Statement by Microsoft Corporation

Tuesday, July 28, 1998 –

In the company’s first formal response to antitrust charges filed earlier this year, Microsoft Corporation Tuesday said that the lawsuits filed by federal and state governments are
“completely groundless,”
and noted that

Microsoft decided to include Internet Explorer technologies in Windows 95 before Netscape was even founded.”

“We are working hard to prepare our case in the short time frame provided by the Court, and we are looking forward to presenting facts and legal argument in a court of law,”
said William H. Neukom, Microsoft senior vice president for law and corporate affairs.
“As the recent Appeals Court decision shows, our legal system applauds the development of better products for customers. We are looking forward to showing in court the many ways that software developers and customers benefit from Microsoft’s constant improvements to Windows.”

Microsoft’s two legal filings represent the company’s first formal responses to the allegations filed May 18 th against the company by the federal Department of Justice and 20 State Attorneys General. Tuesday’s documents provided only part of the company’s position. A more complete statement of Microsoft’s position will be provided in Microsoft’s responses to the governments’ motions for a preliminary injunction, which will be filed by August 10 th .

In Tuesday’s court papers Microsoft denied all of the essential allegations of the governments’ case against the company:

  • Microsoft argued that it had planned to integrate its Internet Explorer technologies into the Windows operating system long before rival Netscape even existed, refuting the governments’ central accusation that the company only incorporated its browser technologies into Windows in order to disadvantage Netscape.
    Microsoft decided to include Internet Explorer technologies in Windows 95 before Netscape was even founded, in response to consumer demand for Internet-enabled operating systems and the need to remain competitive with IBM’s OS/2 Warp and the Apple Macintosh, which were both being enhanced to include Internet-related technologies, including Web browsing software.”
    (Federal response paragraph #10)

  • Microsoft argued that its Internet Explorer technology is gaining popularity with consumers for the simple reason that it offers superior technology and has won virtually all of the recent independent reviews against Netscape’s Navigator browser. “Internet Explorer has won the vast majority of comparative reviews against Netscape over the past two years, and Internet Explorer is generally recognized to be superior to Netscape Navigator for computer users and software developers.”
    (Federal response paragraph #64)

  • Microsoft rejected government allegations that the company had tried to

    illegally divide the browser market

    with rival Netscape in the spring of 1995.
    “[R]epresentatives of Microsoft met with representatives of Netscape in Redmond, Washington on June 2, 1995 and again in Mountain View, California on June 21, 1995 to explore ways in which the two companies could work together to improve their respective products…Microsoft has never attempted to divide the market for Internet browser software…Microsoft has consistently provided Netscape with all the technical information.”
    (Federal response paragraph #14)

  • Microsoft rejected government allegations that the company had entered into exclusionary contracts with Internet Service Providers or Internet Content Providers. Microsoft stated
    “…that agreements between Microsoft and ISPs have never included an exclusivity provision regarding distribution of software providing web browsing functionality.”
    (Federal response paragraph #78)
    “Microsoft’s agreements with ISPs in the Internet referral server typically require ISPs to promote Internet Explorer in parity with their promotion of other web browsing software.”
    (Federal response paragraph #84)
    “Microsoft’s ICP agreements do not in any way restrict ICPs from developing content that is optimized for use with competing software providing web browsing functionality.”
    (Federal response paragraph #33)

  • The company also rejected government claims that it had illegally restricted the ability of computer manufacturers to alter the Windows desktop screen that users see when they turn on their computers for the first time. “Microsoft’s license agreements with OEMs give those OEMs broad flexibility to differentiate their products in response to perceived consumer preferences.”
    (Federal response paragraph #25)
    “Microsoft has been, and continues to be, willing to work with OEMs seeking to alter the startup sequence of Windows if Microsoft can assure itself that such alterations will not degrade the performance of Windows 98.”
    (Federal response paragraph #93)
    “Microsoft gives OEMs great flexibility to add to the Windows desktop as many icons as they want for as many different software products providing web browsing functionality (or software programs of any kind) as they want.”
    (Federal response paragraph #96)

In addition to rejecting the governments’ allegations, Microsoft Tuesday filed a counter-claim against the 20 State Attorneys General who sued Microsoft earlier this year, alleging that the State’s lawsuits unconstitutionally undermine the company’s intellectual property rights under federal law.

Like other software products, Windows 95 and Windows 98 are subject to the protections afforded by the Federal Copyright Act of 1976, enacted in accordance with Article 1, Section 8 of the Constitution. The Copyright Act states that copyright owners have the right to license their products to third parties in an unaltered form. Microsoft has asserted a counterclaim against the State Attorneys General because we believe they are inappropriately trying to use state antitrust laws to infringe Microsoft’s federal rights.

By asserting state-law claims as a basis for an order that would require Microsoft to (a) license and distribute altered versions of Windows 95 and Windows 98, and (b) allow further alteration of Microsoft’s copyrighted works by OEMs acting as Microsoft’s distributors, the Attorneys General improperly seek to impose state law restrictions on–and thereby impair–Microsoft’s rights under the Copyright Act and the Constitution.

(Counterclaim paragraph #35)

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