Brief for the United States In Response to the Jurisdictional Statement
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In the Supreme Court of the United States Microsoft Corporation, Appellant v. United States of America, et. al. ON APPEAL FROM THE UNITED STATES DISTRICT CO URT FOR THE DISTRICT OF COLUMBIA BRIEF FOR THE UNITED STATES IN RESPONSE TO THE JURISDICTIONAL STATEMENT
QUESTIONS PRESENTED Microsoft Corporation's statement of the questions presented (J.S. i-ii) identifies seven issues for review by this Court: 1. Whether the district court erred in holding that Micro soft violated Section 2 of the Sherman Act, 15 U.S.C. 2, by engaging in a course of exclusionary conduct to protect and maintain its personal computer (PC) operating system monopoly. 2. Whether the district court erred in holding that Micro soft violated Section 2 of the Sherman Act, 15 U.S.C. 2, by attempting to monopolize the market for Web browsers. 3. Whether the district court erred in holding that Micro soft violated Section 1 of the Sherman Act, 15 U.S.C. 1, by tying its Internet Explorer Web browser to its Windows operating system through contracts and technological artifices. 4. Whether any of the district court's procedural and evidentiary rulings constituted an abuse of discretion requiring reversal of the judgment. 5. Whether the district court abused its discretion by ordering structural separation of Microsoft into two entities and transitional restrictions on its conduct. 6. Whether the district court erred in dismissing Microsoft's counterclaim under 42 U.S.C. 1983, alleging that state attorneys general, under color of state law, sought relief in this case that would deprive Microsoft of its rights under federal copyright law. 7. Whether the district judge's extrajudicial comments about the case require reversal of the judgment. TABLE OF CONTENTS TABLE OF AUTHORITIES Cases: AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) Amadeo v. Zant, 486 U.S. 214 (1988) American Textile Mfrs. Inst. v. Donovan, 452 U.S. 490(1981) Anderson v. City of Bessemer City, 470 U.S. 564 (1985) Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) California v. United States, 464 U.S. 1013 (1983) Citizen Publ'g Co. v. United States, 394 U.S. 131(1969) Clinton v. New York, 524 U.S. 417 (1998) Colorado v. New Mexico, 467 U.S. 310 (1984) Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992) Ford Motor Co. v. United States, 405 U.S. 562 (1972) Gay v. Ruff, 292 U.S. 25 (1934) IBM Corp. v. United States, 480 F.2d 293 (2d Cir. 1973), cert, denied, 416 U.S. 980 (1974) International Boxing Club v. United States, 358 U.S. 242 (1959) International Salt Co. v. United States, 332 U.S. 392(1947) Jefferson Parsh Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) Kansas v. Colorado, 514 U.S. 673 (1995) Maryland v. United States, 460 U.S. 1001 (1983) Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) Multi-Medical Convalescent & Nursing Ctr. v. NLRB, 550 F.2d 974 (4th Cir.), cert, denied, 434 U.S. 835(1977) National Soc'y of Prof I Eng'rs v. United States, 435 U.S. 679 (1978) Neumann v. Reinforced Earth Co., 786 F.2d 424 (B.C. Cir.), cert, denied, 479 U.S. 851 (1986) Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989) Roe v. Wade, 410 U.S. 113 (1973) Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) United States v. Alaska, 521 U.S. 1 (1997) United States v. Crescent Amusement Co., 323 U.S. 173 (1944) United States v. E.I. du Pont de Nemours & Co., 366 U.S. 316 (1961) United States v. Fordice, 505 U.S. 717 (1992) United States v. Griffith, 334 U.S. 100 (1948) United States v. Mattock, 415 U.S. 164 (1974) United States v. Microsoft Corp., 147F.3d935 (B.C. Cir. 1998) United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948) United States v. Taylor, 487 U.S. 326 (1988) United States v. United Shoe Mach. Corp., 391 U.S. 244 (1968) United States v. United States Gypsum Co., 333 U.S. 364 (1948) United States v. Western Elec. Co.: 552 F. Supp. 131 (1982J, aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983) 569 F. Supp. 1057 (D.D.C.), aff'd sub nom. California v. United States, 464 U.S. 1013 (1983) 1983-2 Trade Cases (CCH) ¶ 65,596 (D.D.C. 1983) United States Dep't of Commerce v. Montana, 503 U.S. 442 (1992) Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100 (1969) Statutes and rules: Expediting Act of 1903, ch. 544, 32 Stat. 823 15 U.S.C. 29(a) 15 U.S.C. 29(b) Sherman Act: 28 U.S.C. 1254 Fed. R. Civ. P. 52(a) Sup. Ct. R. 18.2 Miscellaneous: 3 Phillip Areeda & Donald F. Turner, Antitrust Law (1978) 119 Cong. Rec. 24,599 (1973) 120 Cong. Rec. (1974): H.R. Rep. No. 1463, 93d Cong., 2d Sess. (1974) S. Rep. No. 1214, 91st Cong., 2d Sess. (1970) S. Rep. No. 298,93d Cong., 1st Sess. (1973) Robert L. Stern et al., Supreme Court Practice (7th ed. 1993) BRIEF FOR THE UNITED STATES IN RESPONSE TO THE JURISDICTIONAL STATEMENT Because immediate consideration of this appeal is of general public importance in the administration of justice, the Solicitor General, on behalf of the United States, urges this Court to note probable jurisdiction under the Expediting Act of 1903, as amended, 15 U.S.C. 29(b). On May 19, 1998, the United States filed a civil complaint alleging that Microsoft Corporation has engaged in an anticompetitive course of conduct in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. 