The District Court Properly Declined To Hold An Evidentiary Hearing A preliminary injunction's resolution of issues "is designed to be tentative." Aoude v. Mobile Oil Corp., 862 F.2d 890, 894 (1st Cir. 1988). For this reason "an evidentiary hearing is not an indispensable requirement when a court allows . . . a preliminary injunction." Id. at 893. Rather, "in certain settings a matter can adequately be 'heard' on the papers." Id. at 894; see also Ross-Whitney Corp. v. Smith-Kline & French Labs., 207 F.2d 190, 198 (9th Cir. 1953).
Contrary to what Microsoft contends (Br. at 18-19), this is true even when "the written evidence reveals a dispute as to material facts." When disputed issues do not turn on the credibility of affiants or declarants, such as when knowledge and intent are at issue, see, e.g., SEC v. Frank, 388 F.2d 486, 491 (2d Cir. 1968); Sims v. Greene, 161 F.2d 87, 88 (3d Cir. 1947), "the documentary evidence [before the court may be] sufficient to permit an informed, albeit preliminary, conclusion that injunctive relief [is] warranted." Campbell Soup Co. v. Giles, 47 F.3d 467, 472 (1st Cir. 1995); see also e.g., Schultz v. Williams, 38 F.3d 657, 658 (2d Cir.1994) (per curiam); Herbert Rosenthal Jewelry Corp. v. Grossbardt, 428 F.2d 551, 554 (2d Cir. 1970). In light of these principles, the district court did not abuse its discretion in declining to hold an evidentiary hearing here.
- As to the merits, the district court faced no disputed issues of material fact and, therefore, was entitled to resolve the matter without an evidentiary hearing. See, e.g., Aoude, 682 F.2d at 893. The United States argued that Microsoft's forced licensing of Internet Explorer with Windows 95 violated Section IV(E)(i) because (1) that provision prohibits Microsoft from conditioning an OEM license to Windows 95 on OEMs' licensing what Microsoft and antitrust tying law treat as a separate product, and (2) under this test, Internet Explorer and Windows are separate products.
The proper construction of Section IV(E)(i) presented a question of law that was fully addressed in the parties' submissions and at the December 5 hearing. While Microsoft contested the United States' reading of Section IV(E)(i), arguing that Internet Explorer and Windows 95 are part of a single "integrated" product and, therefore, that Section IV(E)(i) did not prohibit Microsoft's conduct (JA 459-60, 460-67), that argument raised no disputed issue of material fact. The only potentially disputed relevant facts involved Microsoft's account of the decree's negotiating history; and United States agreed for the purpose of the district court's ruling not to contest Microsoft's description of the "the written communications and exchanges between the parties" (JA 983). Although arguing that "the court ought to proceed on the basis of a full record that will explore what was intended by th[e] provision" (JA 1257), Microsoft expressly recognized that the United States did "not contest" the facts contained in Microsoft's submissions (JA 1241). The United States' concession thus eliminated any issue of material fact and permitted the court to construe Section IV(E)(i) without holding an evidentiary hearing.(8)
The district court similarly faced no issue of material fact in determining that Internet Explorer and Windows 95 are separate products. The United States introduced ample evidence demonstrating that Microsoft markets Internet Explorer apart from Windows 95 and that consumers separately demand browsers and OSs. Although Microsoft contested other issues and introduced significant evidence in support of its arguments, it did not contest these issues. Instead, Microsoft argued only that this evidence was irrelevant.(9)
Having elected to contest neither the existence of separate consumer demand nor that it markets Internet Explorer and Windows 95 separately, Microsoft can hardly complain that it was improperly denied an evidentiary hearing. In any event, Microsoft has failed to demonstrate, as it must, that an evidentiary hearing "would [have been] productive." Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1171 (7th Cir. 1997). Microsoft now asserts (Br. at 19) that it would have sought to introduce further evidence demonstrating "there is no interest on the part of OEMs in licensing a version of Windows 95 with its Internet Explorer technologies removed." But additional evidence on this question would have served no purpose. The United States did not contend that demand exists for Windows 95 without that which Microsoft labels "Internet Explorer technologies," which include the shared program libraries that Microsoft makes available for distribution with both Internet Explorer and numerous other Microsoft and non-Microsoft applications (JA 1700-10). Rather, the United States demonstrated that there is demand for Windows 95 without the web browsing functionality that Internet Explorer provides (JA 92), and the district court was entitled to find separate consumer demand on the basis of this uncontested evidence. See infra pp.39-40.(10)
Microsoft complains on appeal that it was denied the opportunity to "cross-examine any oral testimony offered by the DOJ" (Br. at 19). But the United States had no duty to offer oral testimony for Microsoft's convenience.(11) In any event, even if the court erred in failing to hold an evidentiary hearing, that error was harmless. Microsoft's own evidence at the subsequent hearing on the United States' motion for contempt confirmed the requisite separate demand (JA 1641, 1685-87).
