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Slide 1

Remedies in High-Tech Industries

David A.Heiner
Vice President, Deputy General Counsel (Antitrust)
Microsoft Corporation

March 28, 2007

Presented at DOJ/FTC Hearings on Single Firm Conduct


Slide 2

Microsoft Remedies

1994 CD and EU
Undertaking
• Licensing to computer manufacturers
2001 Consent Decree and
Litigated Final Judgment
• Software integration, interoperability
Competitor Lawsuits• Damages, some conduct relief
Consumer Class Actions• Damages
European Union Decision
March 2004
• Software integration, interoperability
Korean FTC Decision
February 2006
• Software integration

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Slide 3

Overall Approach

Focus on creating or preserving competitive opportunities, rather than limiting defendantís efforts to deliver consumer value

U.S. Consent Decree

  • Focused on creating competitive opportunities

  • No ban on including new functionality (but governed by Rule of Reason)

  • Consumers benefit from ability to choose integrated approach or separate programs—or both

  • Today: Broad distribution of competing software on new Windows PC

EU Decision

  • Focused on removing useful functionality from Windows (Windows XP N)

  • No uptake by any computer manufacturer

  • Costs imposed, but little apparent benefit to anyone

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Slide 4

Objective

Aim to create competitive opportunities, rather than engineer particular market outcomes

Quadrant displaying market outcome

[D]

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Slide 5

Assess Remedy and Liability Together

Careful consideration of remedy at outset may inform liability analysis, speed resolution

Windows Inegration Legal Analysis

  • May create challenges for competitors, yet...

  • Benefits for software developers, consumers; and

  • Long history of product improvement through integration across many product categories

Settlement

  • Seemingly impossible to fashion appropriate remedy to limit integration over time

  • Renders cases difficult of impossible to settle

Liability

  • Unlawful in Europe & Korea to fail to offer product (Windows XP N) for which there is no appreciable consumer demand?

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Slide 6

Type of Remedy

Legal process generally best suited to contractual relief

Contracts

  • Purview of lawyers

  • Relatively easy to monitor (for defendants and enforcers)

Product Design

  • May require considerable technical expertise to device & monitor remedy

  • Difficult for lawyers to assess issues that may arise, even with expert help

  • Agency lawyers likely to get drawn into detailed design decisions

Technology Sharing

  • Technological complexity may lead to enforcement complexity

  • Pricing may be particulary challenging for information goods

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Slide 7

Cross-Border Considerations

High-tech markets often global in nature

Agency Cooperation

  • Greater coordination on remedies with global reach

  • Due respect for comity principles

Windows

  • Central value proposition: enabling compatibility through uniformity

  • Value threatened by varying approaches to integration issue

Compulsory Licensing

  • Most onerous legal regime becomes de facto legal rule worldwide

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Slide 8

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