1, 2 (1994 & Supp. IV 1998). At Microsoft's request, the district court consolidated the case for all purposes with a similar case brought by 20 States and the District of Columbia. The district court conducted the proceedings expeditiously and, after a 78-day trial, entered its findings of fact (FF), App. 46-246, and its conclusions of law, App. 1-43. On the central issue in the case, the district court found that Microsoft had successfully engaged in a series of anticompetitive acts to protect and maintain its personal computer operating system monopoly, in violation of Section 2 of the Sherman Act. App. 3-21. On June 7, 2000, the district court entered its final judgment. App. 253-279. That judgment requires Microsoft to submit a plan to reorganize itself into two separate firms and to comply with transitional injunctive provisions. Ibid. Microsoft filed notices of appeal. App. 280-283. Upon motion of the United States and the State plaintiffs, the district court concluded that Microsoft's appeal presents a matter "of general public importance in the administration of justice" and certified the case for direct appeal in accordance with the Expediting Act, 15 U.S.C. 29(b). At Microsoft's request, the district court stayed the judgment. See App. 284-285. Microsoft opposes expedition of its own appeal. See J.S. 15-30. We submit, however, that direct appeal to this Court is warranted. In describing the case, we rely on the district court's factual findings, which "shall not be set aside unless clearly erroneous." Fed. R. Civ. P. 52(a). See Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985).1 1. Personal computers (PCs), including the familiar "Intel-compatible" PCs (see Add. B, infra, 7a), accomplish useful tasks, such as word processing, through the use of an operating system and applications programs. FF 1-4 (App. 47-48). An operating system is "a software program that controls the allocation and use of computer resources"; it serves as a "platform" for applications "by exposing interfaces, called 'application programming interfaces,' or 'APIs,'" that applications invoke. FF 2 (App. 47). Microsoft "possesses a dominant, persistent, and increasing share of the worldwide market for Intel-compatible PC operating systems." FF 35 (App. 60). That share "has stood above ninety percent" for a decade. Ibid. The "original equipment manufacturers" of PCs (OEMs) "uniformly are of a mind that there exists no commercially viable alternative" to Microsoft's Windows operating system. FF 54 (App. 70-71). The Windows monopoly is protected by an "applications barrier to entry." FF 30-32, 36 (App. 58-60, 61). The pervasiveness of the Windows operating system induces developers to create vastly more applications for Windows than for other PC operating systems. The availability of a rich array of applications in turn "attracts consumers to Windows." FF 37 (App. 61-62). A competing operating system will not attract a large number of users unless those users believe that there is and will continue to be a sufficient and timely array of applications for use on that operating system, FF 30-31, 37 (App. 58-59, 61-62), but software developers have little incentive to write applications for an operating system without a large number of users. FF 40-41 (App. 63-64). This formidable entry barrier can be eroded through "middleware." A middleware program invokes the APIs of the operating system on which it runs, but also exposes its own APIs and thus can serve as a platform for other applications. FF 28 (App. 57). An application written to rely on a middleware program's APIs thus could run on all operating systems on which that middleware runs. FF 68 (App. 78). Applications developers would have incentives to write for widely used middleware, and so users would not be reluctant to choose an alternative operating system for fear that it would run an insufficient array of applications. FF 29, 68 (App. 57-58, 78). Microsoft "was concerned with middleware" because middleware could severely weaken the applications barrier and threaten the dominance of Windows. FF 29, 68 (App. 57-58, 78). Microsoft particularly focused "on two incarnations of middleware that, working together, had the potential to weaken the applications barrier severely * * *. These were Netscape's Web browser [Navigator] and Sun's implementation of the Java technologies." FF 68 (App. 78); see also FF 69-77 (App. 78-82). a. Within months after Netscape publicly released Navigator in December 1994, Navigator became the preeminent Web browser. FF 72 (App. 79-80). Because of the likelihood that Web browsers would become ubiquitous, and because Navigator also has middleware capabilities, Microsoft soon perceived Navigator as a threat to the applications barrier to entry that protected its Windows operating system monopoly. In May 1995, Microsoft Chief Executive Officer William Gates wrote that Netscape was "pursuing a multi-platform strategy where they move the key API into the client [Web browser] to commoditize the underlying operating system." FF 72 (App. 80). Microsoft determined to eliminate the threat that Navigator would become a viable alternative platform for applications. FF 133, 142 (App. 108-109,113-114). Microsoft first tried to reach a "market allocation" agreement with Netscape. App. 21-22; FF 79-92 (App. 83-89). The proposed agreement would have required Netscape to stop its efforts to develop Navigator into "platform-level" (i.e., API-exposing) browsing software for the upcoming Windows 95 operating system in return for Microsoft's refraining from developing browser products for other operating systems. FF 83 (App. 85). Microsoft "warned" (FF 91 (App. 89)) Netscape that its access to critical technical information about Windows APIs--information that Netscape needed to make its browser run well on Windows 95 (FF 82 (App. 84-85))--depended on Netscape's acquiescence. FF 84, 90 (App. 85-86, 88-89). Had Netscape gone along with Microsoft's scheme, it would have become "all but impossible" for Navigator or any other browser rival to pose a platform threat to Windows. FF 88-89 (App. 87-88). Netscape, however, refused to agree to Microsoft's proposal, FF 88, 91 (App. 87, 89), and Microsoft then withheld important technical information needed by Netscape. FF 91-92 (App. 89). Microsoft understood that large numbers of developers would write to the APIs exposed by Navigator only if they believed Navigator would become "the standard" Web browser, FF 133 (App. 108), and that, if developers expected Microsoft's own browser, Internet Explorer (IE), to attract a large share of usage, they would continue to focus their efforts on the Windows platform, ibid. Microsoft therefore decided to engage