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For those who assume that the Microsoft vs Netscape thing was only simple
business matter of competing with a superior browser, herewith is Judge
Jackson's detailing of the techniques which Microsoft employed to prevent
Netscape from deploying a fully functional browser i.e. a browser which
exposed Application Programming Interfaces which could be used to support
applications, on Win95 (similarly detailed are anti-competitive actions
taken against Intel, Apple, RealNetworks, IBM, and others):
A. Microsoft's Attempt to Dissuade Netscape from Developing Navigator as a
Platform
79. Microsoft's first response to the threat posed by Navigator was an
effort to persuade Netscape to structure its business such that the company
would not distribute platform-level browsing software for Windows. Netscape'
s assent would have ensured that, for the foreseeable future, Microsoft
would produce the only platform-level browsing software distributed to run
on Windows. This would have eliminated the prospect that non-Microsoft
browsing software could weaken the applications barrier to entry.
80. Executives at Microsoft received confirmation in early May 1995 that
Netscape was developing a version of Navigator to run on Windows 95, which
was due to be released in a couple of months. Microsoft's senior executives
understood that if they could prevent this version of Navigator from
presenting alternatives to the Internet-related APIs in Windows 95, the
technologies branded as Navigator would cease to present an alternative
platform to developers. Even if non-Windows versions of Navigator exposed
Internet-related APIs, applications written to those APIs would not run on
the platform Microsoft executives expected to enjoy the largest installed
base, i.e., Windows 95. So, as long as the version of Navigator written for
Windows 95 relied on Microsoft's Internet-related APIs instead of exposing
its own, developing for Navigator would not mean developing cross-platform.
Developers of network-centric applications thus would not be drawn to
Navigator's APIs in substantial numbers. Therefore, with the encouragement
and support of Gates, a group of Microsoft executives commenced a campaign
in the summer of 1995 to convince Netscape to halt its development of
platform-level browsing technologies for Windows 95.
81. In a meeting held at Microsoft's headquarters on June 2, 1995, Microsoft
executives suggested to Jim Clark's replacement as CEO at Netscape, James
Barksdale, that the version of Navigator written for Windows 95 be designed
to rely upon the Internet-related APIs in Windows 95 and distinguish itself
with "value-added" software components. The Microsoft executives left unsaid
the fact that value-added software, by definition, does not present a
significant platform for applications development. For his part, Barksdale
informed the Microsoft representatives that the browser represented an
important part of Netscape's business strategy and that Windows 3.1 and
Windows 95 were expected to be the primary platforms for which Navigator
would be distributed.
82. At the conclusion of the June 2 meeting, Microsoft still did not know
whether or not Netscape intended to preserve Navigator's own platform
capabilities and expand the set of APIs that it exposed to developers. In
the hope that Netscape could still be persuaded to forswear any platform
ambitions and instead rely on the Internet technologies in Windows 95,
Microsoft accepted Barksdale's invitation to send a group of representatives
to Netscape's headquarters for a technology "brainstorming session" on June
21. Netscape's senior executives saw the meeting as an opportunity to ask
Microsoft for access to crucial technical information, including certain
APIs, that Netscape needed in order to ensure that Navigator would work well
on systems running Windows 95.
83. Early in the June 21 meeting, Microsoft representatives told Barksdale
and the other Netscape executives present that they wanted to explore the
possibility of building a broader and closer relationship between the two
companies. To this end, the Microsoft representatives wanted to know whether
Netscape intended to adopt and build on top of the Internet-related platform
that Microsoft planned to include in Windows 95, or rather to expose its own
Internet-related APIs, which would compete with Microsoft's. If Netscape was
not committed to providing an alternative platform for network-centric
applications, Microsoft would assist Netscape in developing server- and (to
a limited extent) PC-based software applications that relied on Microsoft's
Internet technologies. For one thing, the representatives explained,
Microsoft would be content to leave the development of browser products for
the Mac OS, UNIX, and Microsoft's 16-bit operating system products to
Netscape. Alternatively, Netscape could license to Microsoft the underlying
code for a Microsoft-branded browser to run on those platforms. The
Microsoft representatives made it clear, however, that Microsoft would be
marketing its own browser for Windows 95, and that this product would rely
on Microsoft's platform-level Internet technologies. If Netscape marketed
browsing software for Windows 95 based on different technologies, then
Microsoft would view Netscape as a competitor, not a partner.
84. When Barksdale brought the discussion back to the particular Windows 95
APIs that Netscape actually wanted to rely on and needed from Microsoft, the
representatives from Microsoft explained that if Netscape entered a "special
relationship" with Microsoft, the company would treat Netscape as a
"preferred ISV." This meant that Netscape would enjoy preferential access to
technical information, including APIs. They intimated that Microsoft's
internal developers had already created the APIs that Netscape was seeking,
and that Microsoft had not yet decided either which ISVs would be privileged
to receive them or when access would be granted. The Microsoft
representatives made clear that the alacrity with which Netscape would
receive the desired Windows 95 APIs and other technical information would
depend on whether Netscape entered this "special relationship" with
Microsoft.
