‘‘exclusive’’ as to merit scrutiny under the§ 1 Rule of Reason test are the agree-ments Microsoft signed with Compaq,AOL and several other OLSs, the topICPs, the leading ISVs, and Apple. TheFindings of Fact also establish that,among the OEMs discussed supra, Com-paq was the only one to fully commit it-self to Microsoft’s terms for distributingand promoting Internet Explorer to theexclusion of Navigator. Beginning with


its decisions in 1996 and 1997 to promoteInternet Explorer exclusively for its PCproducts, Compaq essentially ceased todistribute or pre-install Navigator at all inexchange for significant financial remu-neration from Microsoft. Findings¶¶ 230–34. AOL’s March 12 and October28, 1996 agreements with Microsoft alsoguaranteed that, for all practical pur-poses, Internet Explorer would be AOL’sbrowser of choice, to be distributed andpromoted through AOL’s dominant, flag-ship online service, thus leaving Navigatorto fend for itself. Id. ¶¶ 287–90, 293–97.In light of the severe shipment quotasand promotional restrictions for third-par-ty browsers imposed by the agreements,the fact that Microsoft still permittedAOL to offer Navigator through a fewsubsidiary channels does not negate thisconclusion. The same conclusion as to ex-clusionary effect can be drawn with re-spect to Microsoft’s agreements with AT& T WorldNet, Prodigy and CompuServe,since those contract terms were almostidentical to the ones contained in AOL’sMarch 1996 agreement. Id. ¶¶ 305–06.

Microsoft also successfully induced someof the most popular ICPs and ISVs tocommit to promote, distribute and utilizeInternet Explorer technologies exclusivelyin their Web content in exchange for valu-able placement on the Windows desktopand technical support. Specifically, the‘‘Top Tier’’ and ‘‘Platinum’’ agreementsthat Microsoft formed with thirty-four ofthe most popular ICPs on the Web en-sured that Navigator was effectively shutout of these distribution outlets for a sig-nificant period of time. Id. ¶¶ 317–22,325–26, 332. In the same way, Microsoft’s‘‘First Wave’’ contracts provided crucialtechnical information to dozens of leadingISVs that agreed to make their Web-cen-tric applications completely reliant on tech-nology specific to Internet Explorer. Id.¶¶ 337, 339–40. Finally, Apple’s 1997Technology Agreement with Microsoft pro-hibited Apple from actively promoting anynon-Microsoft browsing software in anyway or from pre-installing a browser other

than Internet Explorer. Id. ¶¶ 350–52.This arrangement eliminated all meaning-ful avenues of distribution of Navigatorthrough Apple. Id.

Notwithstanding the extent to whichthese ‘‘exclusive’’ distribution agreementspreempted the most efficient channels forNavigator to achieve browser usage share,however, the Court concludes that Micro-soft’s multiple agreements with distribu-tors did not ultimately deprive Netscape ofthe ability to have access to every PC userworldwide to offer an opportunity to installNavigator. Navigator can be downloadedfrom the Internet. It is available throughmyriad retail channels. It can (and hasbeen) mailed directly to an unlimited num-ber of households. How precisely it man-aged to do so is not shown by the evidence,but in 1998 alone, for example, Netscapewas able to distribute 160 million copies ofNavigator, contributing to an increase inits installed base from 15 million in 1996 to33 million in December 1998. Id. ¶ 378.As such, the evidence does not support afinding that these agreements completelyexcluded Netscape from any constituentportion of the worldwide browser market,the relevant line of commerce.

The fact that Microsoft’s arrangementswith various firms did not foreclose enoughof the relevant market to constitute a § 1violation in no way detracts from theCourt’s assignment of liability for the samearrangements under § 2. As noted above,all of Microsoft’s agreements, including thenon-exclusive ones, severely restrictedNetscape’s access to those distributionchannels leading most efficiently to theacquisition of browser usage share. Theythus rendered Netscape harmless as aplatform threat and preserved Microsoft’soperating system monopoly, in violation of§ 2. But virtually all the leading case au-thority dictates that liability under § 1must hinge upon whether Netscape wasactually shut out of the Web browser mar-ket, or at least whether it was forced toreduce output below a subsistence level.


The fact that Netscape was not allowedaccess to the most direct, efficient ways tocause the greatest number of consumers touse Navigator is legally irrelevant to afinal determination of plaintiffs’ § 1 claims.