in a multifaceted campaign to maximize lE's share of usage and minimize Navigator's. FF 133 (App. 109). Between 1995 and 1999 Microsoft spent more than $100 million each year and increased to more than a thousand the number of developers working on IE, FF 135 (App. 109), even though Microsoft has given IE away free since its release in July 1995, FF 137 (App. 111). In addition, Microsoft decided "to constrict Netscape's access to the distribution channels that led most efficiently to browser usage" (FF 143 (App. 115))--installation by OEMs on new PCs and distribution by Internet access providers (lAPs) such as America Online. FF 144-145 (App. 115-116). Because "no other distribution channel for browsing software even approaches the efficiency" of those two channels, FF 145 (App. 116), Microsoft sought to "ensure that * * * OEMs and lAPs bundled and promoted Internet Explorer to the exclusion of Navigator," FF 148 (App. 117). Microsoft's campaign to foreclose Netscape from the OEM channel involved a "massive and multifarious investment" in a "complementary set of tactics": (1) contractual restrictions forcing OEMs to take IE with Windows 95 and 98 and forbidding them from removing or obscuring it; (2) "additional technical restrictions to increase the cost of promoting Navigator"; (3) exchanging valuable incentives for OEMs' commitments to promote IE exclusively; and (4) threats to "penalize individual OEMs that insisted on pre-installing and promoting Navigator." FF 241 (App. 160-161). Microsoft's contractual bundling of IE and Windows conflicted with the interests of its OEM customers and browser users, for "Web browsers and operating systems are separate products," FF 154 (App. 119), and "[m]any consumers desire to separate their choice of a Web browser from their choice of an operating system," FF 151 (App. 118). Nevertheless, by July 1995, Microsoft had concluded that bundling Windows 95 and IE, contrary to its initial plan, FF 156 (App. 120), was the "most effective way" to diminish Navigator's threat to the operating system monopoly. FF 157 (App. 120). Its OEM licenses required that OEMs not delete or modify any part of what Microsoft defined to be "Windows," including IE, FF 158 (App. 120), even by using the "Add/Remove" capability Microsoft included in Windows 95 and promoted to users. FF 165, 175-176 (App. 123, 128-129). OEMs acquiesced, even though that prevented them from meeting consumer demand for PCs without IE, because "they had no commercially viable alternative to pre-installing Windows 95 on their PCs." FF 158 (App. 120-121). Microsoft's licensing requirement had no technical justification, FF 175-176 (App. 128-129), and "guaranteed the presence of [IE] on every new Windows PC system," FF 158 (App. 121). Microsoft "knew that the inability to remove [IE] made OEMs less disposed to pre-install Navigator onto Windows 95." FF 159 (App. 121). Despite those contractual restraints, Microsoft officials believed they were not "going to win" the browser war simply by "[p]itting browser against browser," FF 166 (App. 124), so they decided to make technical changes in Windows 98 to ensure that removing IE from Windows is difficult and "running any other browser is a jolting experience." FF 160 (App. 122).2 Unlike Windows 95, Windows 98 thus did not allow even users to "uninstall" IE with the Add/Remove feature, although Gateway, a major OEM, had expressly requested such a feature, and although users were permitted to uninstall numerous other features that Microsoft held out as integrated into Windows 98. FF 170 (App. 126-127). Binding IE to Windows 98 also produces "unpleasant consequences for users" of Navigator, FF 172 (App. 127), because it can "override the user's choice" of browsers and require even Navigator users "to employ [IE] in numerous situations that, from the user's perspective, are entirely unexpected." FF 171 (App. 127). There is no technical justification for that binding.3 Despite those technical obstacles, Microsoft still feared that OEMs might install Navigator in addition to IE and might even configure the icons on the initial computer screen, and arrange the boot (start-up) sequence, to promote the use of Navigator rather than IE. FF 202-203 (App. 139-140). Microsoft thus "threatened to terminate the Windows license of any OEM" that did so or added "programs that promoted third-party software to the Windows 'boot' sequence." FF 203 (App. 140); see also FF 206, 208 (App. 141-142). Microsoft's tactics "soured" its relations with OEMs generally and also "stymied innovation that might have made Windows PC systems more satisfying to users. Microsoft would not have paid this price had it not been convinced that its actions were necessary to ostracize Navigator from the vital OEM distribution channel." FF 203 (App. 140).4 Microsoft "largely succeeded in exiling Navigator from the crucial OEM distribution channel." FF 239 (App. 159). By January 1998, Microsoft executive Joachim Kempin was able to report to CEO Gates and others that Navigator was being shipped through only four of the 60 OEM distribution sub-channels. FF 239 (App. 160). Even then, Navigator was most often in a position "much less likely to lead to usage" than lE's position. Ibid. Within a year, "Navigator was present on the desktop of only a tiny percentage of the PCs that OEMs were shipping." Ibid. Microsoft's strategy for foreclosing Netscape from the other crucial channel of distribution, Internet access providers that provide browser software to their customers, FF 242 (App. 161-162), similarly involved both huge expenditures and substantial sacrifices of revenue that made no business sense except as a way of protecting the applications barrier to entry. FF 139, 247 (App. 111-112, 163). Microsoft "believed that, if lAPs gave new subscribers a choice between [IE] and Navigator, most of them would pick Navigator." FF 243 (App. 162). Accordingly, Microsoft gave lAPs valuable incentives to promote and distribute IE and to inhibit promotion and distribution of