Finally, Microsoft asserts that, if granted an evidentiary hearing, it would have introduced additional evidence that forcing OEMs to license Internet Explorer with Windows 95 "does nothing to prevent OEMs from preinstalling Netscape Navigator on their computers" (Br. at 19). But such evidence would have been irrelevant. Tying arrangements harm competition merely by satisfying a demand rivals otherwise might meet. See generally Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 12-15 (1984). Section IV(E)(i) thus says nothing about --------------- and plainly does not contemplate a defense based on --------------- an OEMs' contractual freedom to license competing products. Such "negative" tying is proscribed by a separate provision of the decree, Section IV(E)(ii).
- The district court did not err in imposing relief relating to Internet Explorer 4 without an evidentiary hearing. When the United States brought its Petition, Microsoft distributed Internet Explorer 4 to OEMs only on a separate disk, and it planned to require OEMs to distribute that separate disk in the box with new PCs early in 1998 (and, perhaps, subsequently to require OEMs to preinstall that disk). The United States demonstrated that enjoining this impending requirement would impose no burden on Microsoft (JA 995-96, 1220-21, 1224, 1236-37, 1259-60) and that preservation of OEMs' freedom to select among competing web browsers required immediate relief (JA 996, 1236-37). At the December 5 hearing, Microsoft offered no facts to contest these assertions. Indeed, it confirmed that a substantial percentage of OEMs would soon lose their freedom to choose whether to license Internet Explorer 4 (JA 1250-51). The record thus presented "no genuine issue of material fact" (JA 1224).(12)
- The record before the district court also supported its conclusion that Microsoft could offer OEMs the option of a version of Windows 95 without Internet Explorer 3 browser functionality. Despite its detailed submissions, Microsoft had failed to explain why it could not offer a version of OSR 2 that included all shared program libraries yet otherwise omitted Internet Explorer 3 as separately distributed by Microsoft (JA 997). And, as the United States pointed out, Microsoft had also failed to explain why it could not offer OEMs the option of "uninstalling" Internet Explorer 3 from OSR 2 (JA 1210).
Moreover, even if the district court should have held a further evidentiary hearing on the relief with respect to Internet Explorer 3, its failure to do so caused Microsoft no prejudice. As explained above, Microsoft could have complied with the Order simply by permitting OEMs to "uninstall" Internet Explorer 3 from OSR 2. Despite Microsoft's prior representations to the contrary (JA 1198), the evidence showed this can be easily accomplished through procedures Microsoft explains to end users, thus confirming that, as Microsoft advertises, "Internet Explorer uninstalls easily" (JA 1088, 1365, 1553-58, 1610-11, 1694-97). Microsoft offered no evidence suggesting that OEMs could not implement these procedures or that Microsoft could not easily provide OEMs with a version of OSR 2 from which Internet Explorer 3 had been "uninstalled." Indeed, Microsoft's subsequent agreement to permit OEMs to exercise that option (JA 1780) demonstrates that compliance with the injunction imposes no hardship. See Socialist Workers Party v. Illinois State Bd. of Elections, 566 F.2d 586, 587 (7th Cir. 1977) (upholding entry of permanent injunction without an evidentiary hearing because facts defendant claimed it was improperly denied the opportunity to present, "if proved, would [not] have altered the result"), aff'd, 441 U.S. 173 (1979).
There is also no merit to Microsoft's assertion that it had "no opportunity" to introduce evidence that "the fragmentation that would result from allowing OEMs to decide what portions of the operating system to install on their computers would undermine the utility of Windows 95 as a stable and consistent development platform" (Br. at 19). To the contrary, Microsoft introduced several declarations in support of that argument. And these declarations, which the court was entitled to assume further "testimony would . . . have duplicated," Ty, 132 F.3d at 1171, actually demonstrated that, because tens of millions of PC users operate prior versions of Windows and lack the latest versions of Internet Explorer, significant "fragmentation" would exist whether or not Microsoft forced OEMs to license Internet Explorer (JA 611, 616, 966; see also JA 1166). Thus, the United States explained, "all the declarations Microsoft has submitted from application developers state that their products include the necessary services provided by Internet Explorer 3.0 or 4.0 to ensure that the products will run whether or not Internet Explorer is pre-installed on any particular user's computer" (JA 997-98; see also JA 944, 949, 953, 965-66, 1168-69).
