Microsoft Appeals Preliminary Injunction

REDMOND, Wash., Dec. 15, 1997 — Microsoft Corp. announced Monday that it is appealing a preliminary injunction issued by U.S. District Court Judge Thomas Penfield Jackson on the grounds that it was an error for the court to impose a preliminary injunction after denying the Justice Department’s petition to hold Microsoft in contempt. Microsoft will comply with the preliminary injunction while it is on appeal.

“The matter before the court was whether Microsoft could be held in contempt for violating a consent decree entered in 1995,” said William H. Neukom, Microsoft’s senior vice president for law and corporate affairs. “The court denied the Justice Department’s petition for contempt; the case should have ended there. But on its own initiative, the court proceeded to treat the matter as a tying case and, without giving Microsoft notice or an opportunity to defend itself, issued a preliminary injunction. The government could have brought a tying case but chose instead to file a petition seeking an order of contempt. It is inappropriate for the court to unilaterally expand the case beyond the scope of the government’s petition.”

From a broader standpoint, Neukom said Microsoft is appealing because the order sets a dangerous precedent. “This preliminary injunction threatens every American technology company’s right to innovate and define what goes into its products. The ruling puts the government into the middle of complex product design issues in an industry that, for more than 20 years, has experienced incredible growth, innovation and competition – without government intervention.”

Last Thursday, Judge Jackson ruled that, pending further judicial proceedings, Microsoft could not license the Microsoft® Windows® 95 operating system to computer manufacturers (OEMs) on the condition that they also license Internet Explorer. The court’s preliminary ruling is premised on the DOJ’s argument that Internet Explorer is not part of Windows 95, but is rather contractually bundled with the operating system by Microsoft. In fact, Internet Explorer has always been an integrated part of Windows 95 as provided to computer manufacturers, and the customer and developer benefits of that integration have grown substantially as Microsoft has continued to develop the operating system since it was first released.

The order allows Microsoft to continue to offer OEMs the complete Windows 95 product, which includes Internet Explorer, as long as the OEMs also have the option of installing only that portion of Windows 95 that does not include Internet Explorer files.

Today, a number of Windows 95 functions, as well as third-party applications, are dependent on Internet Explorer technologies. These technologies provide operating system services that are important both to the operation of Windows 95 itself and to the operation of products created by other software publishers, such as the ability to display information in HTML, a document format first popularized on the Web, but now used more widely. Windows 95 would be lacking if it did not provide these system services to enable software developers to create new applications.

Microsoft has challenged assertions by the DOJ that its integration of Internet technology into the operating system limits consumers’ ability to choose which Web browser they wish to use. “Microsoft’s current licensing practices with OEMs enable, rather than limit, consumer choice,” said Neukom. “Computer manufacturers are free to install Netscape Navigator on new computers with Windows 95 if they choose, and many have. Customers can choose to have one or the other browser, or both, on their computer, and many do.

“The central point of our position is that when a computer manufacturer licenses Windows, it should install the entire product, just as Ford requires that all its vehicles be sold with Ford engines. This is the only way to guarantee customers a consistent Windows experience, and it’s the only way to assure software developers and hardware manufacturers that their products will be compatible with Windows.”

Neukom emphasized that the consent decree expressly states that Microsoft is free to develop integrated products, that Internet Explorer has been an integrated part of Windows 95 since the very first version was shipped to computer manufacturers in July 1995, and that the Justice Department knew of the company’s plans to integrate Web technology into Windows 95 even before negotiations began on the consent decree in 1994. The current legal issues will not affect the launch of Windows 98 in the first half of 1998.

In order to comply with the preliminary injunction, Microsoft sent a letter Monday to all licensed computer manufacturers informing them of the following, pending the appeal:

  • They may continue to ship the full Windows 95 product, including its Internet Explorer features.

  • They have the option, provided in compliance with the court’s order, of removing from Windows 95 all the files that are included in the retail version of Internet Explorer 3.0. Microsoft is alerting computer manufacturers that this stripped version of Windows 95 will not operate or perform as originally designed.

  • Although not required by the court’s order, Microsoft will also provide OEMs with a version of Windows 95 from which Internet Explorer can be removed with less damage to the remaining elements of the operating system. Microsoft will give computer manufacturers the option of installing the original OEM version of Windows 95, but with all Internet Explorer 1.0 files removed. This is the version of Windows 95 that was available in the retail channel for the first year after the product was launched in August 1995, and to which the DOJ repeatedly pointed as

  • an example of Windows 95 as a “separate product.” More recent OEM versions of Windows 95 have been upgraded to provide additional benefits from the integration of important Internet Explorer technology such that removing the Internet Explorer files effectively disables the operating system.

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