Navigator. FF 139 (App. 112). Its actions, which "sealed off a major portion of the IAP channel from the prospect of recapture by Navigator," FF 247 (App. 164), "had, and continue to have, a substantial exclusionary impact," FF 308 (App. 194).5 Microsoft's resulting control of the two distribution channels through which "a very large majority of those who browse the Web obtain their browsing software," FF 144 (App. 115), together with its other efforts to protect the applications barrier, caused browser usage shares to "change[] dramatically in favor of [IE]." FF 360 (App. 220). This prevented Navigator from becoming "an attractive enough platform * * * to weaken the applications barrier to entry." FF 378 (App. 229).6 Microsoft's numerous and varied actions against Navigator " 'would not be considered profit maximizing except for the expectation that . . . the entry of potential rivals' into the market for Intel-compatible PC operating systems will be 'blocked or delayed.'" App. 20 (citation omitted); see also FF 136-142 (App. 110-114). b. Microsoft also feared another middleware technology-- Sun Microsystems' Java--a programming language with related middleware that enables applications "written in Java" to run on different operating systems. FF 73-74 (App. 80-81). Java technology threatened to erode the applications barrier to entry, FF 75-77 (App. 81-82), and Microsoft sought to extinguish the Java threat by "maximizing the difficulty with which applications written in Java could be ported [i.e., adapted] from Windows to other platforms, and vice versa." FF 386 (App. 232). Microsoft induced the development of Java programs that performed well on Windows but would not run on other operating systems without significant modifications. FF 387-394 (App. 232-236). Microsoft, like others, developed a "Java Virtual Machine" (JVM) for the Windows operating system. FF 388 (App. 233). A JVM is a computer program that translates Java-based programs into instructions that the operating system can understand and execute. FF 73 (App. 80); see Add. B, infra, 8a. Microsoft's JVM and developer tools incorporated Windows-specific features in a way that makes a Java program designed to rely on those features more difficult to port to another operating system. FF 388-390 (App. 233-234). Microsoft took steps to ensure that developers would write Java programs that used those features; it conditioned early access to Windows technical information on using Microsoft's JVM as the default, FF 401 (App. 239), and it failed to warn applications developers about the porting consequences of reliance on Windows-specific features of its development tools, FF 394 (App. 235-236). Microsoft undertook other actions to discourage developers from creating Java applications compatible with non-Microsoft JVMs, and those actions made no business sense except as a means of protecting the applications barrier to entry. FF 388-394, 401-404, 406 (App. 233-236, 239-242).7 Microsoft's avowed aim was not to innovate, or to give consumers a better product; it directly acted to prevent Sun from creating Java APIs, and, as Microsoft executive Eric Engstrom put it, "especially ones that run well * * * on Windows." FF 406 (App. 242). Microsoft ultimately succeeded in impeding Java's ability to weaken the applications barrier to entry with a series of actions "whose sole purpose and effect were to do precisely that." FF 407 (App. 243). Microsoft pursued its "dedication to the goal of protecting the applications barrier to entry" despite "the fact that its efforts to create incompatibility between its JVM and others resulted in fewer applications being able to run on Windows than otherwise would have." Ibid. 2. Based on the conduct described above, along with numerous other instances of predatory and exclusionary conduct detailed in other findings, see, e.g., FF 93-132 (App. 89-108), the district court found that, "[t]o the detriment of consumers," Microsoft had undertaken a coordinated series of actions "designed to protect the applications barrier to entry, and hence its monopoly power, from a variety of middleware threats." FF 409 (App. 244).8 The district court entered conclusions of law holding that Microsoft violated Section 2 of the Sherman Act by engaging in anticompetitive acts to maintain its operating system monopoly, App. 3-21, and that it had committed other violations of antitrust law, App. 21-42.9 The district court thereafter entered its final judgment, which requires Microsoft to submit a plan to reorganize itself into two separate firms ("OpsCo" to receive the operating system business and "AppsCo" to receive the rest) and to comply with transitional injunctive provisions.10 App. 253-257. The court found that a structural remedy is "imperative," App. 249, and that the government's plan addressed "all the principal objectives of relief in such cases," App. 251. The court found Microsoft's alternative proposal "plainly inadequate." Ibid. This appeal followed.11 The Expediting Act expressly provides for direct appeal to this Court in that rare instance in which immediate consideration of an appeal in a civil injunctive antitrust case brought by the United States is of "general public importance in the administration of justice." 15 U.S.C. 29(b). This is such a case. The suit has immense importance to our national economy. It is especially important to the rapidly developing high-technology sectors, which need to know how they will be affected by the remedies resulting from this case and, more generally, how this Court's antitrust jurisprudence applies to a dominant firm in their marketplace. The public interest requires prompt and final resolution of the issues on appeal, both so that effective remedies can be put in place to restore competitive conditions and protect consumers and so that the computer and software industries can plan for the future. The findings of fact are cogent and complete, and the legal issues are ready for this Court's review. The Court should note probable jurisdiction.
