|District Court Rules Microsoft Must Carry
|12/23. The U.S. District Court (Maryland) issued its
[42 pages in PDF] in Sun
Microsystems v. Microsoft, holding that Microsoft must carry the
latest Java runtime environment on any product carrying Microsoft's .NET,
including Windows XP. This is a big victory for Sun
Microsystems (Sun). The
U.S. District Court (DC) in the government antitrust case previously declined to impose this
"must carry" remedy upon Microsoft.
Basically, the District Court (Maryland) held that Microsoft years ago unlawfully
fragmented the Java platform, and destroyed Sun's channels of distribution for
Java, and is now taking advantage of its past antitrust violations to leverage
its monopoly in the Intel compatible PC market into the market for general
purpose, Internet enabled distributed computing platforms (that is, to promote
its .NET platform to the detriment of Java). The Court further reasoned that
while Java is the preferred platform for developers today, there is a risk that
the market might irreversibly tip; hence, the Court must require Microsoft to
carry Java in order to prevent the market from tipping, and irreparably injuring Sun.
Introduction. The present case is an antitrust action brought by Sun against
Microsoft. Sun wants
to compel Microsoft to carry its Java technology. However, this case builds upon
two earlier actions.
First, there was a lawsuit brought by Sun against Microsoft in
1997 to enjoin Microsoft from shipping software products with Java technologies
that did not pass Sun's Java compatibility test suite. Sun ultimately prevailed,
to an extent;
Microsoft was enjoined; but, Microsoft determined to drop Java, and
instead develop its own .NET technology.
Second, there is the government antitrust action against
Microsoft, originally assigned to Judge Thomas Jackson, and now assigned to
Judge Colleen Kotelly. In that action, Sun and others had urged the Court to
require Microsoft to carry Java. However, Judge Kotelly rejected that proposed
In the present action, Sun, relying on the antitrust conclusions
in the government case, seeks a court injunction compelling Microsoft to
carry Java. This District Court (Maryland) ruled that this relief is appropriate.
Java Licensing Case. Sun developed the Java technology, a standardized
application programming environment that is designed to allow software
developers to create programming code that can run across different platforms.
In March of 1996, Sun and Microsoft entered into a
Technology Licensing and Distribution Agreement (TLDA) which allowed
Microsoft to use, modify and adapt Java technology. Microsoft proceeded to use
Java technology in developing MS Internet Explorer 4.0, and other software
In October 1997, Sun filed a complaint against Microsoft. (See, Sun's first
Amended Complaint, filed October 14, 1997.) Sun alleged that
Microsoft refused to adhere to Sun's Java specifications and Java API, and that
this constituted an attempt to fragment the standardized application
environment, and break with cross platform compatibility. Sun sought sought
injunctive relief, and monetary damages. See also,
Summary of Sun Microsytems v. Microsoft, N.D.Cal. No. 97-CV-20884. See also,
Microsoft's web page
regarding the Java licensing suit.
Sun ultimately prevailed. In March 1998, the District Court issued a
Preliminary Injunction against Microsoft barring Microsoft from using the Java
Compatibility Logo. After protracted litigation, the District Court also enjoined Microsoft from
shipping software products with Java technologies that do not pass Sun's Java
compatibility test suite.
Rather than complying with Sun's requirements, Microsoft decided to drop
Java, and instead develop its own competing programming language, C#. It also
developed it own new .NET platform to enable developers to
build, deliver and aggregate web services, as an alternative to Java.
Sun and Microsoft entered into a
agreement that ended the Java licensing case in January 2001. They
terminated the TLDA.
Government Antitrust Case. The U.S. and many states filed two
antitrust lawsuits against Microsoft in 1998 (which were consolidated). Judge
Jackson entered findings of fact, conclusions of law, and a final judgment. He
was reversed in part, and affirmed in part, by the Court of Appeals. See,
253 F.3d 34 (D.C. Cir. 2001). In particular, the Appeals Court affirmed the finding that
Microsoft had monopoly power in the market for Intel compatible PC operating
systems. It also affirmed the holding that Microsoft violated § 2 of the Sherman
Act by illegally maintaining a monopoly in that market through a series of
anticompetitive acts. The Appeals Court reversed, among other things, the remedy
portion of Judge Jackson's final judgment. Upon remand, and reassignment to
Judge Kotelly, the District Court declined to require Microsoft to carry Java.