Other courts in similar contexts havedeclined to find liability where alternativechannels of distribution are available to thecompetitor, even if those channels are notas efficient or reliable as the channels fore-closed by the defendant. In Omega Envi-ronmental, Inc. v. Gilbarco, Inc., 127 F.3d1157 (9th Cir.1997), for example, the NinthCircuit found that a manufacturer of petro-leum dispensing equipment ‘‘foreclosedroughly 38% of the relevant market forsales.’’ 127 F.3d at 1162. Nonetheless,the Court refused to find the defendantliable for exclusive dealing because ‘‘poten-tial alternative sources of distribution’’ ex-isted for its competitors. Id. at 1163. Re-jecting plaintiff’s argument (similar to theone made in this case) that these alterna-tives were ‘‘inadequate substitutes for theexisting distributors,’’ the Court statedthat ‘‘[c]ompetitors are free to sell directly,to develop alternative distributors, or to

compete for the services of existing dis-tributors. Antitrust laws require nomore.’’ Id.; accord Seagood TradingCorp. v. Jerrico, Inc., 924 F.2d 1555, 1572–73 (11th Cir.1991).

III. THE STATE LAW CLAIMS

In their amended complaint, the plaintiffstates assert that the same facts establish-ing liability under §§ 1 and 2 of the Sher-man Act mandate a finding of liabilityunder analogous provisions in their ownlaws. The Court agrees. The facts prov-ing that Microsoft unlawfully maintainedits monopoly power in violation of § 2 ofthe Sherman Act are sufficient to meetanalogous elements of causes of actionarising under the laws of each plaintiffstate.7 The Court reaches the same con-clusion with respect to the facts establish-ing that Microsoft attempted to monopo-lize the browser market in violation of§ 2,8 and with respect to those facts estab-lishing that Microsoft instituted an im-proper tying arrangement in violation of§ 1.9

7. See Cal. Bus. & Prof.Code §§ 16720, 16726,17200 (West 1999); Conn. Gen.Stat. § 35–27(1999); D.C.Code § 28–4503 (1996); Fla.Stat. chs. 501.204(1), 542.19 (1999); 740 Ill.Comp. Stat. 10/3 (West 1999); Iowa Code§ 553.5 (1997); Kan. Stat. §§ 50–101 et seq.(1994); Ky.Rev.Stat. §§ 367.170, 367.175(Michie 1996); La.Rev.Stat. §§ 51:123,51:1405 (West 1986); Md. Com. Law II CodeAnn. § 11–204 (1990); Mass. Gen. Laws ch.93A, § 2; Mich. Comp. Laws § 445.773(1989); Minn.Stat. § 325D.52 (1998); N.M.Stat. § 57–1–2 (Michie 1995); N.Y. Gen. Bus.Law § 340 (McKinney 1998); N.C. Gen.Stat.§§ 75–1.1, 75–2.1 (1999); Ohio Rev.Code§§ 1331.01, 1331.02 (Anderson 1993); UtahCode § 76–10–914 (1999); W.Va.Code § 47–18–4 (1999); Wis. Stat. § 133.03(2) (West1989 & Supp.1998).

8. See Cal. Bus. & Prof.Code § 17200 (West1999); Conn. Gen.Stat. § 35–27 (1999);D.C.Code § 28–4503 (1996); Fla. Stat. chs.501.204(1), 542.19 (1999); 740 Ill. Comp.Stat. 10/3(3) (West 1999); Iowa Code § 553.5(1997); Kan. Stat.§§ 50–101 et seq. (1994);Ky.Rev.Stat. §§ 367.170, 367.175 (Michie1996); La.Rev.Stat.§§ 51:123, 51:1405 (West1986); Md. Com. Law II Code Ann. § 11–204(a)(2) (1990); Mass. Gen. Laws ch. 93A,

§ 2; Mich. Comp. Laws § 445.773 (1989);Minn.Stat. § 325D.52 (1998); N.M. Stat.§ 57–1–2 (Michie 1995); N.Y. Gen. Bus. Law§ 340 (McKinney 1988); N.C. Gen.Stat.§§ 75–1.1, 75–2.1 (1999); Ohio Rev.Code§§ 1331.01, 1331.02 (Anderson 1993); UtahCode § 76–10–914 (1999); W.Va.Code § 47–18–4 (1999); Wis. Stat. § 133.03(2) (West1989 & Supp.1998).