From 1903 to 1974, this Court directly reviewed all appeals in civil injunctive antitrust cases brought by the United States. See Expediting Act of 1903, ch. 544, 32 Stat. 823. Over time, Congress determined that direct appeal in all such cases posed an unnecessary burden on this Court. In 1974, Congress gave the courts of appeals jurisdiction over routine appeals. See 15 U.S.C. 29(a). At the same time, Congress gave this Court discretion to hear a direct appeal if the district court certified, at the request of any party, that "immediate consideration of the appeal by the Supreme Court is of general public importance in the administration of justice." 15 U.S.C. 29(b). This Court should exercise its discretion under 15 U.S.C. 29(b) in light of Congress's expressed desire to preserve direct appeals in that limited situation. Congress relieved the Court of the task of reviewing routine antitrust appeals, but Congress concluded, as a matter of national policy, that the Court should continue to decide direct appeals "where the underlying antitrust judgment involves matters of great and general importance to the public interest because of their 'impact on the economic welfare of this nation.'" United States v. Western Elec. Co., 1983-2 Trade Gas. (CCH), ¶ 65,596, at 68,971 (D.D.C. 1983) (quoting H.R. Rep. No. 1463, 93d Cong. 2d Sess. 14 (1974)).12 Congress's grant of jurisdiction under the Expediting Act differs fundamentally from, and operates in addition to, Congress's open-ended grant of certiorari jurisdiction under 28 U.S.C. 1254. The Expediting Act, unlike the certiorari statute, is limited by subject matter and requires district court certification. See 15 U.S.C. 29(b). But most importantly, it provides the Court with an express standard --"general public importance in the administration of justice"--to guide the Court's exercise of discretion. The purpose of the amended Act remains to "[e]xpedit[e]" the final resolution by this Court of cases meeting that standard. Congress plainly intended that the Court would decide whether to accept review based on the appeal's practical consequences for the national economy and the needs of effective antitrust enforcement--not on whether the Court would normally grant certiorari (or certiorari before judgment) in such a case. See Robert L. Stern et al., Supreme Court Practice § 2.7, at 53 (7th ed. 1993) ("Whether a case warrants direct review under § 29(b) turns on the importance of a prompt decision by the Court, not on the general significance of the legal issues presented."). The United States recognizes that the need for direct appeal arises infrequently and does not lightly seek it. The United States has invoked the Expediting Act's direct review provisions in only two previous instances in the past 26 years. Those requests both arose from United States v. Western Electric Co., supra, a Sherman Act suit against AT&T and its subsidiaries that bears close similarities to this case. In each instance, the Court accepted direct review. See California v. United States, 464 U.S. 1013 (1983); Maryland v. United States, 460 U.S. 1001 (1983). The California and Maryland appeals arose from inter-venor challenges to the AT&T consent decree, which required AT&T to divest assets and restructure its operations.13 Like the appeal in this case, the appeals in California and Maryland involved a government enforcement action against an "overwhelmingly dominant firm" in an important market and had resulted in a "structural remedy" to prevent abuse of monopoly power and "further the public interest in competition." 82-952 MA, at 13; see 83-737 MA, at 10-11. The United States urged the Court to hear the appeals, stating that "[wjhether a case warrants direct review * * * turns on the importance of a prompt decision of the case by this Court." 82-952 MA, at 10-11. The United States explained that "delay in resolving the validity of the decree will have a broad and significant adverse impact on the telecommunications industry, on related industries including data processing, and thus on the public in general." 82-952 MA, at 12; see also 83-737 MA, at 8-11.14 This case, like the California and Maryland appeals, clearly satisfies the Expediting Act's "general public importance" standard. The district court has determined that Microsoft, one of the Nation's largest companies and the dominant participant in the Intel-compatible PC operating system market, has taken unlawful actions to maintain its monopoly in that market. The court's remedy will directly impact competition in that important market and other related sectors, which in turn will directly affect the information-processing choices of virtually every computer user, including virtually every business and governmental entity, as well as hundreds of millions of consumers worldwide. In addition, the pendency of the appeal will likely affect Microsoft's workforce and its relations with other computer and software entities that form the burgeoning high-technology sectors of the economy.15 Microsoft itself has acknowledged the significance of this case to the Nation's economy. See, e.g., J.S. 28. Indeed, Microsoft recently told the court of appeals that the district court's judgment may cause "the entire United States economy [to] * * * suffer." Microsoft Motion For Stay Pending Appeal 37 (D.C. Cir. June 13, 2000) (No. 00-5212). Recognizing "the exceptional importance" of the case, the court of appeals took the extraordinary step of ordering en bane consideration within an hour of the filing of Microsoft's notices of appeal. See J.S. 13; App. 311-312. To be sure, the court of appeals has taken steps within its power to expedite the appeal. But Congress has concluded that, in cases of "general public importance," those steps are not enough. The