Present Action. Sun filed a complaint in the
U.S. District Court (NDCal)
against Microsoft alleging violations of antitrust law (and copyright
infringement). This is just one of several such antitrust actions filed in the
wake of the governments' success. The Judicial Panel on Multidistrict Litigation transferred the
action to the U.S. District Court (Maryland)
for resolution of pretrial issues. The case has been assigned to Judge Frederick
Basically, building upon the Court's conclusions regarding
monopoly behavior in the government antitrust case, Sun, in this private
antitrust action, asks the District Court (Maryland) to require Microsoft to carry
Java. The District Court opinion summarizes Sun's request. It seeks an
injunction requiring Microsoft "to set up Sun's most current Java runtime
environment to be installed by default on any product containing .NET, including
Windows XP (the most recent iteration of the Windows operating system) and
Internet Explorer. Under the proposed injunction, the Java runtime environment
is to be provided by Sun to Microsoft at no cost, and it must pass the relevant
Java compatibility tests available from the Java Community Process."
(Parentheses in original.)
The District Court (Maryland) continued that "The theory underlying
Sun’s requested injunction is that Microsoft, having unlawfully fragmented the
Java platform and having destroyed Sun’s channels of distribution for that
platform, is now taking advantage of its past antitrust violations to leverage
its monopoly in the Intel-compatible PC market into the market for general
purpose, Internet enabled distributed computing platforms."
The Court added that "The ``must-carry´´ remedy Sun proposes is
designed to prevent Microsoft from obtaining future advantage from its past
wrongs and to correct the distortion in the marketplace that its violations of
the antitrust laws have caused."
The Court concluded that Sun's theory is sound, and the proposed remedy
appropriate. The District Court (Maryland) also distinguished this case from the
case before the District Court (DC). It wrote that
wrote that "The record in this case is also different; additional witnesses and
exhibits have been presented. Most importantly, here the must-carry injunction
is a means to correct a private wrong done to Sun and the other members of the
Java community, rather than as an external governmental mandate."
Anti Tipping. In reaching this conclusion, the Court
conceded that Sun's Java, not Microsoft's .NET, is dominant today. But, the
Court reasoned, as part of the analysis of likelihood of irreparable harm, that
the market might reach an irreversible "tipping point".
The Court wrote that "there will be a substantial feedback
effect in the market for general purpose, Internet enabled distributed computing
platforms as the competition between .NET and Java unfolds. I also find that, in
accordance with the general economic principles cited by the D.C. Circuit in the
Department of Justice case, .NET and Java will compete for the field rather than
within the field. ... I do not suggest, however, it is inevitable that the
market will tip in favor of .NET. ... It is possible that .NET and Java will
both survive as competing platforms and that the new market will be a
The Court continued that "if one took a snapshot
picture of the existing market for general purpose, Internet enabled distributed
computing platforms, it is Java that would appear dominant. Having just been
commercially introduced, .NET has virtually no present share of the market. On
the other hand, Java, despite the absence of Sun’s most current platform on PCs
caused by the events I have previously described, is presently in a strong
position. For many years it has been the platform of choice for software on
large servers and handheld devices. Moreover, Sun’s own documents show there are
presently approximately 3 million developers who use Java today."
"But in that dynamic environment, it is
impossible to identify the moment when the competition has been won. Waiting for
the score to appear in market share data is too late because by that time the
critical events will have already occurred" wrote the Court. "Therefore, the genuine threat
that market tipping presents cannot be dismissed on the ground that at the
moment, before the competition has begun, a large number of software developers
are still Java-oriented. Microsoft, Sun, and the developer community are all
looking toward the future, and in order to determine whether a must-carry
injunction is necessary and appropriate, a court must do so as well."
|DC Circuit Rules in Pole Attachments Act
|12/20. The U.S.