85. After listening to Microsoft's proposal, Barksdale had two main
questions: First, where would the line between platform (Microsoft's
exclusive domain) and applications (where Netscape could continue to
function) be situated? Second, who would get to decide where the line would
lie? After all, the attractiveness of a special relationship with Microsoft
depended a great deal on how much room would remain for Netscape to innovate
and seek profit. The Microsoft representatives replied that Microsoft would
incorporate most of the functionality of the current Netscape browser into
the Windows 95 platform, perhaps leaving room for Netscape to distribute a
user-interface shell. Where Netscape would have the most scope to innovate
would be in the development of software "solutions," which are applications
(mainly server-based) focused on meeting the needs of specific types of
commercial users. Since such applications are already minutely calibrated to
the needs of their users, they do not present platforms for the development
of more specific applications. Although the representatives from Microsoft
assured Barksdale that the line between platform and solutions was fixed by
a collaborative decision-making process between Microsoft and its ISV
partners, those representatives had already indicated that the space
Netscape would be allowed to occupy between the user and Microsoft's
platform domain was a very narrow one. Simply put, if Navigator exposed APIs
that competed for developer attention with the Internet-related APIs
Microsoft was planning to build into its platform, Microsoft would regard
Netscape as a trespasser on its territory.
86. The Microsoft representatives did not insist at the June 21 meeting that
Netscape executives accept their proposal on the spot. For his part,
Barksdale said only that he would like more information regarding where
Microsoft proposed to place the line between its platform and Netscape's
applications. In the ensuing, more technical discussions, the Netscape
executives agreed to adopt one component of Microsoft's platform-level
Internet technology called Internet Shortcuts. The meeting ended cordially,
with both sides promising to keep the lines of communication open.
87. The executive who led Microsoft's contingent on June 21, Daniel Rosen,
emerged from the meeting optimistic that Netscape would abandon its platform
ambitions in exchange for special help from Microsoft in developing
solutions. His sentiments were not shared by another Microsoft participant,
Thomas Reardon, who had not failed to notice the Netscape executives grow
tense when the Microsoft representatives referred to incorporating Navigator
's functionality into Windows. Reardon predicted that Netscape would compete
with almost all of Microsoft's platform-level Internet technologies. Once he
heard both viewpoints, Gates concluded that Rosen was being a bit naive and
that Reardon had assessed the situation more accurately. In the middle of
July 1995, Rosen's superiors instructed him to drop the effort to reach a
strategic concord with Netscape.
88. Had Netscape accepted Microsoft's proposal, it would have forfeited any
prospect of presenting a comprehensive platform for the development of
network-centric applications. Even if the versions of Navigator written for
the Mac OS, UNIX, and 16-bit Windows had continued to expose APIs controlled
by Netscape, the fact that Netscape would not have marketed any platform
software for Windows 95, the operating system that was destined to become
dominant, would have ensured that, for the foreseeable future, too few
developers would rely on Navigator's APIs to create a threat to the
applications barrier to entry. In fact, although the discussions ended
before Microsoft was compelled to demarcate precisely where the boundary
between its platform and Netscape's applications would lie, it is unclear
whether Netscape's acceptance of Microsoft's proposal would have left the
firm with even the ability to survive as an independent business.
89. At the time Microsoft presented its proposal, Navigator was the only
browser product with a significant share of the market and thus the only one
with the potential to weaken the applications barrier to entry. Thus, had it
convinced Netscape to accept its offer of a "special relationship,"
Microsoft quickly would have gained such control over the extensions and
standards that network-centric applications (including Web sites) employ as
to make it all but impossible for any future browser rival to lure
appreciable developer interest away from Microsoft's platform.
B. Withholding Crucial Technical Information
90. Microsoft knew that Netscape needed certain critical technical
information and assistance in order to complete its Windows 95 version of
Navigator in time for the retail release of Windows 95. Indeed, Netscape
executives had made a point of requesting this information, especially the
so-called Remote Network Access ("RNA") API, at the June 21 meeting. As was
discussed above, the Microsoft representatives at the meeting had responded
that the haste with which Netscape received the desired technical
information would depend on whether Netscape entered the so-called "special
relationship" with Microsoft. Specifically, Microsoft representative J.
Allard had told Barksdale that the way in which the two companies concluded
the meeting would determine whether Netscape received the RNA API
immediately or in three months.
91. Although Netscape declined the special relationship with Microsoft, its
executives continued, over the weeks following the June 21 meeting, to plead
for the RNA API. Despite Netscape's persistence, Microsoft did not release
the API to Netscape until late October, i.e., as Allard had warned, more
than three months later. The delay in turn forced Netscape to postpone the
release of its Windows 95 browser until substantially after the release of
Windows 95 (and Internet Explorer) in August 1995. As a result, Netscape was
excluded from most of the holiday selling season.
92. Microsoft similarly withheld a scripting tool that Netscape needed to
make its browser compatible with certain dial-up ISPs. Microsoft had
licensed the tool freely to ISPs that wanted it, and in fact had cooperated
with Netscape in drafting a license agreement that, by mid-July 1996, needed
only to be signed by an authorized Microsoft executive to go into effect.
There the process halted, however. In mid-August, a Microsoft representative
informed Netscape that senior executives at Microsoft had decided to link
the grant of the license to the resolution of all open issues between the
companies. Netscape never received a license to the scripting tool, and as a
result, was unable to do business with certain ISPs for a time.
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