IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

MICROSOFT CORPORATION,

Defendant.

Civil Action No. 98-1232 (TPJ)

STATE OF NEW YORK ex rel.

Attorney General DENNIS C. VACCO, et al.,

Plaintiffs,

v.

MICROSOFT CORPORATION,

Defendant.

Civil Action No. 98-1233 (TPJ)

UNITED STATES' AND PLAINTIFF STATES' MEMORANDUM IN SUPPORT OF MOTION TO COMPEL MICROSOFT CORPORATION

Pursuant to Rule 37(a) of the Federal Rules of Civil Procedure, the United States and Plaintiff States (collectively "Plaintiffs") respectfully submit this Memorandum in support of their motion to compel Microsoft Corporation ("Microsoft") to comply with the Plaintiffs' First Joint Request for Production of Documents (Request for Production No. 20) (attached hereto as Exhibit A); Plaintiffs' Notice of Rule of 30 (b)(6) Deposition of Microsoft Corporation (attached hereto as Exhibit B); and Plaintiffs' Notice of Deposition of Microsoft Corporation (attached hereto as Exhibit C).

.	BACKGROUND

A.	Procedural History

On May 18, 1998, the United States and the Attorneys General for 20 states and the District of Columbia filed separate antitrust actions against Microsoft for violating various Federal and State antitrust statutes. On May 22, 1998, the Court consolidated the separate actions for all purposes, including but not limited to discovery, pending further order of the Court. On June 12, 1998, and after a scheduling conference with attorneys for all parties, the Court entered Pretrial Order No. 1. Pretrial Order No. 1 provides, in relevant part, that the "presumptive limitations on depositions set forth in Local Rule 207(b) shall not apply, but counsel for parties shall exercise good judgment in not taking an unreasonably large number of depositions." (¶ 3.) Additionally, the Court expressed that it "expects the parties to work in good faith to resolve discovery disputes." (¶ 5.)

In an effort to expedite discovery and allay any confidentiality concerns of the parties or any third parties, the parties entered into a Stipulated Protective Order on June 27, 1998. The Stipulated Protective Order provides protection for "Confidential" and "Highly Confidential" documents and information. "Confidential" material is defined to be "any trade secret or other confidential research, development or commercial information contained in any document as such terms are used in Rule 26(c)(7) of the Federal Rules of Civil Procedure and any applicable case law interpreting Rule 26(c)(7)." (¶A(9)). "Highly Confidential" material is defined to be "any trade secrets or other confidential research, development or commercial information . . . that is entitled to a higher level of protection than Confidential Information due to its commercial sensitivity." (¶A(10)). Taking into account the sensitive nature of "Highly Confidential Information," the Stipulated Protective Order further provides that "Highly Confidential Information" can only be disclosed to limited categories of people, including independent experts or consultants. (¶D(2)). Moreover, such disclosure can be made only if the independent expert or consultant agrees to be bound by the Stipulated Protective Order and further agrees to submit to the jurisdiction of the Court with regard to enforcement of the Order. (¶F(1)).

.	Microsoft Refuses to Produce Certain Documents Called For By Document Request No. 20

On June 17, 1998, Plaintiffs served on Microsoft its First Joint Request for Production of Documents (Exhibit A). Request for Production No. 20 seeks production of source code files of certain versions of Windows 95 and 98, and the related documentation necessary to understand the source code files. (See Exhibit A). Plaintiffs limited the request to the listed files in an effort to minimize production burdens, and also limited the request to only those files believed to be relevant to Microsoft's integration claims.

On June 27, 1998, Microsoft served its objections to Plaintiffs' Requests for Production. Microsoft objected to Request for Production No. 20 on the grounds that it was burdensome, irrelevant, and required disclosure of "extemely confidential, highly sensitive trade secrets." (See Exhibit D). Microsoft refused to produce the requested code.

Plaintiffs met and conferred with Microsoft in an attempt to reach an accommodation. With regard to burden, Plaintiffs have expressed a willingness to address Microsoft's concerns and it appears an accommodation can be reached. (See Exhibit E). Microsoft's improper confidentiality and relevance objections, however, have not been resolved despite good faith efforts and are the subject of this motion.

.	Microsoft Refuses to Make Available William Gates, III for Adequate Deposition

On July 14, 1998, Plaintiffs served deposition notices on Microsoft. Among the notices, Plaintiffs noticed the deposition of William Gates, III, Microsoft's Chief Executive Officer. (See Exhibit C). Plaintiffs requested that Mr. Gates be made available for two days of deposition. While Microsoft recognizes the relevance of Mr. Gates' testimony in this matter and has tentatively made Mr. Gates available to testify on August 12, 1998, Microsoft has refused to make Mr. Gates available for more than eight hours of testimony.