Court of Appeals (DCCir) issued its
opinion in Southern
Company Services v. FCC, upholding the
Federal Communications Commission's (FCC) pole attachments
Southern Company Services and other companies that own utility poles and
conduits filed a petition for review of three FCC orders implementing amendments
to the Pole Attachments Act,
47 U.S.C. § 224. This
statute requires owners of poles and conduits to lease space to companies that
want to attach cables or wires, and gives the FCC authority to promulgate
The petitioners argued that the rules exceed the FCC's enforcement authority and
interfere with their rights to reasonably deny pole, duct, conduit, and
right-of-way space. They also argued that rules violate the Administrative
Procedure Act (APA). The Appeals Court denied the petition for review.
|BSA Recommends Funding Levels for
|12/23. The Business Software Alliance (BSA)
letter [3 pages in PDF] to President Bush with its recommendations for the
President's FY 2004 budget proposals.
The BSA recommends "At least $4.2 billion to strengthen the cyber security of
federal agencies in FY 2004, in keeping with the Administration’s intention to
utilize this level of resources in FY03". It also recommends "$900 million to
fund cyber security research and development efforts over the next five years."
The BSA also recommends "$13 million to fund vital law enforcement efforts to
combat Internet theft". It elaborated that "While BSA member companies expend
significant resources to fight piracy on the Internet and in traditional
settings, these actions are a minimal deterrent for large and organized pirate
groups. For this reason, criminal sanctions are a necessary and appropriate
|Administrative Law Judge
Concludes Mitnick Has Been Rehabilitated
|12/23. The Federal Communications Commission (FCC) released
decision [PDF] of an administrative law judge (ALJ) who concludes that
Kevin Mitnick, the
famous former computer hacker, has
rehabilitated himself. He now has enough character to hold an FCC license.
The FCC released a document titled "Initial Decision of Chief Administrative
Law Judge Richard L. Sippel" in the proceeding titled "In the Matter of Kevin
David Mitnick, Licensee of Station N6NHG in the
Amateur Radio Service for Renewal of Station License".
The decision notes that Mitnick is a "disgraced felon" who spent five
years in prison. But, the ALJ concludes,
he has "paid his debt to society", and now possesses a "positive
attitude towards society".
The ALJ "concluded that Kevin David Mitnick has been sufficiently
rehabilitated to show that he now possesses the requisite character for the
renewal of his licenses in the amateur radio service."
Mitnick's illegal activities included the
interception of electronic communications, computer fraud, wire fraud, and
damaging computers. The ALJ decision does not address the relationship between
accounting fraud, character, and FCC licenses.
|Frist Elected Senate Majority Leader
|12/23. Senate Republicans elected Sen.
Bill Frist (R-TN) Senate Majority Leader. He replaces
Sen. Trent Lott (R-MS). The other members
of the Senate Republican leadership are Ted
Stevens (R-AK), Mitch McConnell
(R-KY), Rick Santorum (R-PA),
Kay Hutchison (R-TX),
Jon Kyl (R-AZ), and
George Allen (R-VA). See also,
President Bush stated in a
release that "I congratulate Senator Bill Frist on his election to Majority
Leader of the U.S. Senate. Senator Frist has earned the trust and respect of his
colleagues on both sides of the aisle. I look forward to working with him and
all members of the Senate and House to advance our agenda for a safer, stronger,
and better America."
|Sendo Sues Microsoft
|12/20. Sendo filed a
complaint [27 pages
in PDF] in U.S.
District Court (EDTex)
against Microsoft alleging a shotgun list of state causes of actions, including
misappropriation of trade secrets. The suit arises out of Microsoft's and
Sendo's prior business dealings pertaining to mobile communications.
Sendo is a U.K. based mobile phone make. Its complaint offers a long introductory statement. It states that "This
lawsuit is the result of Microsoft's master plan
(``The Plan´´) to quickly obtain the technology necessary to enter and ultimately
dominate the next generation mobile phone market, also known as 2.5G, created by
the convergence of mobile phones and computers. ... The Plan came at a time when
Microsoft had little or no experience in the technology of mobile telephone
handsets or their operating systems; nor did it have relationships with the
primary customers for units, the carriers -- such as Orange, Cingular and AT&T
Wireless. Microsoft had made repeated unsuccessful attempts to work with the
major handset manufacturers and to attempt to license to them its planned
software for handsets. Finally, Microsoft had no experience with the technical
requirements that the carriers imposed upon manufacturers, some of which were the
results of unwritten custom."
The complaint states that Sendo is "made up of able and experienced former employees of
such established mobile phone manufacturers as Phillips, Motorola and Nokia" who
have substantial experience with 2.5G.