Expediting Act provides a mechanism, beyond the measures available to the court of appeals, that should be utilized here. Expedition is justified for a related reason as well. At the same time that the district court certified the case as one of general public importance, it also stayed its judgment pending appeal. App. 285. Prompt resolution of the appeal is therefore critical to effective federal and state antitrust enforcement. Microsoft steadfastly maintains that everything it has done was legal, see App. 249, so it likely will continue such conduct until the judgment goes into effect, ibid. Delay will postpone, and likely complicate substantially, the restoration of competition in the affected high-technology industries, which evolve at an extraordinary pace. Moreover, prolonged uncertainty about the outcome of this case creates significant inefficiencies. No firm in the affected industries can confidently plan or commit resources until it knows whether or when the final judgment will take effect. In sum, all agree--and the evidence establishes--that the stakes in this case for the national economy are immense. If this case does not qualify for direct review under the Expediting Act, it is difficult to imagine what future case would.16
This case epitomizes the exceptionally important public antitrust case for which Congress has preserved direct review under the Expediting Act. For that reason alone, the Court should note probable jurisdiction. But even if the Court accepts Microsoft's invitation to look beyond the importance of the case and the consequent need for immediate resolution, Microsoft's rationales for denying direct review are not convincing. Microsoft essentially argues that this case is too legally and factually complex for this Court's review. J.S. 16-23. But this Court regularly decides complex cases, and, from 1903 to 1974, the Court routinely decided all such antitrust appeals. Congress has relieved the Court of that routine chore. The Court will not be unduly burdened by undertaking to resolve the singularly important appeal in this case--the first such appeal in 17 years.
Microsoft argues that the legal issues it intends to raise are too complex and numerous for direct review. J.S. 19-23. Microsoft, however, overstates the complexity of this case, underestimates this Court's capabilities, and disregards the responsibility of counsel to "clear out"--rather than cultivate--"procedural and factual underbrush" (J.S. 23).17 Viewed realistically, Microsoft's appeal would require the Court to make, at most, five inquiries: whether the district court properly applied this Court's antitrust decisions respecting (1) monopoly maintenance, (2) attempted monopolization, and (3) tying; and whether the district court abused its discretion (4) in expediting the trial and admitting evidence, and (5) in selecting a remedy. See J.S. i-ii.18 This Court is no less capable than the court of appeals of deciding those matters. And unlike the court of appeals, this Court can dispositively resolve the appeal and vindicate the enormous public interest in swift resolution of the case. 1. The central issue in this case is whether Microsoft violated Section 2 of the Sherman Act by engaging in a course of exclusionary conduct to protect and maintain its PC operating system monopoly. As this Court's decisions explain, the proscribed practice of monopolization is the willful acquisition or maintenance of monopoly power by the use of anticompetitive means "to foreclose competition, to gain a competitive advantage, or to destroy a competitor." Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 482-483 (1992) (quoting United States v. Griffith, 334 U.S. 100, 107 (1948)). This Court has described such conduct as "exclusionary" and "predatory." Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602 (1985). If there are no "valid business reasons" for conduct that tends to impair the opportunities of a monopolist's rivals, it is exclusionary. See Eastman Kodak, 504 U.S. at 483; Aspen, 472 U.S. at 605 & n.32 (quoting 3 Phillip Areeda & Donald F. Turner, Antitrust Law ¶ 626b at 78 (1978)); see also, e.g., Neumann v. Reinforced Earth Co., 786 F.2d 424, 427 (D.C. Cir.) (Bork, J.), cert, denied, 479 U.S. 851 (1986). The district court applied that standard (App. 6-8) to its findings of fact (App. 51-246), which describe a textbook example of monopoly maintenance (App. 9-21). See pp. 2-11, supra. The district court was accordingly correct in concluding that Microsoft has violated Section 2. The district court properly determined that Microsoft had monopoly power in a relevant market. App. 3-6. The court also concluded that Microsoft has engaged in a broad-ranging course of predatory conduct in which Microsoft sacrificed current wealth and opportunities to "perpetuate the applications barrier to entry" that protected its monopoly power. See App. 6-21. The court's decision on monopoly maintenance cogently addresses the relevant considerations and frames the issues for this Court's review. Indeed, the court explicitly addressed and rejected the arguments respecting monopoly maintenance that Microsoft proposes to raise on appeal. Its decision accordingly provides a systematic guide for addressing those arguments on appeal. App. 4-20.19 2. The district court's monopoly maintenance ruling is sufficient to establish liability and support all the relief in the final judgment. The district court additionally ruled, however, that Microsoft has violated Section 2 of the Sherman Act by unlawfully attempting to monopolize the market for Web browsers. App. 21-24. The court correctly stated that liability for attempted monopoly will attach if the plaintiff proves: "(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize" and (3) that there is a "dangerous probability" that the defendant will succeed in achieving monopoly power. App. 21 (quoting Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993)). The court properly ruled that the plaintiffs proved each of those elements. App. 21-24. As in the case of the monopoly maintenance claim, the court addressed Microsoft's specific objections, and the attempted monopolization claim is therefore also well postured for this Court's review. App. 21-24.20 3. The district court also ruled, on another matter that is not necessary to support the prescribed relief, that "Micro soft's combination of Windows and [IE] by contractual and technological artifices constitute [s] unlawful tying to the extent that those actions forced Microsoft's customers and consumers to take [IE] as a condition of obtaining Windows." App. 25. The district court acknowledged that its conclusion "is arguably at variance" with the court of appeals' prior decision in United States v. Microsoft Corp., 147 F.3d 935 (D.C. Cir. 1998). App. 25. But the court concluded that the relevant passages of the court of appeals' decision, which dealt only with obligations under a consent decree, were dicta and did not control this Sherman Act case. App. 26. The court additionally concluded that this Court's decisions in Eastman Kodak and Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2 (1984), support its conclusion that Microsoft unlawfully tied its products. App. 27-33. If Micro soft intends to dispute the district court's understanding of this Court's decisions--or seeks a special exception from those decisions--then this Court provides the proper forum in which to address that matter. See, e.g., Rodriguez de Quijas v. Shear'son/'American Express, Inc., 490 U.S. 477, 484 (1989). 4. Microsoft argues that the district court unduly expe dited the proceedings in this case and improperly admitted, at the bench trial, hearsay evidence. J.S. 21. Resolution of those matters would not significantly burden the Court. A "trial court is endowed with great discretion to make decisions concerning trial schedules," United States v. Taylor, 487 U.S. 326, 343 (1988), and Microsoft must demonstrate that the court's scheduling actions in this case amount to an abuse of discretion. Microsoft has failed to identify an action that would constitute an abuse.21 Similarly, a judge does not commit reversible error in admitting hearsay in a bench trial unless the judge improperly relies on that evidence. See United States v. Matlock, 415 U.S. 164, 175 (1974); Multi-Medical Convalescent & Nursing Ctr. v. NLRB, 550 F.2d 974, 977 (4th Cir. 1977), cert, denied, 434 U.S. 835 (1977). The district court stated repeatedly that it would assess hearsay evidence to determine what weight, if any, to give it. See, e.g., Tr. 10:9-11 (2/11/99 am); Tr. 5:21-24, 10:19-23 (1/25/99 pm); Tr. 4:21-5:3 (10/20/98 pm). In so doing, the court acted well within its discretion. Microsoft has not identified any finding of fact supported only by inadmissible hearsay. 5. Microsoft's proposed challenge to the district court's remedy (J.S. 11-12, 23) presents a matter that ought to be decided by this Court, rather than the court of appeals, in light of the extraordinary public and private interests at stake. The task is an important one, but it is facilitated, to a considerable extent, by the applicable standard of review. District courts "are invested with large discretion to model their judgments to fit the exigencies of the particular case," International Salt Co. v. United States, 332 U.S. 392, 400-401 (1947), and this Court has long held that it "will not direct a recasting of the decree except on a showing of abuse of discretion." United States v. Crescent Amusement Co., 323 U.S. 173,185 (1944).22 In examining the remedy, the Court would obtain considerable assistance from the district court's cogent and thorough findings. The court found that Microsoft engaged in a pattern of predatory activity directed at innovations that threatened its monopoly. See App. 19-21. Its "corporate practice [has been] to pressure other firms to halt software development that either shows the potential to weaken the applications barrier to entry or competes directly with Microsoft's most cherished software products." FF 93 (App. 89). The divestiture remedy limits OpsCo's ability to engage in that and other similar forms of anticompetitive conduct, while giving AppsCo increased incentives to offer applications that run on alternative operating systems and to develop cross-platform middleware. The divestiture remedy responds directly to the district court's finding of monopoly maintenance by weakening the barrier to entry that Microsoft's predatory practices maintained and creating an independent entity, AppsCo, well positioned to renew the challenge to the operating system monopoly that Microsoft's restraints on Netscape and Java suppressed. Moreover, it does so without the need for an intrusive and cumbersome regulatory decree. The transitional conduct restrictions, which expire when divestiture is fully effective, are designed to address the specific exclusionary strategies that Microsoft pursued or similar strategies that may fairly be anticipated. Such remedies also fall well within the district court's discretion. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 132 (1969).23