Because Microsoft's own evidence demonstrated that the preliminary injunction did not "undermine the utility of Windows 95 as a stable and consistent development platform" (Br. at 19), the court was entitled without further proceedings to conclude that Microsoft's argument did not preclude a preliminary injunction. See Campbell Soup, 47 F.3d at 471-72; Herbert Rosenthal, 428 F.2d at 554. Indeed, Microsoft had long permitted end users to "uninstall" Internet Explorer 3, even if OEMs provide it (JA 1696), so the preliminary injunction, which Microsoft complied with by permitting OEMs also to uninstall Internet Explorer 3, did not increase the uncertainty application developers confront.
- Finally, Microsoft's reliance on the district court's statement that "disputed issues of technological fact, as well as contract interpretation, abound as the record presently stands" (JA 1294) is misplaced. The court did not mean that the parties's arguments on the merits presented genuine issues of material fact. Rather, as the next paragraph made clear, the court determined that exploration of other avenues might be appropriate before issuing a definitive ruling on the merits. The court also recognized that the government's request for more extensive permanent relief raised factual issues (JA 1294-95). Neither of these matters, however, precluded a preliminary injunction, and the court committed no reversible error in entering such relief on the record before it.
Microsoft Received Adequate Notice Microsoft's argument (Br. at 17-18) based on the district court's failure to notify the parties that it intended to issue a preliminary injunction is without merit. Microsoft relies on Rule 65(a). The Rule's purpose, however, is to permit a party "to marshall the evidence and present arguments against the issuance of the injunction." 11A Charles A. Wright, et al., Federal Practice and Procedure § 2949, at 213 (2d ed. 1995). Microsoft did just that.
Although Microsoft now argues that only a request for an Order to Show Cause was before the district court (Br. at 17), Microsoft did not treat the proceeding as so limited. Instead, it filed a voluminous response replete with assertedly relevant evidence, and joined issue on both the merits of the United States' Petition and the request for permanent injunctive relief. Because the "standard for a preliminary injunction is essentially the same as for a permanent injunction with the exception that the plaintiff must show a likelihood of success on the merits rather than actual success," Amoco Prod. Co. v. Gambell, 480 U.S. 531, 546 n.12 (1987), Microsoft's response to the United States' request for permanent relief effectively addressed the factors that govern the issuance of a preliminary injunction. The request for injunctive relief gave Microsoft notice, and the scope of its response demonstrated that such notice was adequate.
Microsoft argues that it had "no reason to anticipate" that the court might issue a preliminary injunction because "a final judgment ha[d] already been entered in this action" (Br. at 17). It is not "unorthodox" (id.), however, for a court to enter a preliminary injunction to enforce a consent judgment. See, e.g., International Brotherhood of Teamsters v. Teamsters Local Union 714, 109 F.3d 846 (2d Cir. 1997) (per curiam); Xerox Fin. Servs. Life Ins. Co. v. High Plains Ltd. Partnership, 44 F.3d 1033 (1st Cir. 1995); cf. Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 587 (1984) (O'Connor, J., concurring). Nor is it "inappropriate" (Br. at 17) for a court to enforce an outstanding court order, including a consent judgment, on its own motion when the circumstances so warrant. See, e.g., Alberti v. Klevenhagen, 46 F.3d 1347, 1365-66 (5th Cir. 1995) (holding that a court has the discretion "regardless of the parties' silence or inertia, to modify a decree," that is, to act "sua sponte," "when the court sees that the factual circumstances or the law underlying that decree has changed").
In any event, "surprise alone is not a sufficient basis for appellate reversal; appellant must also show that the procedures followed resulted in prejudice." Socialist Workers, 566 F.2d at 587; see also D. Patrick Inc. v. Ford Motor Co., 8 F.3d 455, 459-60 (7th Cir. 1993) (same); cf. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 28 F.3d 1388, 1398 (5th Cir. 1994) (finding failure to provide notice prior to granting summary judgment sua sponte harmless error). Here, the court's failure to inform Microsoft that it intended to issue a preliminary injunction was, if error, harmless. Microsoft has pointed to no new significant, relevant evidence or argument that it would have brought to the court's attention; and subsequent events confirm that the preliminary injunction imposes no burden on Microsoft and, therefore, that the court's balancing of the equities was correct. See supra pp.23-25. "A more formal notice," in short, "would not have provided [Microsoft] with a greater opportunity to alter th[e] result." Socialist Workers, 566 F.2d at 587.
