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Tech Law Journal |
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| News, records, and analysis of legislation, litigation, and regulation affecting the computer, internet, communications and information technology sectors | |
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Part II. A. II. MICROSOFT IS NOT ENTITLED TO SUMMARY JUDGMENT In order to obtain summary judgment, the moving party must demonstrate "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Beatty v. WMATA, 860 F.2d 1117, 1120-21 (D.C. Cir. 1988). The party seeking summary judgment carries the initial burden of demonstrating the absence of any genuinely disputed issue of material fact. See Beatty, 860 F.2d at 1122. Only then must the nonmoving party, through "‘depositions, answers to interrogatories, . . . admissions on file’" and other appropriate evidence demonstrate that there is a genuine issue for trial. Celotex, 477 U.S. at 324. "The evidence must be viewed in a light most favorable to the nonmoving party, giving that party the [begin page 14] benefit of all reasonable inferences." Startmore v. Goodbody, 866 F.2d 189, 191 (6th Cir. 1989) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 487 (1986)).
"It is axiomatic that Rule 56 must be used carefully so as not improperly to foreclose trial." Thompson Everett, Inc. v. National Cable Advertising, L.P., 57 F.3d 1317, 1323 (4th Cir. 1995). Courts should be especially cautious before entering summary judgment where, as here, liability is likely to turn on factual questions about the purpose and effects of conduct whose existence is not disputed. See, e.g., Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 482-86 (1992).2 Microsoft’s motion for summary judgment falls far short of meeting these standards. With respect to plaintiffs’ Section 2 claims, Microsoft limits its discussion to its bundling of Internet Explorer with Windows and certain restrictive agreements with OEMs, ISPs, and ICPs. Microsoft’s motion (which seeks dismissal of plaintiffs’ claims in their entirety) is insufficient on its face because it does not even address either Microsoft’s attempt to induce Netscape not to compete, which in itself constitutes an unlawful attempt to monopolize, see United States v. American Airlines, Inc., 743 F.2d 1114,1120-21 (5th Cir. 1984), or the other elements of Microsoft’s predatory maintenance of its monopoly and attempted monopolization (see infra, Section II.A). Moreover, even with respect to the aspects of its conduct that it does address, Microsoft fails to remotely satisfy the summary judgment standard. Microsoft mounts essentially three [begin page 15] attacks on the factual basis for plaintiffs’ claims, asserting that: (1) there is no genuine issue that its agreements with OEMs, ISPs, and ICPs have not had sufficient anticompetitive effects to unreasonably restrain trade; (2) its bundling of Internet Explorer with Windows is not an unlawful tying arrangement because the two are not separate products; and (3) its restrictive agreements with OEMs are immunized from antitrust scrutiny by the copyright laws (and subsidiary justifications). These arguments are neither supported by substantial evidence, let alone the uncontested evidence that would be required to justify summary judgment, nor are they correct as a matter of law. Microsoft’s motion for summary judgment on the Section 1 tying claim fails both as a matter of law (because it rests on an erroneous intepretation of tying law standards set forth by the Supreme Court and the lower courts) and as a matter of fact (because it is plainly disputed whether Microsoft’s conduct amounts to "conditioning" of Windows licenses on OEMs’ acceptance of Internet Explorer, whether Windows and Internet Explorer are a single product or two separate products, and whether Microsoft’s conduct has a "not insignificant" effect on interstate commerce). We discuss below the types of anticompetitive conduct in which Microsoft has engaged. Much of Microsoft’s conduct constitutes an independent violation of Section 1 of the Sherman Act; such conduct also necessarily violates Section 2 of the Sherman Act if Microsoft is found to possess monopoly power. United States v. Griffith, 334 U.S. 100, 106 (1948); Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d. 227, 239 (1st Cir. 1983). In addition, conduct that does not violate Section 1 violates Section 2 if Microsoft is demonstrated to possess monopoly power and if the conduct has a significant exclusionary effect and was not