The Browser Wars: From computers to the courtroom

Microsoft contends that the Justice Department's case is fundamentally flawed

By Marc Saltzman
Special to CNN Interactive

(CNN) -- Microsoft and the Justice Department have over the last year squared off in court time and again over the anti-trust case against the software giant. Here's a look-back at how it all began:

Business practices in question

On October 20, 1997, the Justice Department filed a motion in Federal District Court, alleging that Microsoft had violated a 1995 consent decree. That decree prohibited Microsoft from imposing various anti-competitive terms in its contracts with PC original equipment manufacturers (OEMs), which pre-install Microsoft's operating system software products on the computers they sell.

More specifically, the suit protested Microsoft's decision to bundle its Internet Explorer browser with Windows 95 and force computer makers to install its browser as a condition of using its popular operating software.

Considering Microsoft's Windows operating systems are installed on more than 90 percent of the world's personal computers, browser rivals such as Netscape Communications have been protesting that Microsoft has an unfair advantage since OEMs are forced to bundle the Internet Explorer browser with Windows 95.

Microsoft responded to the Justice Department by maintaining that the consent decree specifically allows Microsoft to integrate new features into its Windows operating systems, such as its proprietary browser.

Browser views:
Netscape	Microsoft
	Netscape
Statement by Chris Holton, manager of Netscape's corporate public relations: "What Netscape and many other software companies want and what everyone in the world should demand is a level playing field in the software industry so people have choice. Without choice, we would all wear the same shoes, buy the same make of car, and have exactly the same software programs on our computers. "As we shift into the Digital Age and use our computers to obtain news and do commerce online, we run the risk of severely concentrating control of distribution of goods and services, including such vital services as news and banking through one primary source, Microsoft. "We believe enforcement of the antitrust laws is necessary in order to keep our economy open so that more than a single company can compete fairly in the digital economy. It's a very important public policy issue facing our country today."
	Microsoft
Microsoft's Jim Cullinan, manager of corporate public relations in Redmond, Washington, believes Windows must evolve to incorporate what its users want in an operating system, and denies Microsoft is disallowing consumers a choice on what to use as their window to the Internet. "We want freedom for Microsoft and other companies to be able to innovate and integrate new features into their products," says Cullinan. "This is a multibillion dollar industry, and there's more venture capital going into software developers than ever before. ... There's always tremendous opportunity ... especially with our competitors publicly talking about replacing Windows, such as Java, and Netscape rumored to upgrade and expand." Cullinan reasserts that manufacturers have the right to ship PCs with a Netscape icon on the Windows 95 desktop, and emphasizes that Netscape still has the dominant share of Internet browsers on all computers.

Furthermore, Microsoft argued, there is nothing in its licensing agreements that prevents computer manufacturers from including Netscape's browser or other competitors' software along with the Windows operating system.

In contempt of court?

On December 11, U.S. District Judge Thomas Penfield Jackson temporarily blocked Microsoft from requiring PC makers to include Explorer pending further review. Microsoft complied while it filed an appeal, but it was how they complied that heated things up considerably.

Microsoft said it would continue to ship the full Windows 95 product, including its Internet Explorer browser, but OEMs could remove all the files that are included in the retail version of Internet Explorer 3.0 with a warning from Microsoft that the stripped-down version would not perform as originally designed.

Alternatively, Microsoft said it would also license out the first version of Windows 95 (shipped August 1995) with all of the Internet Explorer functions stripped.

The Justice Department swiftly accused Microsoft of attempting to flout the judge's ruling. Jackson denied the Justice Department's petition for an order holding Microsoft in contempt of court (at a proposed fine of $1 million a day) for allegedly violating the consent decree, and sided with Microsoft that further investigations were necessary before any official decision can be made.

In January 1998, Microsoft and federal regulators argued in court for two days over the Justice Department's contention that Microsoft was strong-arming OEMs and using its monopoly power to illegally drive out competition.

A few days later, a preliminary antitrust settlement was established between the two parties. Under this arrangement, Microsoft allowed OEMs to remove the Internet Explorer desktop icon from the Windows 95 desktop. However, the larger issue -- whether Microsoft violated the original 1995 consent decree -- remained unsettled.

On January 30, Microsoft argued that the Justice Department's case is fundamentally flawed and pushed a federal appeals court to overturn the ruling.

In early March, attorneys general from 27 states filed a brief in federal court backing the Justice Department's antitrust investigation, saying Judge Jackson had not come down hard enough on Microsoft during the last few months. The states were immediately joined by the European Commission and Japanese trade officials.

Then possibly as an act of good faith, Microsoft announced it had revised agreements with more than 40 large Internet service providers, allowing them to promote non-Microsoft browser software.

While awaiting an appeal date, Microsoft President Bill Gates took part in a Senate hearing with rival corporations and industry experts. Much of the debate focused on the definition of the word monopoly.

In rebuttal, Gates maintained that Microsoft's operating systems were growing to accommodate new technology and the company does not desire to monopolize the computer software industry. He also argued government control would only restrict innovation, not promote it.

A three-judge panel began hearing Microsoft's appeal on April 21. It could take weeks for them to reach a decision.

Fighting battle outside the courtroom

In the weeks leading up to the hearing, Microsoft tried to gain public support with a number of advertisements in major newspapers across the country. Not a bad idea, considering the results collected from marketing research firm Techtel Corp. which suggest Microsoft's image had been severely tarnished, likely due to the ongoing investigation. In a recent home PC user survey, Microsoft's approval level was at an all-time low.

One of the Microsoft ads reads: "Every wave of innovation and integration creates another wave of great ideas ... imagine if someone had tried to stop innovation in automobiles in the 1920s, or TVs in the 1950s ... in the same way no one should try to freeze software innovation in 1998."

Meanwhile, the Justice Department is also allegedly considering antitrust charges related to the upcoming Windows 98 operating system, scheduled to be released June 25.

To make matters worse for Microsoft, 11 states reportedly have joined forces to prepare their own antitrust case, concerned that the Justice Department is moving too slowly to consider government violations surrounding Windows 98.

To appease the Justice Department further, last week Microsoft altered its contracts with "push" content providers such as AOL, Disney and the Pointcast news service, allowing them to promote and use other Internet browsers -- not contract solely with the Active Channel portion of Microsoft's Internet Explorer 4.0.

And even though Netscape has an edge over Microsoft in the browser market, Microsoft is rapidly gaining ground in that area. The software giant's share in the browser market was up 19 percent during the fourth quarter of 1996, according to PC Magazine. Part of that success was due to the fact that Microsoft gave away Internet Explorer for free, while Netscape continued to charge for its browser up until a few months ago.

Cullinan hopes the appeals case will prove the court's preliminary injunction wasn't grounded and executed properly, resulting in the order being overturned. Then, he says, Microsoft can get back to business.