The complaint continues that "Microsoft recognized Sendo had the technology and
experience it lacked to quickly penetrate this new lucrative market. As such,
Microsoft set about through a secret plan (``The Secret Plan´´) to obtain that
technology and know-how from Sendo with the false promises that Microsoft would
co-develop, help finance, and be the ``go to market´´ partner for Sendo's 2.5G
Smartphone, the Z100."
"Microsoft's Secret Plan was to plunder the small company of
its propriety information, technical expertise, market knowledge, customers, and
prospective customers. Microsoft had been unable to successfully access the
wireless market because the major handset manufacturers would not use their
software. So instead, Microsoft gained Sendo's trust and confidence through
false promises that Sendo would be its ``go to market partner´´ with the Microsoft
Smartphone platform, originally code named ``Stinger.´´ As a result of those false
promises, Microsoft gained access to Sendo's hardware expertise and knowledge of
the mobile carrier business. Microsoft then provided Sendo's proprietary
hardware expertise and trade secrets to low cost original equipment
manufacturers (OEM) (who would not otherwise have had the expertise) to
manufacture handsets that would use Stinger and used Sendo's carrier-customer
relationships to establish it own contractual relationships. In short, Microsoft
used Sendo's knowledge and expertise to its benefit to gain direct entry into
the burgeoning next generation mobile phone market and then, after driving Sendo
to the brink of bankruptcy, cut it out of the picture", the complaint alleges.
The lawsuit was filed in federal court based upon diversity of
citizenship. There are no causes of action based upon federal law. The
complaint pleads a long list of Texas commercial tort and contract claims.
First, the complaint pleads misappropriation of trade secrets
"relating to its operation of a mobile telephone development and manufacturing
business". The complaint also pleads common law misappropriation
There is also a count for conversion. It alleges that Microsoft is "currently
in possession of Sendo's property, including but not limited to Sendo's company confidential
information including strategies and plans, source code, trade secrets embodied
in documents, Z100 mock-ups or demo units, pre-production testing units, and
source code for several key drivers."
The complaint also pleads unfair competition, based upon Microsoft's alleged
"unauthorized use of Sendo's trade secrets and confidential proprietary
Other causes of action plead in the complaint include fraud, breach of fiduciary duty,
negligent misrepresentation, civil conspiracy, breach of contract, tortious interference,
constructive fraud, and fraudulent inducement.
The plaintiffs request monetary damages, and "Defendants' profits arising
from their tortious acts".
Sendo's various corporate entities are incorporated and registered in the
United Kingdom, the Cayman Islands, and Hong Kong. Microsoft is incorporated in,
and based in, the state of Washington. The complaint was filed in Texarkana,
Texas, a town located on Interstate
30 at the Texas Arkansas border. Out of district plaintiffs
frequently file lawsuits against large technology companies in the U.S.
District Court for the Eastern District of Texas.
This case is Sendo Limited, Sendo International Limited, Sendo Holdings
PLC, and Sendo America, Inc., v. Microsoft Corporation, Microsoft Licensing,
Incorporated, and Microsoft Capital Corporation, D.C. No. 502CV282. Plaintiffs
are represented by the Texarkana, Texas, law firm of
Patton Haltom Roberts McWilliams & Greer,
and the law firm of Jackson Walker.
|FCC Approves Long Distance Application for
Nine Western States
|12/23. The Federal Communications Commission
(FCC) announced and released its
order [556 pages in PDF] approving Qwest's
application to provide in region interLATA service in the states of Colorado,
Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington, and Wyoming.
This is Docket No. WC 02-314. See also,
release [MS Word].
The FCC approved the application by a 4-0 vote on December 20. New
Commissioner Jonathan Adelstein did not participate. Commissioner
Michael Copps wrote in a
separate statement that "this is one of the most difficult applications we have
faced. There are a number of troubling allegations raised in this proceeding,
including among other things, the existence of confidential unfiled agreements,
accounting depredations, withholding of information, and provision of in-region
long-distance services without authority. Accordingly, we have subjected this
application to especially close scrutiny. Indeed, Qwest withdrew previous
versions of these applications in order to address these issues. The FCC has now
approved long distance applications for 35 states." Nevertheless, he voted for
approval of the application.