.	Microsoft Refuses to Make Available Rule 30(b)(6) Witness and Certain Employees for Deposition

On July 14, 1998, Plaintiffs noticed the Rule 30(b)(6) deposition of Microsoft (see Exhibit B) and also served subpoenas for deposition testimony from fifteen Microsoft employees. (See Exhibit C). Microsoft has not served any objections to the Notices or Subpoenas, nor has it moved for a Protective Order. Rather, Microsoft unilaterally has refused to schedule more than seven depositions in addition to the depositions of Mr. Gates and Steven Ballmer. Despite Plaintiffs' good faith agreement to evaluate the need for any depositions that appear to be duplicative on an on-going basis as the depositions proceed, Microsoft persists in its refusal even to schedule the depositions.

Having complied with their Rule 37 and Local Rule 108(m) meet and confer requirements (see Exhibit F), the United States and Plaintiff States bring this Motion to address Microsoft's groundless objections and unilateral refusals to comply with proper discovery requests.

.	ARGUMENT

.	The Court Should Order Microsoft To Immediately Produce The Requested Source Code Files Of Windows 95 and 98

Microsoft continues to object to producing certain source code files for Windows 95 and 98 on the basis of relevance and confidentiality. Microsoft's objections are improper.

.	The Requested Source Code is Relevant

Microsoft's assertion that the requested source code is not relevant is disingenuous. Indeed, in its recently filed answer, Microsoft makes repeated factual and legal assertions relating to technical design features of its products that can only be countered through analysis of its source code. Specifically, Microsoft asserts that "Internet Explorer technologies are integral elements of Windows 95 and Windows 98, not a `separate software program'." (Defendant Microsoft Corporation's Answer to the Complaint Filed by the U.S. Department of Justice at ¶64). Microsoft further asserts that "the incorporation of Internet Explorer technologies into Windows is efficient and produces benefits that users could not otherwise obtain themselves." (See id. at ¶119). Microsoft also asserts that it "has never `tied Internet Explorer to Windows 95' or Windows 98 and that Web browsing functionality is an integral feature of both operating systems." (See id. at 109). Accordingly, Microsoft's source code is relevant and important to an analysis of Microsoft's claims.

.	The Protective Order Adequately Addresses Microsoft's Confidentiality Concerns

Microsoft stipulated to a Protective Order that provides adequate protection for trade secrets, including Microsoft's source code. Indeed, Microsoft circulated a first draft of the Protective Order to Plaintiffs within days of the filing of the action for the purpose of allowing expedited discovery without concern for confidentiality issues. The Stipulated Protective Order, as initially circulated and as filed, specifically provides protection for trade secrets and other highly sensitive or confidential information in accordance with Federal Rule of Civil Procedure 26(c)(7) and is enforceable in this Court. Because Microsoft clearly anticipated that Plaintiffs would request its source code given that Microsoft has made technical integration an issue in this litigation, it should have requested additional protections in the Stipulated Protective Order or otherwise moved the Court if it felt such protections were necessary. Microsoft has not done so, but rather unduly delayed producing the source code based on its improper objections. These delays severely impede Plaintiffs ability to prepare their case for the rapidly approaching trial.

In addition to the Stipulated Protective Order, Microsoft now requests that the parties enter into a commercial license agreement for its source code. (See Exhibit G). The terms of the license agreement are so oppressive that entering into such an agreement would literally eliminate Plaintiffs' ability to utilize any competent technical expert. Specifically, the proposed commercial license prohibits anyone who views the source code from working in any way on any project related to operating systems for a period of twelve months, and further prohibits any consultant from working in any way for a list of many of the largest software companies for a period of eighteen months. Accordingly, Plaintiffs will be unable to utilize the service of their consultants or experts who work with operating system technologies unless they are willing to give up their livelihood for a period of twelve to eighteen months following the termination of this litigation. Such a limitation is improper in the context of this litigation and effectively prohibits Plaintiffs from employing experts knowledgeable about operating system technologies.

Microsoft's requirement that Plaintiffs enter into such a license is severely undermined by its position with regard to third party Novell, Inc.'s confidentiality concerns. Microsoft subpoenaed documents and testimony from Novell, a direct competitor. Novell objected to the subpoena based on confidentiality concerns. Microsoft moved to compel Novell's compliance with the subpoena. (See Exhibit H). Acknowledging that Novell is a direct competitor, Microsoft asserted that disclosure of Novell's trade secrets to its outside counsel and consultants was appropriate under the terms of the Stipulated Protective Order because the Stipulated Protective Order provided adequate protections for the trade secrets. (Id. at 8-10). Given Microsoft's assertion that third party direct competitors, such as Novell, who did not participate in the drafting of the Stipulated Protective Order are adequately protected by the Order, Microsoft's arguments that it is not adequately protected should be rejected.