9. See Cal. Bus. & Prof.Code § 16727, 17200(West 1999); Conn. Gen.Stat. §§ 35–26, 35–29 (1999); D.C.Code § 28–4502 (1996); Fla.Stat. chs. 501.204(1), 542.18 (1999); 740 Ill.Comp. Stat. 10/3(4) (West 1999); Iowa Code§ 553.4 (1997); Kan. Stat. §§ 50–101 et seq.(1994); Ky.Rev.Stat. §§ 367.170, 367.175(Michie 1996); La.Rev.Stat. §§ 51:122,51:1405 (West 1986); Md. Com. Law II CodeAnn. § 11–204(a)(1) (1990); Mass. Gen. Lawsch. 93A, § 2; Mich. Comp. Laws § 445.772(1989); Minn.Stat. § 325D.52 (1998); N.M.Stat.§ 57–1–1 (Michie 1995); N.Y. Gen. Bus.Law § 340 (McKinney 1988); N.C. Gen.Stat.§§ 75–1.1, 75–2.1 (1999); Ohio Rev.Code§§ 1331.01, 1331.02 (Anderson 1993); UtahCode § 76–10–914 (1999); W.Va.Code § 47–18–3 (1999); Wis. Stat. § 133.03(1) (West1989 & Supp.1998).


The plaintiff states concede that theirlaws do not condemn any act proved in thiscase that fails to warrant liability underthe Sherman Act. States’ Reply in Sup-port of their Proposed Conclusions of Lawat 1. Accordingly, the Court concludesthat, for reasons identical to those statedin § II.B, supra, the evidence in this rec-ord does not warrant finding Microsoftliable for exclusive dealing under the lawsof any of the plaintiff states.

[20] Microsoft contends that a plaintiffcannot succeed in an antitrust claim underthe laws of California, Louisiana, Mary-land, New York, Ohio, or Wisconsin with-out proving an element that is not requiredunder the Sherman Act, namely, intrastateimpact. Assuming that each of thosestates has, indeed, expressly limited theapplication of its antitrust laws to activitythat has a significant, adverse effect oncompetition within the state or is other-wise contrary to state interests, that ele-ment is manifestly proven by the factspresented here. The Court has found thatMicrosoft is the leading supplier of operat-ing systems for PCs and that it transactsbusiness in all fifty of the United States.Findings ¶ 9.10 It is common and univer-sal knowledge that millions of citizens of,and hundreds, if not thousands, of enter-prises in each of the United States and theDistrict of Columbia utilize PCs runningon Microsoft software. It is equally clearthat certain companies that have been ad-versely affected by Microsoft’s anticompet-itive campaign—a list that includes IBM,Hewlett–Packard, Intel, Netscape, Sun,and many others—transact business in,and employ citizens of, each of the plaintiffstates. These facts compel the conclusionthat, in each of the plaintiff states, Micro-soft’s anticompetitive conduct has signifi-cantly hampered competition.

Microsoft once again invokes the federalCopyright Act in defending against stateclaims seeking to vindicate the rights ofOEMs and others to make certain modifi-

cations to Windows 95 and Windows 98.The Court concludes that these claims donot encroach on Microsoft’s federally pro-tected copyrights and, thus, that they arenot pre-empted under the SupremacyClause. The Court already concluded in§ I.A.2.a.i, supra, that Microsoft’s decisionto bundle its browser and impose first-boot and start-up screen restrictions con-stitute independent violations of § 2 of theSherman Act. It follows as a matter ofcourse that the same actions merit liabilityunder the plaintiff states’ antitrust andunfair competition laws. Indeed, the par-ties agree that the standards for liabilityunder the several plaintiff states’ antitrustand unfair competition laws are, for thepurposes of this case, identical to those ex-pressed in the federal statute. States’ Re-ply in Support of their Proposed Conclu-sions of Law at 1; Microsoft’s Sur–Replyin Response to the States’ Reply at 2 n.1.Thus, these state laws cannot ‘‘stand[ ] asan obstacle to’’ the goals of the federalcopyright law to any greater extent thando the federal antitrust laws, for they tar-get exactly the same type of anticompeti-tive behavior. Hines v. Davidowitz, 312U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581(1941). The Copyright Act’s own preemp-tion clause provides that ‘‘[n]othing in thistitle annuls or limits any rights or reme-dies under the common law or statutes ofany State with respect to TTT activitiesviolating legal or equitable rights that arenot equivalent to any of the exclusiverights within the general scope of copy-right as specified by section 106TTTT’’ 17U.S.C. § 301(b)(3). Moreover, the Su-preme Court has recognized that there is‘‘nothing either in the language of thecopyright laws or in the history of theirenactment to indicate any congressionalpurpose to deprive the states, either inwhole or in part, of their long-recognizedpower to regulate combinations in re-straint of trade.’’ Watson v. Buck, 313U.S. 387, 404, 61 S.Ct. 962, 85 L.Ed. 1416