The District Court Fully Complied With Rule 52(a) Microsoft is also wrong that the "District Court entered [the] preliminary injunction without making any findings of fact" (Br. at 22). "The purpose of Rule 52(a), pertinent to injunctions, is to provide the appellate court with a clear understanding of the decision." Wynn Oil Co. v. Purolator Chem. Corp., 536 F.2d 84, 85 (5th Cir. 1976). Accordingly, contrary to what Microsoft implies (Br. at 22), there is "fair compliance with Rule 52(a)," Mayo v. Lakeland Highlands Canning Co., 309 U.S. 310, 316 (1940), when a "court's opinion, read in conjunction with the record of the proceedings below" provides a "sufficient basis for the court to consider the merits." McCawley v. Ozeanosun Compania Maritime, S.A., 505 F.2d 26, 30 n.4 (5th Cir. 1974); see also Wynn Oil, 566 F.2d at 85-86. See generally 9A Charles A. Wright, et al., Federal Practice and Procedure § 2580, at 549-50 (2d ed. 1995).
Here, the court's Memorandum Opinion more than adequately discloses the "underlying rationale," Inverness Corp. v. Whitehall Labs., 819 F.2d 48, 51 (2d Cir. 1987) (per curiam), for entering the preliminary injunction. The district court addressed each of the four pertinent factors; the court succinctly explained its reasons for finding that each factor pointed toward the injunction's entry; and (as discussed throughout this Brief) the facts supporting the district court's findings are readily apparent from the record. No more was required. See Applewood Landscape & Nursery Co. v. Hollingsworth, 884 F.2d 1502, 1503 (1st Cir. 1989) ("[T]he judge need only make brief, definite, pertinent findings and conclusions upon contested matters; there is no necessity for over-elaboration of detail or particularization of facts." (internal quotations omitted)).
Microsoft's specific complaint --------------- that the district court acknowledged that the parties were "sharply divided on numerous material issues of fact" (Br. at 22) concerning whether Microsoft was violating the decree, but nevertheless entered a preliminary injunction without making findings of fact --------------- is twice flawed. First, as explained above, the district court faced no genuine issues of material facts in ruling on the merits. Second, the district court's basis for concluding that the United States had a reasonable probability of success on the merits is apparent from its opinion and the record. See infra pp.34-40. This is not a case where the court of appeals must "speculate as to the basis of the district court's ruling." TEC Engineering Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 545 (1st Cir. 1996).
The Preliminary Injunction Properly Preserves The Competitive Status Quo And The Court's Ability To Fashion Meaningful Relief Microsoft further errs in contending that the district court abused its discretion by issuing an injunction without applying a "heightened standard" (Br. at 24). Microsoft argues that such a standard is required simply because a preliminary injunction grants "substantially all the relief [the United States] could have obtained after a full trial on the merits" (Br. at 23). To the contrary, as explained in the very case Microsoft cites: "If the use of a heightened standard is to be justified, the term 'all the relief to which a plaintiff may be entitled' must be supplemented by a further requirement that the effect of the order, once complied with cannot be undone." Tom Doherty Assocs., Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 34-35 (2d Cir. 1995). That is plainly not the case here. The preliminary injunction concerns Microsoft's ongoing licensing to OEMs; if Microsoft were to prevail on the merits, the preliminary injunction would not thereafter prevent Microsoft from again compelling OEMs to license both Windows 95 and Microsoft's web browser.(13) Moreover, the preliminary injunction, as previously explained, provides less extensive relief than the government requested.
Nor was the preliminary injunction a "mandatory" injunction that "radically alter[ed] the status quo" (Br. at 23-24). With regard to Internet Explorer 4, the injunction simply preserved the status quo. OEMs had not previously been required to license Internet Explorer 4, and Microsoft responded to the preliminary injunction by promising that "[i]nstallation of Internet Explorer 4.0" would remain "optional" (JA 1403).(14) The conclusion is the same with respect to Internet Explorer 3 because Microsoft could have complied, and eventually did comply, with the preliminary injunction simply by declining to enforce its licensing agreements to prevent OEMs from "uninstalling" that product (JA 1423-29, 1780). Permitting OEMs to take advantage of the "uninstall" option that Microsoft makes available to end users required from Microsoft no "positive act" (Br. 23).
