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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA



UNITED STATES OF AMERICA,   

                                   Petitioner,


                  v.

MICROSOFT CORPORATION,

                                Respondent.



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Supplemental to
Civil Action No. 94-1564

Hon. Thomas Penfield Jackson



 MOTION BY THE UNITED STATES FOR JUDGMENT OF CIVIL CONTEMPT
         AND TO ENFORCE PRELIMINARY INJUNCTION



   "If a party can make himself a judge of the validity of orders which have been
issued, and by his own act of disobedience set them aside, then are the courts impotent, and
what the Constitution now fittingly calls the `judicial power of the United States' would be
a mere mockery." Gompers v. Buck Stove & Range Co., 221 U.S. 418, 450 (1911). That is
precisely what Microsoft has sought to achieve in the wake of this Court's December 11,
1997, preliminary injunction. In that order, this Court required Microsoft to cease and
desist from forcing OEMs to license and preinstall Internet browser software in order to
obtain a license to Windows 95. But in its December 15, 1997, public response to the
injunction, Microsoft, without seeking further guidance from this Court or consulting the
United States, made clear that an OEM not wishing to license Internet Explorer in order to
obtain the latest version of Windows 95 has two, and only two, options: (1) the OEM may


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license a version of Windows 95 that Microsoft believes will not work; or (2) the OEM may
license a version of Windows 95 that is two-and-a-half years out of date and is not
commercially viable.
   As Microsoft well knows, these are options in name only. Far from treating the
Court's Order with "[]obedience" and "respect[]" until properly challenged, Walker v. City
of Birmingham
, 388 U.S. 307, 314 (1967) (internal quotations omitted), Microsoft has
cynically acted as if the preliminary injunction permits it to perpetuate the very conditioning
the Court enjoined. Microsoft's naked attempt to defeat the purpose of the Court's Order
and to further its litigation strategy is an affront to the Court's authority; the Court
accordingly should hold Microsoft in civil contempt and act swiftly to bring it into
compliance. 1

I.  This Court's Preliminary Injunction

   This Court enjoined Microsoft from conditioning a license for "Microsoft personal
computer operating system software," including "Windows 95," on an OEM agreeing to
"license and preinstall any Microsoft Internet browser software" "including Internet
Explorer 3.0[ &] 4.0" (Memorandum and Order 19 (Dec. 11, 1997) ("Mem.")). The
meaning of the Court's injunction is obvious: Microsoft must permit an OEM to license the
most up-to-date version of Windows 95 without also requiring an OEM to take the browser
functionality.


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   Indeed, in light of the concerns that drove the Court to issue the Order, the
proscription could have no other meaning. See United States v. Christie Indus., Inc., 465
F.2d 1002, 1007 (3d Cir. 1972) (explaining that "[t]he language of an injunction must be read
in light of the circumstances surrounding its entry" including "the mischief that the injunction
seeks to prevent"); United States v. Greyhound Corp., 508 F.2d 529, 532 (7th Cir. 1974)
(same). The injunction was intended to end, at least during the pendency of the case,
Microsoft's use of its monopoly power in the market for operating system software to force
OEMs to take what Microsoft promotes as a separate product, Microsoft's browser (Mem.
at 15, 16-17). A construction of the terms "operating system software" and "Microsoft
Internet browser software" that authorizes degrading the non-browser functionality of
Windows 95 would effectively require OEMs to take a license to both Windows 95 and
Internet Explorer and thereby thwart the Court's purpose and impermissibly render the
preliminary injunction's prohibition on conditioning a dead letter. See Greyhound, 508
F.2d at 533 (rejecting construction of decree that would "for all practical purposes" "render
th[e] provision a nullity"). The Court thus plainly required Microsoft to offer to OEMs the
option of obtaining Microsoft's most current version of Windows 95 less only the software
that enables web browsing functionality with no other function degraded.
   As the record before the Court amply reflects, Microsoft can provide this option with
ease. 2 Microsoft already enables PC users who obtain Internet Explorer through non-OEM
channels to "uninstall" (essentially deactivate) the Internet Explorer browser software using