Microsoft argues that this Court should deny direct appeal because Microsoft intends to raise "numerous complicated factual issues" that will require the Court to "sift through an extensive record." J.S. 16-19. Microsoft's prediction, at the outset, is implausible. The district court trial was the "main event" for purposes of determining disputed facts. See Anderson, 470 U.S. at 575. The district court made cogent and comprehensive factual findings based on the evidence at trial. See App. 46-246. This Court has repeatedly emphasized that the "clearly erroneous standard," which governs review of district court factfinding, is highly deferential. Anderson, 470 U.S. at 571-576. That standard, by its own force, imposes inherent limits on the scope of fact-based challenges in a case such as this.24 Even if Microsoft is inclined to raise record-based challenges, that prospect would provide no basis for declining review. When Congress amended the Expediting Act, it was well aware that the records in government civil antitrust cases are frequently voluminous. S. Rep. No. 298, supra, at 8. Congress relieved the Court of the burden of routinely reviewing trial records in government civil antitrust cases, but it did so knowing that the Court would not shrink from that task in cases of general public importance. This Court has not been daunted by large antitrust records in exercising its certiorari jurisdiction.25 It is, of course, counsel's responsibility to relate their contentions to the portions of the record that are pertinent. The Court's task here is not onerous. The Court regularly reviews cases that rest on factual records that are more challenging than this appeal would present.26 Indeed, the Court regularly does so when exercising its original jurisdiction, where the Court must act as the ultimate finder of fact and review the evidence de novo. See Colorado v. New Mexico, 467 U.S. 310, 317 (1984).27 To the extent Microsoft elects to challenge the district court's findings, the Court should encounter no difficulty in applying the clearly erroneous standard. The district court has distilled the record into clear and well-organized findings of fact that provide a detailed roadmap of its reasoning. See App. 46-246; Add. A, infra?28The clearly erroneous standard is extremely demanding, and Microsoft's examples of purported error--which are presumably its strongest examples--do not come close to satisfying the test. See Anderson, 470 U.S. at 573- 576.29
Microsoft argues (J.S. 23-24, 29) that direct review is inappropriate because the court of appeals should be entitled to weigh in on this case. That argument disregards the purpose of the Expediting Act, which, "as its very title indicates, is to eliminate piecemeal appeals and to bring to the Supreme Court expeditiously, the entire case without intervening appeals to the Courts of Appeals." IBM Corp. v. United States, 480 F.2d 293, 296 (2d Cir. 1973), cert, denied, 416 U.S. 980 (1974). A litigant in federal court is normally entitled to only one appeal as of right. The Expediting Act reflects Congress's considered judgment that, when a government antitrust case presents an issue of "general public importance to the administration of justice," that appeal should take place in this Court. Congress wisely preserved the Court's availability to hear cases of "general public importance" because it recognized that only this Court can ensure expeditious resolution of the appeal. If the Court accepts direct review in this case, it can surely complete the review process within the 2000 Term. See note 27, supra. If the Court declines, then the timing of a final resolution will be beyond any single court's control. The proceedings in the court of appeals are likely to consume at least as much time as proceedings in this Court, and the case is virtually certain to return to this Court on petition for a writ of certiorari. As a result, the final resolution of the appeal would likely be delayed by at least one year. The district court, which commendably expedited the trial proceedings, certified this case for direct review in light of its awareness that a lengthy appeals process could irreparably harm competition in a vital and rapidly evolving sector of the national economy. The United States agrees. This Court alone has the authority, and therefore the responsibility, to ensure that the public interest is not harmed and that justice is not denied through delay.30 The Court should note probable jurisdiction and set the case for briefing and argument. Respectfully submitted.
August 2000 FOOTNOTES Contrary to Microsoft's contention (J.S. 18), the court's further finding that "Navigator was present on the desktop of only a tiny percentage of PCs that OEMs were shipping," FF 239 (App. 160), is supported not only by the evidence from Microsoft's own document that Navigator is shipped through only four OEM sub-channels, GX 421, but also by the testimony of Franklin Fisher. Tr. 7:20-8:10, 11:15-12:10 (1/7/99 am); Tr. 42:15-21 (6/3/99 am). Microsoft ignores that evidence and cites a single document, containing an estimate that Navigator was included in "22% of OEM shipments." J.S. 18. But that estimate, which expressly states that Navigator shipments were "with minimal promotion," see GX 2440, does not reflect shipments in which Navigator is "on the desktop" rather than shipped "in a manner much less likely to lead to usage than if its icon appeared on the desktop." FF 239 (App. 159-160); see also GX 2116 (sealed). Microsoft additionally asserts that "no probative evidence" supports the district court's finding (FF 161 (App. 122)) that "Microsoft 'bound' Internet Explorer to Windows 98" by commingling code specific to Web browsing with code that provides operating system functions. J.S. 18. Microsoft relies on testimony of its Senior Vice President James Allchin that there is no code specific to Web browsing in Windows 98 (J.S. 19), but on cross-examination Allchin admitted that Windows 98 contains code used only to browse the Web. Tr. 65:10-67:25 (2/2/99 am); see also Tr. 60:15-25 (12/14/98 am) (testimony of Edward Felten). Index to the Appendix to the
Glossary of Frequently Used Terms
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