10. The omission of the District of Columbiafrom this finding was an oversight on the part

of the Court; Microsoft obviously conductsbusiness in the District of Columbia as well.


(1941). See also Allied Artists PicturesCorp. v. Rhodes, 496 F.Supp. 408, 445(S.D.Ohio 1980), aff’d in relevant part, 679F.2d 656 (6th Cir.1982) (drawing uponsimilarities between federal and state anti-trust laws in support of notion that au-thority of states to regulate market prac-tices dealing with copyrighted subjectmatter is well-established); cf. Hines,312 U.S. at 67, 61 S.Ct. 399 (holding statelaws preempted when they ‘‘stand[ ] as anobstacle to the accomplishment and execu-tion of the full purposes and objectives ofCongress’’).

The Court turns finally to the counter-claim that Microsoft brings against theattorneys general of the plaintiff statesunder 42 U.S.C. § 1983. In support of itsclaim, Microsoft argues that the attorneysgeneral are seeking relief on the basis ofstate laws, repeats its assertion that theimposition of this relief would deprive it ofrights granted to it by the Copyright Act,and concludes with the contention that theattorneys general are, ‘‘under color of’’state law, seeking to deprive Microsoft ofrights secured by federal law—a classicviolation of 42 U.S.C. § 1983.

Having already addressed the issue ofwhether granting the relief sought by theattorneys general would entail conflict withthe Copyright Act, the Court rejects Mi-crosoft’s counterclaim on yet more funda-mental grounds as well: It is inconceivablethat their resort to this Court could repre-sent an effort on the part of the attorneysgeneral to deprive Microsoft of rightsguaranteed it under federal law, becausethis Court does not possess the power toact in contravention of federal law. There-fore, since the conduct it complains of isthe pursuit of relief in federal court, Mi-crosoft fails to state a claim under 42U.S.C. § 1983. Consequently, Microsoft’srequest for a declaratory judgment againstthe states under 28 U.S.C. §§ 2201 and2202 is denied, and the counterclaim isdismissed.

ORDERIn accordance with the Conclusions of

Law filed herein this date, it is, this 3rdday of April, 2000,

ORDERED, ADJUDGED, and DE-CLARED, that Microsoft has violated§§ 1 and 2 of the Sherman Act, 15 U.S.C.§§ 1, 2, as well as the following state lawprovisions: Cal. Bus. & Prof.Code§§ 16720, 16726, 17200; Conn. Gen.Stat.§§ 35–26, 35–27, 35–29; D.C.Code §§ 28–4502, 28–4503; Fla. Stat. chs. 501.204(1),542.18, 542.19; 740 Ill. Comp. Stat. ch.10/3; Iowa Code §§ 553.4, 553.5; Kan.Stat. §§ 50–101 et seq.; Ky.Rev.Stat.§§ 367.170, 367.175; La.Rev.Stat.§§ 51:122, 51:123, 51:1405; Md. Com. LawII Code Ann. § 11–204; Mass. Gen. Lawsch. 93A, § 2; Mich. Comp. Laws§§ 445.772, 445.773; Minn.Stat. § 325D.52;N.M. Stat. §§ 57–1–1, 57–1–2; N.Y. Gen.Bus. Law § 340; N.C. Gen.Stat. §§ 75–1.1,75–2.1; Ohio Rev.Code §§ 1331.01,1331.02; Utah Code § 76–10–914; W.Va.Code §§ 47–18–3, 47–18–4; Wis. Stat.§ 133.03(1)-(2); and it is

