BUSINESS WEEK ONLINE / COURTTV ONLINE:  MICROSOFT ON TRIAL
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Decoding the Trial
 
 
JAN. 29, 1998
 
By Mike France

Microsoft Misses Its First Shot
If it's going to prove that Justice used company E-mail out of context, it'll have to do a lot better

When the U.S. Justice Dept. filed its antitrust suit against Microsoft back in May last year, it embellished its charges with seemingly incriminating quotes from dozens of internal Microsoft E-mails. It was an aggressive tactic, because plaintiffs aren't required to put so much detail in their initial court filing. But it worked and helped win over many people who had been skeptical of the government's case to begin with. Stung by the public spotlight on its internal correspondence, Microsoft responded that Justice had merely released "out-of-context snippets" and promised that the damage would be undone as soon as the company got a chance to put the E-mails in context.

Now the software giant is getting that chance. But will it make a difference? Over the next several weeks, top Microsoft employees will try to convince Judge Thomas Penfield Jackson that their words weren't as awful as they may have initially sounded. The first company witness to speak was Paul Maritz, platforms and applications group vice-president and author of the now-famous quote about how Microsoft planned on "cutting off Netscape's air supply." The highest-ranking company executive scheduled to speak at the trial, Maritz tried to explain away threats that Microsoft allegedly made to Netscape, Intel, and Apple.

But while the soft-spoken Maritz avoided losing his temper -- something that many people didn't think chairman William H. Gates III would be able to do -- he was not entirely effective. Microsoft "has been talking a lot about how they were quoted out of context, but I didn't see [Maritz] put anything in a context that made a difference," says New York City antitrust attorney Stephen M. Axinn.

"YES," HE SAID. One of Maritz' top priorities was proving that his company didn't propose dividing the browser market with Netscape at a key June, 1995, meeting. In his written testimony, Maritz said that while he wasn't at the meeting, he was "the most senior Microsoft representative to meet with" Netscape's management team during that period and that he "never instructed any Microsoft personnel to seek 'a division of the market.'"

But on cross-examination, lead Justice litigator David Boies managed to get Maritz to concede that Netscape's browser could become a competing platform for software developers -- and one day even threaten Microsoft's operating systems monopoly. Asked if Microsoft was "offering to do stuff for Netscape to make them less of a platform" threat, Maritz answered, "Yes." Not much of an admission, perhaps, but one that could give Judge Jackson ammunition for a finding against the company.

Another key charge against Microsoft is that the company once asked Intel not to market multimedia software that could have potentially been a threat to Windows. In his testimony, Maritz parroted the company line about this charge: that Microsoft fought Intel's so-called native signal processing software because it was an inferior product, not because it was a threat to the Windows monopoly.

But once again, on cross-examination Maritz gave up some ground. "Intel cound have, if they had chosen to do it, grown that piece of software into a software platform," Maritz said.

Do these admissions kill Microsoft's case? No. But they are undercutting the company's attempts to discredit the government's case and Justice's use of E-mail as important evidence. And, for a company that had high hopes for its turn at the witness stand, that's not a good sign.

The next witness is James Allchin, Microsoft senior vice-president, personal and business systems group, who will describe why Microsoft decided to incorporate Internet functions in Windows. He'll take the stand on Monday, Feb. 1.

France is Business Week's Legal Affairs editor

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