UPDATE: Judge denies MS bid to dismiss lawsuits

A U.S. federal court judge Friday denied Microsoft Corp.’s motions to dismiss the private antitrust lawsuits brought by Be Inc. and Burst.com Inc., while delaying action on motions to dismiss seven Sun Microsystems Inc. antitrust claims.

U.S. District Judge Frederick Motz did grant Microsoft’s motion to dismiss two Sun antitrust claims, on maintaining monopolies on the Intel Corp.-compatible PC operating system market and on the browser market, telling Sun to refile those claims with more explanation of how Microsoft’s actions affected Sun’s products. Motz also told Sun to refile a third claim dealing with alleged copyright violations by Microsoft.

Motz turned down Microsoft’s motions to dismiss three other claims. Sun has 16 antitrust claims against Microsoft, but Microsoft asked the judge to dismiss only 13.

The result of Motz’s decisions Friday is that the Be and Burst.com lawsuits will move forward, and at least part, and maybe all, of Sun’s lawsuit will move forward, pending the judge’s decision on the seven remaining claims. But Motz did indicate that Microsoft lawyer Matthew Larrabee made some strong points against those seven claims.

The seven Sun claims on which Motz reserved judgment all focus on products bundled with Microsoft’s Windows operating system, such as the Internet Explorer browser, or products Sun claims are tied to Windows, such as Microsoft’s server operating systems. Sun lawyer Rusty Day argued that customers have a strong incentive to use Microsoft’s server operating systems with Windows because Windows loses some functionality when used with competing servers.

But that strong incentive isn’t enough of a legal standard for an antitrust claim, Larrabee argued. The law’s definition of a “tied” product requires that customers be forced to buy a product, he said. And in the case of bundled products such as Internet Explorer, customers could install and use competing products.

“If Microsoft’s products have better functionality, you should be induced to create better products, not sue Microsoft,” Larrabee said. “Sun’s products don’t give consumers as much functionality as Microsoft’s products, and therefore, they want to allege an antitrust violation. It’s perverse to the extreme.”

Day disagreed that Larrabee’s definition of tying was the correct one. The standard for unfair bundling or tying, he said, was if there was some coercion, not force, for customers to use Microsoft products such as Internet Explorer or Exchange Server with Windows.

Day also argued that Microsoft’s desktop OS and browser monopolies held back both Sun’s Solaris OS and its Java platform. “A competitive browser would enhance the value of its (Solaris) operating system,” he said.

The Microsoft legal team also argued that Be, like Sun, had other ways to distribute its product. Be wanted its OS installed beside Windows through OEMs (original equipment manufacturers). Be is alleging that Microsoft harmed it through illegal acts designed to maintain its monopoly in the PC operating system market, and that Microsoft made deals with PC manufacturers that prohibited them from selling PCs with multiple preinstalled operating systems.

Be lawyer Stephen Susman argued that having the Be OS distributed as a dual-boot system with a boot loader and an icon was the only way the company could compete with Windows, but Microsoft disagreed.

“This claim is kind of like the Frank Sinatra claim,” said Microsoft counsel Michael Shepard, referring to the singer’s signature tune “My Way.” He added, “They said they didn’t get to do it exactly like they wanted to do it, and they don’t have any other meat to the claim.”

Microsoft also argued before Motz that neither Be nor Burst.com were as directly affected by Microsoft antitrust violations as other companies had been. “What they are is several steps removed from the operating system market, where all these complaints stem from,” Microsoft lawyer Charles Douglas said of Burst.com.

Burst.com lawyer Spencer Hosie said the streaming media company was directly affected by Microsoft’s actions when the software giant pressured Intel to drop support in 1998 for a video player Burst.com and Intel had developed. When Burst.com released a plug-in for Windows Media Player, Microsoft deliberately changed the application program interface, making the Burst.com plug-in incompatible with a version of Windows Media Player released in 2000, Hosie said.

Douglas said Microsoft shouldn’t have to stand still for Burst.com. “The law is clear,” he added. “Even a monopolist can innovate and improve its products.”

Motz is presiding over a number of private antitrust cases as well as several class-action lawsuits that have been filed against Microsoft. In December, he approved a preliminary injunction forcing Microsoft to distribute Sun-compatible Java technology in every copy of Windows and Internet Explorer it ships. Microsoft has said it intends to appeal that decision.

Sun’s antitrust suit, filed in March, charges that Microsoft used its monopoly in the PC operating system market to thwart the adoption of Sun’s version of Java.

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