Finally, the Court should note that Microsoft attempted to advance similar arguments in on-going antitrust suit with Caldera, an operating system vendor, in the District of Utah. Caldera's motion to compel production of documents including source code was heard on July 30, 1998. The Utah Court ordered Microsoft to produce the source code to Caldera. (See Exhibit I). The Court specifically refused to require the twelve and eighteen month limitations Microsoft seeks to impose here.

.	The Court Should Order Microsoft To Make Bill Gates Available To Answer All Plaintiffs' Questions

Microsoft cannot justify limiting the deposition of Mr. Gates, the founder, former president, Chief Executive Officer, and Chairman of the Board of the only defendant in this matter, to a mere 8 hours. In this jurisdiction, Local Rule 207(c) states that: A[n]o presumptive limits are established for the duration of a deposition, but the Court in its scheduling order may provide that a deposition shall not exceed a set number of hours or days. (a) This Court has not made, nor has Microsoft sought, any such order limiting Mr. Gates' deposition. Microsoft simply has unilaterally refused to permit Plaintiffs to question Mr. Gates for more than 8 hours.

Full access to Mr. Gates is necessary for Plaintiffs to prepare their case. Mr. Gates has personal knowledge about every aspect of this matter which cannot be obtained through other sources. (Fed. R. Civ. Proc. 26(b)(2)(ii).) Countless documents reveal Mr. Gates personal involvement in most of Microsoft's critical corporate decisions, many of which are at the heart of this case. Mr. Gates' name appears in a large portion of the documents produced to the United States by Microsoft, and appears in no less than 16 of the exhibits submitted in support of the United States' motion for preliminary injunction. Mr. Gates has given numerous speeches and reports to the press, testified before Congress, and has actively represented Microsoft's position on the relevant issues in public. Additionally, Plaintiffs have not yet taken Mr. Gates' deposition in the investigation or litigation of this matter.

If Mr. Gates answers all of Plaintiffs' questions to the best of his ability within the first 8 hours, Plaintiffs would see no value in extending the deposition to the following day. Plaintiffs do not seek carte blanche access to Mr. Gates; rather, Plaintiffs simply want to be able to schedule Mr. Gates for two consecutive days, so that they may exercise their rights under the Federal and Local rules to seek all relevant information and testimony from Mr. Gates.

.	The Court Should Order Microsoft To Schedule All Noticed Depositions

Based on agreements among the parties and the Court, the Court's Pretrial Order No. 1 did not set any limits on the parties' ability to take depositions, except to instruct the parties to Anot tak[e] unreasonably large number of depositions. (a) (¶ 3) Thus far, Plaintiffs have only sought the testimony of 15 Microsoft employees and two 30(b)(6) witnesses. Neither Microsoft, nor the individual employees for that matter, have objected to or sought leave of court for a protective order from the deposition subpoenas. (See Fed. R. Civ. Proc. 26(c).) Rather, Microsoft unilaterally refuses to schedule more than nine of the seventeen depositions.

Plaintiffs repeatedly sought to address Microsoft's concerns about the numbers of depositions. Plaintiffs proposed to place a number of the witnesses into several tracks, and to take depositions of the witnesses in each track in order of priority. (See Exhibit F). If an earlier witness in that track provides all the information needed on the subject matter of that track and further depositions in that track would merely be cumulative, Plaintiffs would cancel subsequent depositions in that track.

Because of the limited time for discovery and the difficulty in coordinating schedules among the various parties and witnesses, at a minimum, all depositions must be scheduled. Doing so will ensure that all parties are prepared to take the depositions if needed and that Plaintiffs can complete discovery in time for trial. Microsoft's unilateral decision that Plaintiffs are entitled to no more than nine depositions, and refusal to even schedule the remaining eight depositions, impairs Plaintiffs ability to prepare for trial.

III.	CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that the Court compel Microsoft to produce the requested source code, to schedule Mr. Gates' deposition for two days, and to schedule the Rule 30(b)(6) depositions and depositions of Microsoft employees.

DATED: July 31, 1998	_____________/s/______________

Christopher S Crook

Chief

Phillip R. Malone

Denise M. De Mory

Michael C. Wilson

Attorneys

David Boies

Special Trial Counsel

U.S. Department of Justice

Antitrust Division

450 Golden Gate Ave., Room 10-0101

San Francisco, CA 94102

(415) 436-6660