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November 30, 1998

MICROSOFT SAYS OEMS “HAD THE FREEDOM TO CHOOSE”

By CBR Staff Writer

Microsoft lawyers spent Monday picking holes in the testimony of economist Frederick Warren-Boulton, a government witness who has been arguing that Microsoft had used its monopoly position to restrict Netscape’s ability to get its browser out to users. Microsoft lawyer Michael Lacovara spent much of the session refuting allegations made during Warren-Boulton’s testimony, and challenging the underlying information used to back up those claims. Microsoft sought to show that it had allowed its OEMs to customize the Windows desktop, with their own graphics, branding, software products and links. It had struck only 20 or so agreements with internet content providers out of tens of thousands, and had later de-emphasized even those deals. And it had made deals with only two to three dozen internet service providers, and none was exclusive.

Successfully negotiated

OEMs such as Gateway Inc and Hewlett-Packard Co had successfully negotiated with Microsoft to customize boot-up schemes and browsers, said Lacovara. But Gateway, with its Browser Choice scheme enabling users to choose either Internet Explorer or Netscape Navigator, was an exception insisted Warren-Boulton, and only applied to a sub-set of its product line. But Lacovara accused him of excluding any mention of the deal, and other similar ones, from his original testimony. Lacovara also pointed to the use of a shell browser supplied by Encompass Inc to Hewlett-Packard Co, Acer Inc and Compaq Computer Co, which enabled OEMs to customize the look of IE, remove Microsoft branding and replace it with their own. Encompass, not available for Netscape browsers, was out on around 70% of PCs using IE, said Lacovara. Warren-Boulton argued that the user interface was irrelevant, and that it was the underlying technology, affecting developers, that was the issue. On content providers, Lacovara argued that companies such as Disney, the Hearst Corporation and Hollywood Online had all come to an agreement with Microsoft over dual support of IE and Navigator. Integrated content, push technology and Microsoft’s Active Desktop had all turned out to be less important than either Microsoft or Netscape had predicted, and all those Microsoft agreements had now lapsed in any case, the court heard. On ISPs, Lacovara argued that America Online Inc had insisted on – and won – the concession to be included in the Online Service Folder of Windows 95, even though it already had separate agreements with OEMs to have its icon put directly on the desktop. Warren-Boulton claimed that Microsoft had significantly relaxed its licensing rules in June 1998, but by then the game was already over as Microsoft had signed exclusivity agreements with most of the important providers. Throughout the session, Lacovara cast doubt on Warren-Boulton’s knowledge of the terms of contracts and other crucial documents, such as Microsoft’s OPK OEM pre-installation kit agreement. He also attempted to show – often successfully – the limits of Warren-Boulton’s technical knowledge. But Lacavora’s disjointed and time-consuming cross-examination appeared to irritate Judge Thomas Penfield Jackson, who looked bored by the proceedings and took few notes.

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