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Windows 95's simple built-in "Add/Remove Programs" utility (Gaspar Decl. . 19, Exh. 9
("IE uninstalls easily if you want . . . simply [to] get rid of it . . . .")), and has even included
this uninstall ability (albeit concealed) in the OEM Service Release 2 ("OSR 2") version
(Declaration of Michael McCarthy . 4, App. 3 ("McCarthy Decl.)). Uninstalling Internet
Explorer in this way eliminates visible signs of, and user access to, browser functionality
without harming the underlying operating system. As the United States previously
explained (U.S. Reply Br. 16 n.16; U.S. Response to Microsoft Sur-Reply at 4 n.4) -- and
Microsoft did not contest -- Microsoft could readily implement a similar option for OEMs
by providing OEMs with the most current version of Windows 95 from which Microsoft has
removed the Internet icon and other aspects of the browser that are visible to users or allow
users access to it. That is, Microsoft could offer the most current version of Windows with
the same changes already made to it as would result when a user activates the uninstall
utility and removes browser functionality.

II.   Microsoft Has Flouted This Court's Order

   Although making available this simple and obvious version of Windows 95 would
have complied with both the letter and spirit of the Court's injunction, Microsoft chose a
different course. Specifically forbidding OEMs from removing the Internet icon from its
conditioned offering, 3 Microsoft on December 15 announced two alternatives to the current
conditioned license, neither of which is commercially feasible. Microsoft's "options" thus


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leave OEMs with no option at all and have the practical effect of perpetuating the very
conditioning the Court enjoined. Microsoft's transparent attempt to rewrite the injunction
to permit precisely what it precludes constitutes a flagrant disregard of this Court's lawful
authority and warrants holding Microsoft in civil contempt. See Greyhound, 508 F.2d at
532-33 (upholding criminal contempt conviction because the defendant's "strained and
twisted interpretation of the order" would "render the provision a nullity" and explaining
that such "`tortured constructions'" or "mere `paper compliance'" coupled with failure to
seek clarification from the court is "strong evidence of a willful violation of the decree").
   On December 15, 1997, three days after the Court issued its preliminary injunction,
Microsoft announced that it had "complied" with the Court's injunction by sending a letter
notifying PC manufacturers that, if they no longer wish to license Internet Explorer along
with Windows 95, they have two -- and only two -- "options" for licensing Windows 95.
First, an OEM may license the current OSR 2 version of Windows 95 with the option of
"removing . . . all the files that are included in the retail version of Internet Explorer 3.0"
(Microsoft Telephone Press Conference Tr. 3 (emphasis added)). However, according to
Microsoft, an OEM taking this option will confront a version of Windows 95 that will not
work
and that is different from what a user would have after "uninstalling" the very same
retail version of Internet Explorer 3. In its December 15 press conference, Microsoft flatly
said that this "alternative" will result in a version of Windows 95 that "doesn't boot" and
"isn't functional" (Id. at 6, 14; see also Microsoft Qs & As). As Microsoft itself has
conceded, no OEM would license such an operating system (Microsoft Telephone Press
Conference at 6, 13; Supplemental Declaration of David Cole at 2 . 6 ("[E]xcluding files
distributed `at retail' as `Internet Explorer 3.0' from OSR 2.0 would result in an operating
system that would be seriously deficient and undoubtedly would find no acceptance in the
marketplace.")).


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   The second "option" is that OEMs may license "the original OEM version of
Windows 95, but with all Internet Explorer 1.0 files removed," which is equivalent to the
August 1995 retail release of Windows 95 (Microsoft Telephone Press Conference at 3).
Although this version of Windows 95 would function, it is commercially worthless to
OEMs and no OEM would ever purchase it. Microsoft has produced two major upgrades to
Windows 95 since this original version was released in August 1995. The updated versions
(including OSR 2) provide numerous non-browser operating system "bug fixes" and
enhancements to Windows 95, such as support for larger hard drives and a new file system
(Declaration of Brad Chase, . 5; Cole Declaration . 42). Microsoft has made clear that
OEMs quite reasonably demand the current version of Windows 95 that includes these
operating system bug fixes and enhancements. Indeed, less than a week ago, Microsoft's
senior vice president in charge of licensing Windows 95 to OEMs stated in a declaration
Microsoft lodged with the Court:
   As demand-driven enterprises, OEMs are interested in installing the most up-
   to-date and popular version [sic] Microsoft's operating systems on their new
   machines. I am not aware of any interest among OEMs in installing outmoded
   versions of Windows 95.