Qwest stated in a
release that it "will file an application to re-enter the long-distance
business in three additional states, Oregon, New Mexico and South Dakota, in
January. Qwest anticipates filing applications for its final two states, Arizona
and Minnesota, in early 2003."
|Holiday Reading List
|Got too much free time on your hands over the holidays? If so, TLJ recommends
the following online reading.
Sen. Bill Frist: The newly elected Senate Majority Leader
has given several speeches on technology
related issues. Here is a selection. First, there is a
speech in the Senate on local competition and the
1996 Telecom Act that may worry ILECs. He stated on June 20, 2001 that "We need to
ensure that the market opening requirements of the 1996 Act are vigorously
implemented". Second, there is a
speech on the
Next Generation Internet, on March 1, 2000. There is also his
opening statement [3 pages in PDF] titled "The Role of Standards in the Growth of
Global Electronic Commerce" at a October 28, 1999 hearing before the Senate
Commerce Committee's Subcommittee on Science Technology and Space. He also gave
statement [2 pages in PDF] on "Telemedicine Technologies", at a
Science Subcommittee hearing on September 15, 1999. Finally, see
story titled "Where Sen. Frist
Stands on Tech Issues", December 23, 2002.
Jurisdiction and the Internet: Two vastly different opinions were
handed down earlier this month by courts in the U.S. and Australia on
jurisdiction over defendants based upon their publication on the Internet. On December 10
the High Court of Australia
opinion in Dow Jones v. Gutnick holding that
because of publication on the Internet, the Australian
courts have jurisdiction over a U.S. based news publisher. The Court reasoned
that jurisdiction exists where the injury occurs, and in the case of Internet
defamation, it is where web pages are downloaded. This could be be anywhere in
the world. Then, on December 13, the U.S. Court of Appeals
(4thCir) issued its opinion
[12 pages in PDF] in Young
v. New Haven Advocate holding that a court in Virginia does not
have jurisdiction over two small newspapers, and their editors and reporters, located
in Connecticut, who wrote allegedly defamatory stories about a Virginia resident and
published them on the Internet. The Court held that the web
publication did not establish minimum contacts with Virginia because the newspapers are not
directed at a Virginia audience.
Spectrum Rights: Two recent items may be of interest. First, there is
a paper [36
pages in PDF] titled "Spectrum Management: Property Rights, Markets, and The
Commons", by Gerald Faulhaber and David Farber (AEI Brookings Joint Center for
Regulatory Studies, Working Paper No. 02-12, December 2002). Second, there is a
[73 pages in PDF] by the FCC's Spectrum Policy Task Force, released on
November 15. The report recommends that "spectrum policy must evolve towards
more flexible and market oriented regulatory models."
Broadband Deployment: A FCC
report [21 pages in PDF] titled "High Speed Services for Internet Access:
Status as of June 30, 2002", released on December 17,
measured growth in the uptake of broadband. While legislators, groups and
companies debate what the government should do to increase use of broadband, the
FCC's data shows that the number of
broadband lines grew from 12.8 to 16.2 Million in the first half of
2002, a 27% increase in just six months, without any help from the government. For an overview
of some of the broadband related issues at the FCC, read the
speech [13 pages in PDF] by FCC Commissioner Kevin
Martin on December 12. He offers his recommendations for how the FCC ought to
resolve the pending broadband related proceedings at the FCC.
Antitrust: FTC Chairman Timothy Muris gave a long and detailed
speech on December
10 titled "Looking Forward: The Federal Trade Commission and the Future
Development of U.S. Competition Policy". He discussed many tech related
cases and issues, including intellectual property. Also, the Department of Justice
filed an amicus
brief with the Supreme Court on December 13 in Verizon v. Trinko on the
interaction of antitrust and telecom law.
Miscellaneous Reading: Other recent items include:
"Whatever Happened to Leaving the Internet Unregulated?", by Clyde Crews and
Adam Thierer (Cato Institute, December 22);
study titled "Empirical
Analysis of Internet Filtering in China", by Jonathan Zittrain and Benjamin
Edelman (Berkman Center for Internet and Society, Harvard Law School, last
11); and book
[120 pages in PDF] titled "Government Policy toward Open Source Software", by
Robert Hahn, James Besson, Laurence Lessig, David Evans, and Bradford Smith (AEI
Brookings Joint Center for Regulatory Studies).
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