Indeed, even if the injunction were "mandatory" or altered the status quo, no heightened standard follows. See Aoude, 862 F.2d at 893 (explaining that the "status quo doctrine is one of equity, discretion, and common sense, not woodenly to be followed"); Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 808, 809 (9th Cir. 1963) (same). A traditional function of a preliminary injunction "is to prevent irreparable injury." Ross-Whitney Corp. v. Smith Klein & French Labs., 207 F.2d 190, 199 (9th Cir. 1953). As then-Judge Taft explained: "it sometimes happens that the status quo is a condition not of rest, but of action, and the condition of rest is exactly what will inflict the irreparable injury . . . . In such a case courts of equity issue mandatory writs before the case is heard on the merits." Toledo, AA & NM Ry. v. Pennsylvania Co., 54 F. 730, 741 (C.C.N.D. Ohio), appeal dismissed, 150 U.S. 393 (1893).(15)
The district court confronted threatened irreparable injury here. Failure to impose a preliminary injunction might have undermined the court's ability to fashion appropriate final relief. As the court explained, if "Microsoft continues with its 'integration process' in the expectation that its licensing practices will continue to make it ever more profitable to do so, the cost of compulsory unbundling of Windows 95 and [Internet Explorer] in the future could be prohibitive" (JA 1297).
Moreover, Microsoft's licensing practices threatened irreparable harm to the competitive status quo. Because the United States sought to enforce an antitrust consent decree designed to prevent potentially anticompetitive conduct, such harm may be presumed. See United States v. Siemens Corp., 621 F.2d 499, 506 (2d Cir. 1980) (presumption invoked when government showed a likely Clayton Act Section 7 violation); but the court did not rest on the presumption. As Microsoft's own documents revealed (JA 261-62, 318, 321, 328, 337; CJA 152, 249, 371, 414), and the district court tentatively found (JA 1297-98), the success of competing web browsers might erode Microsoft's PC OS monopoly, and Microsoft viewed its forced licensing of Internet Explorer as a weapon with which it might prevail in its "battle" against the Netscape Navigator browser. Thus, as the district court concluded, "the probability that Microsoft will not only continue to reinforce its operating system monopoly by its licensing practices, but might also acquire yet another monopoly in the Internet browser market, [was] simply too great to tolerate indefinitely until the issue is finally resolved" (JA 1298).
The Preliminary Injunction Should Remain In Place Even If A Remand Is Necessary The district court properly entered the preliminary injunction. But even if the court had committed reversible error, this Court should not, as Microsoft insists (Br. at 14), vacate the preliminary injunction. This Court has equitable discretion to keep the injunction intact during the district court's reconsideration of its issuance. See Rosen v. Siegel, 106 F.3d 28, 33 (2d Cir. 1997) (injunction held in place despite district court's "failure to give notice and opportunity to be heard" or to include "specific findings"); see also United States v. Marine Shale Processors, 81 F.3d 1329, 1360 (5th Cir. 1996) (insufficient findings); Inverness Corp. v. Whitehall Labs., 819 F.2d 48, 51 (2d Cir. 1987) (per curiam) (same). This power is appropriately exercised when traditional equitable criteria support the injunction's issuance or it is otherwise inequitable to vacate the injunction. See Rosen, 106 F.3d at 33; Inverness, 819 F.2d at 49.
Here, there are compelling reasons to uphold the injunction. "On the record developed to date, there are sufficiently serious questions going to the merits to be a fair ground for litigation and the balance of hardships tip[s] decidedly" in favor of issuing the injunction. Inverness, 819 F.2d at 51. The district court correctly determined that the United States has a substantial probability of success on the merits. See infra pp.34-40. Compliance with the preliminary injunction imposes on Microsoft no significant burden, see supra pp.23-25, and Microsoft did not even seek a stay. The preliminary injunction also serves the public interest by ensuring that competition on the merits determines which web browsers OEMs license. There is little reason to vacate the preliminary injunction when the district court, based on these considerations, will in all probability reinstate it.
Microsoft, moreover, does not come to this Court with clean hands. Although Microsoft inveighs that the preliminary injunction suffers from numerous procedural defects and "radically alter[ed] the status quo" (Br. at 24), Microsoft neither sought a stay of the district court's order nor asked the court for clarification. Nor did Microsoft bring its objections to the district court through a motion for reconsideration. Rather, "mak[ing] its own determination of what the [injunction] meant," McComb v. Jacksonville Paper Co., 336 U.S. 187, 192 (1949), Microsoft read the Order to require it to offer a product that would not work (JA 1729-30); and Microsoft knew that this would effectively require OEMs wishing to license Windows 95 also to license Internet Explorer web browsing functionality, thereby turning the preliminary injunction on its head and "for all practical purposes[] render[ing it] a nullity," United States v. Greyhound Corp., 508 F.2d 529, 533 (7th Cir. 1974). Having caused the very mischief for which it now blames the district court (Br. at 21), Microsoft should remain subject to the preliminary injunction if the district court is required to reconsider it.
U.S. Department
of Justice