Declaration of Joachim Kempin at 5 . 10. Like the first "option" proffered by Microsoft to
create the appearance of complying with the Court's Order, this purported "option" is no
option at all. Any OEM that does not want to license Internet Explorer is stuck with the
"option" of receiving what Microsoft itself recognizes as an outdated, commercially
worthless version of Windows 95.
   The only alternative Microsoft has left for OEMs, therefore, is to continue to take the
present conditioned license -- and Microsoft knows this. Microsoft cannot, through the
shell-game of defining "Windows 95" without "Internet browser software" as Microsoft
sees fit, render the injunction meaningless. Compliance, as explained above, requires


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Microsoft to make available the most up-to-date version of Windows 95 apart from what the
market regards as the browser. To be sure, the decree left to Microsoft to work out
precisely how to avoid the forbidden conditioning; but "[i]t does not lie in [Microsoft's]
mouth[] to say that [it] has an immunity from civil contempt because the plan or scheme
which [it] adopted was not specifically [forbidden]." McComb v. Jacksonville Paper Co.,
336 U.S. 187, 192 (1949). Microsoft is "not an unwitting victim[] of the law" but rather
"took a calculated risk when under the threat of contempt [it] adopted measures designed to
avoid the legal consequences" of this Court's injunction. Id. at 193.
   And the reasons why Microsoft attempted what is most charitably characterized as
impermissible "mere `paper compliance,'" Greyhound, 508 F.2d at 532, are plain. By
suggesting that only commercially worthless options comply with the injunction, Microsoft
seeks to make a mockery of the Court's Order in the hopes of bolstering its argument that
Section IV(E)(i) of the consent decree affords it "`unfettered liberty'" (Mem. at 15) to
decide what it can require OEMs to take in its Windows 95 license. At the same time as it
rewrites the preliminary injunction to fit its theory of the case, Microsoft continues to impair
consumer choice and cause the very marketplace harm that the Court by its injunction
intended to prevent. As this Court explained, the "probability" that Microsoft's conditioned
licenses "continue to reinforce its operating system monopoly" "is simply too great to
tolerate indefinitely" until the government's request for permanent relief is "finally
resolved." Mem. at 17.

III.  The Court Should Act Swiftly To Bring Microsoft Into Compliance With Its
   Order


   Accordingly, the United States requests that the Court judge Microsoft in civil
contempt. Because of the flagrant manner in which Microsoft violated the preliminary


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injunction, and to ensure compliance in the future, the United States believes an appropriate
remedial sanction is an order requiring Microsoft to give the United States and the Court at
least 30 days notice (1) of Microsoft's intent to release commercially any new PC operating
system or Internet browser product, including upgrades to existing products; (2) of the
nature of the release; and (3) of the steps Microsoft intends to take to ensure that the release
complies with the preliminary injunction. 4
   The United States further seeks an order from the Court requiring Microsoft to
comply with the outstanding preliminary injunction in the manner outlined above.
Specifically, the United States requests that Microsoft be required to offer OEMs the option
of licensing the most current OSR version of Windows 95 from which Microsoft has
removed the Internet icon and other aspects of the Internet Explorer browser that are visible
to the user or allow the user access to the browser, without impairing any operating system
functionality, as outlined in the attached proposed order.
   The United States believes that the Court can and should act swiftly in ruling on the
United States' Motion. There is particular urgency in this period, which Microsoft itself
described as critical for new computer sales (Tr. at 40 (Dec. 5, 1997)), that OEMs should
be given a commercially viable option to the present conditioned license. The United States
therefore requests that the Court require Microsoft to respond to this Motion by Friday,
December 19, 1993. The United States further requests that the Court grant the requested
relief as soon thereafter as possible. 5