FURTHER ORDERED, that judgmentis entered for the United States on itssecond, third, and fourth claims for reliefin Civil Action No. 98–1232; and it is

FURTHER ORDERED, that the firstclaim for relief in Civil Action No. 98–1232is dismissed with prejudice; and it is

FURTHER ORDERED, that judgmentis entered for the plaintiff states on theirfirst, second, fourth, sixth, seventh, eighth,ninth, tenth, eleventh, twelfth, thirteenth,fourteenth, fifteenth, sixteenth, seven-teenth, eighteenth, nineteenth, twentieth,twenty-first, twenty-second, twenty-fourth,twenty-fifth, and twenty-sixth claims forrelief in Civil Action No. 98–1233; and it is

FURTHER ORDERED, that the fifthclaim for relief in Civil Action No. 98–1233is dismissed with prejudice; and it is

FURTHER ORDERED, that Micro-soft’s first and second claims for relief inCivil Action No. 98–1233 are dismissedwith prejudice; and it is

57PUBLIC SERVICE CO. OF NEW HAMPSHIRE v. PATCHCite as 87 F.Supp.2d 57 (D.N.H. 2000)

FURTHER ORDERED, that the Courtshall, in accordance with the Conclusionsof Law filed herein, enter an Order withrespect to appropriate relief, including anaward of costs and fees, following proceed-ings to be established by further Order ofthe Court.

,

PUBLIC SERVICE COMPANYOF NEW HAMPSHIRE, et

al., Plaintiffs,

and

Connecticut Valley Electric Companyand Central Vermont Public ServiceCorporation, et al., Plaintiffs/Inter-veners,

v.

Douglas L. PATCH, Bruce Ellsworthand Susan S. Geiger,

Defendants.

Nos. 97–97–JD, 97–121–L.

United States District Court,D. New Hampshire.

March 6, 2000.

Electric utility sued state public utilitycommission, challenging denial of permis-sion to pass through costs to consumers.On remand, 202 F.3d 29, parties crossmoved for summary judgment. The Dis-trict Court, Lagueux, J., held that, underfiled-rate doctrine, commission could notpreclude utility from passing through in itsretail rates the wholesale energy pricepaid by it for power purchased from par-ent corporation pursuant to federally-ap-proved contract and tariff.

Plaintiff’s motion granted; defendant’smotion denied.

1. Public Utilities O183

Johnson Act does not bar federal in-junction against state rate order found tobe inconsistent with federal statute oragency determination. 28 U.S.C.A.§ 1342.

2. Public Utilities O119.1

Under ‘‘filed-rate doctrine,’’ state com-mission is precluded from taking any ac-tion that alters wholesale rate or powerallocation lawfully set by Federal EnergyRegulatory Commission (FERC).


3. Electricity O11.3(4)

Under filed-rate doctrine, state publicutility commission could not preclude elec-tric utility from passing through in itsretail rates the wholesale energy pricepaid by it for power purchased from par-ent corporation pursuant to federally-ap-proved contract and tariff.

Bruce W. Gladstone, Cameron & Mittle-man, Providence, RI, Jeffrey S. Cohen,Sulloway, Hollis & Soden, Concord, NH,John B. Nolan, Day, Berry & Howard,Hartford, CT, James J. Tancredi, Day,Berry & Howard, Hartford, CT, Allan B.Taylor, Day, Berry & Howard, Hartford,CT, Martin L. Gross, Sulloway & Hollis,Concord, NH, for plaintiffs.

Robert Frank, NH Office of PUC, Con-cord, NH, Dennis Lane, Steven K. White,John E. McCaffrey, Michael E. Tucci,Morrison & Hecker, L.L.P., Washington,DC, Gary M. Epler, Larry S. Eckhaus,New Hampshire Public Utilities Commis-sion, Concord, NH, for Douglas L. Patch,Chairman of the State of N.H. Public Utili-ties Commission, defendant.

Mark W. Dean, Dean, Rice & Howard,Manchester, NH, for New HampshireElectric Cooperative, Inc., intervenor-de-fendant.

Documents

30 87 FEDERAL SUPPLEMENT, 2d SERIES · edge that competitor’s acquiescence in market allocation scheme would endow de-fendant with de facto monopoly power in browser market, after