reasonably necessary to [begin page 16] achieve a legitmate business objective or "impaired competition in an unnecessarily restrictive way." Aspen Sking Co. v. Aspen Highlands Sking Corp., 472 U.S. 585, 605 (1985); Lorain Journal v. United States, 342 U.S. 143, 149 (1951). As Justice Scalia has observed: "Where a defendant maintains substantial market power, his activities are examined through a special lens: Behavior that might otherwise not be of concern to the antitrust laws -- or that might even be viewed as procompetitive -- can take on exclusionary connotations when practiced by a monopolist." Eastman Kodak, 504 U.S. at 488 (Scalia, J., dissenting). Microsoft’s motion virtually ignores the pattern of predatory conduct directed at raising the costs of Netscape and other Microsoft rivals, raising barriers to entry, depriving Netscape and other competitors of revenue and resources (even at the cost of Microsoft itself foregoing revenue), below-cost pricing, and intimidating and inducing both customers and distributors of Netscape’s browser not to consider that browser on the merits. First, Microsoft decided it would give its Internet browser away for free even though it was costing Microsoft hundreds of millions of dollars to develop, test, promote, and distribute Internet Explorer; even though Microsoft would not recoup except through the maintenance and expansion of monopoly power; and even though Netscape was charging OEMs, ISPs, and others for its Navigator browser. [redacted material] as a browser supplier: "We are going to cut off their air supply. Everything they’re selling, we’re going to give away for free," [redacted material] PI Ex. 4. [begin page 17] [redacted material] Moreover, Microsoft set out to undercut Netscape’s perceived viability -- and thereby discourage customers, suppliers, distributors, and others from dealing with Netscape -- by publicly warning Netscape (and those considering dealing with Netscape) in June and July 1996 that: "Our business model works even if all Internet software is free . . . . We are still selling operating systems. What does Netscape’s business model look like? Not very good." SJ Ex. 69, p.4; see also SJ Ex. 67, pp.3-4 and Ex. 68, p.2. Microsoft went on to announce that its browser would be distributed free not only for an introductory period but would be "forever free."3 [redacted material]
Second, Microsoft did not stop at giving its browser away for free. Instead, Microsoft set out to do whatever it took to induce significant market participants to distribute and use its Internet Explorer browser instead of Netscape’s browser -- including paying some customers to take the already free Internet Explorer and providing others with valuable concessions if they did so. [redacted material] [begin page 18] Ultimately, Microsoft succeeded in getting Intuit to agree not to support Netscape, but only after tying Intuit’s access to valuable placement on the Windows desktop to Intuit’s agreement to abandon Netscape. In Microsoft’s April 1997 agreement with Intuit, Microsoft required Intuit to agree that it would, among other things:
SJ Ex. 72. Third, Microsoft set out to further deprive Netscape of revenues by securing agreements from Internet Content Providers not to pay Netscape for participation in any competing Netscape "channel" or other browser service. PI Ex. 36-40. Fourth, Microsoft undertook to raise Netscape’s costs by closing off the most effective and profitable (and least costly) distribution channels for its browsers and thereby forcing Netscape to resort to less effective and more expensive distribution methods. See infra, Section II.B.1. Fifth, Microsoft used its power to intimidate both customers and distributors not to adopt or support Netscape’s browser (as well as non-Microsoft Java technology). Microsoft’s dealings [begin page 19] with Apple are illustrative of how far Microsoft was willing to go to limit Netscape’s opportunities and to stifle Java.
[begin page 20]
Microsoft’s determination to restrict the support and distribution of
Netscape’s browser by Apple is particularly telling since Apple represents the main
alternative to desktop PCs running Microsoft’s Windows. Whatever the relevance of
Microsoft’s arguments about why it wanted Windows users also to use Internet
Explorer, those arguments cannot apply to Internet Explorer use by Apple users. [redacted material] [begin page 21] In addition, there is no
legitimate justification for Microsoft and Apple [redacted material]
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