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Dated: December 17, 1997              Respectfully submitted,



                            Joel I. Klein
                             Assistant Attorney General

                            A. Douglas Melamed
                             Principal Deputy Assistant Attorney
                             General

                             Rebecca P. Dick
                              Director of Civil Non-Merger
                              Enforcement




                            Christopher S Crook
                              Chief
                            Phillip R. Malone
                            Steven C. Holtzman
                            Pauline T. Wan
                            Karma M. Giulianelli
                            Michael C. Wilson
                            Sandy L. Roth
                            John F. Cove., Jr.
                            Mark S. Popofsky
                              Attorneys

                            Antitrust Division
                            U.S. Department of Justice
                            Room 10-0101
                            450 Golden Gate Avenue
                            San Francisco, CA 94102
                            415/436-6660
.


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                 CERTIFICATE OF SERVICE


   The undersigned certifies that on December 17, 1997, copies of the foregoing
Motion by the United States For judgment of Civil Contempt and to Enforce Preliminary
Injunction and supporting documents were served by facsimile transmission and Federal
Express overnight delivery upon:

                 Special Master
                 Professor Lawrence Lessig
                 1525 Massachusetts Avenue
                 G-502
                 Cambridge, MA 02138


                 Counsel for Microsoft Corporation

                 William H. Neukom, Esq.
                 Microsoft Corporation
                 One Microsoft Way
                 Redmond, Washington 98052


                 Richard J. Urowsky, Esq.
                 Sullivan & Cromwell
                 125 Broad Street
                 New York, New York 10004






                            __________________________
                            Mark S. Popofsky
                            Attorney
                            Antitrust Division



.

.


FOOTNOTES


1 This Court, of course, retains jurisdiction to enforce the unstayed preliminary injunction during the pendency of Microsoft's present appeal. See Deering Milliken, Inc. v. FTC., 647 F.2d 1124, 1128-29 (D.C. Cir. 1978). See generally 16 Charles A. Wright et al., Federal Practice and Procedure &167; 3921.2, at 56-58 (2d ed. 1996).

2 The United States has previously told the Court that it believes Microsoft's statements about Windows 95 "breaking" if one were to remove entirely all of the files that are installed when Internet Explorer is installed are greatly overblown, and that, at most, removal of only a handful of those files might under some circumstances create problems. The United States has also previously told the Court on several occasions that Microsoft's concerns can be avoided by a simpler yet fully-effective means of relief. It is that relief the United States urges the Court to order now in order to achieve an immediate resolution of this matter.

3 See Microsoft Telephone Press Conference Tr. 12 (Dec. 15, 1997), McCarthy Decl. . 3, App. 2; Microsoft Press "Questions & Answers," ("Microsoft Qs & As") (Dec. 15, 1997), McCarthy Decl. . 2, App. 1. Of course, removing the icon is the very alternative some OEMs have requested or actually performed (before being forced by Microsoft to stop) in the past. See U.S. Memo in Support of Contempt Petition at 16, 20.

4 Obviously, notwithstanding this obligation on a going forward basis, Microsoft should be required to come into compliance immediately.

5 If the Court determines that the United States' request for injunctive relief or judgment of contempt requires further proceedings, the United States requests that the Court grant preliminary relief requiring Microsoft to comply with the attached proposed order pending the outcome of such proceedings. Because, as explained above, implementing the proposed relief is trivial, Microsoft will suffer no injury, let alone irreparable injury, by complying with it. In contrast, the public interest plainly is served by securing consumer choice and preventing Microsoft, through its licensing practices, from seeking to reinforce its operating system monopoly. See also Memorandum of Amicus CCIA in Support of Petition 13 (Nov. 20, 1997) (explicating harm to the public interest from Microsoft's practices). Although Microsoft opposed CCIA's participation as amicus curiae, the United States believes such participation is appropriate in the circumstances presented by this case and therefore consents to the Court granting CCIA's motion.