Just as Microsoft Corp settled its antitrust case, it seems fitting that the spectre of the Addamax Corp antitrust suit against the Open Software Foundation, Digital Equipment Corp and Hewlett-Packard Co should again loom large. Back in 1990 the Software Foundation chose SecureWare Inc of Atlanta, Georgia over Champaign, Illinois-based Addamax to provide the technical basis for its secure Unix offering, prompting Addamax to launch its $100m antitrust action a year later. Addamax lawyers Kelley Drye & Warren and Warner & Stackpole have now filed their brief with the federal courts, opposing a long-standing motion by the Software Foundation and others for summary judgement, an attempt to get the case thrown out of court.
Going to trial
It is now up to the courts to decide whether the case will go to trial. The 61-page memorandum outlines some of the case Addamax might bring and how the Software Foundation would refute it. Addamax’s contentions are based on the assertion – which its lawyers maintain is recorded in the Software Foundation documents and the sworn testimony of its officers and employees – that the Foundation was from its inception a deception, and nothing more than an agreement among the leading vendors of proprietary computer systems to fend off the proponents of a ‘whole new approach to computing,’ namely the open systems movement, as represented by AT&T Corp and Sun Microsystems Inc. It says that to derail open systems required preventing the standardisation or industry-wide acceptance of software technologies the Software Foundation sponsors did not control. Thus an essential mission of the Software Foundation was to use the combined market power of its sponsors to manipulate input markets for component technologies, a nefarious goal accomplished through a rigged Request for Technology mechanism publicly touted as unbiased but in practice a way to promote sponsors’ interests and stifle innovation and displace existing or emerging standard technology with sponsor or sponsor affiliated technology. Since Addamax did not advance the interests of the sponsors, says the brief, it was rejected after an essentially fake evaluation pre-ordained to pick SecureWare, a vendor strategic to Hewlett-Packard, in a process that was rigged by Hewlett-Packard, assented to by DEC, and colluded in by SecureWare. Since the Software Foundation indisputedly functioned as a joint purchasing arrangement for its sponsors, Addamax claims – and this is its key point – it was damaged and the market for trusted systems destroyed not only by the defendants’ monopoly power but also by its monopsony power, that is, the ability of a buyer to reduce the price of a purchased item below the competitive level by restricting purchases of it. Economists uniformly recognise – or at least this is what the Addamax Corp lawyers contend – that the lower input prices commanded by monopsonists do not translate into lower consumer prices. To the contrary, where the monopsonists control a large share of the output, like the computer systems market – and destroy competition by reducing demand in the input market – the price of the finished goods will actually rise.
Monopsony
The Addamax memorandum contends the Software Foundation sponsors exercised monopsony power in the trusted system security software input market which lowered the price of input below competing levels, thereby destroying the market for software and injuring Addamax. It claims the Software Foundation security negotiator Doug Hartman told Addamax to bid its technology development costs which Addamax put at $7m. The Software Foundation wanted to purchase the technology for six figures. Addamax protested a price below development costs would put it out of business and Hartman concurred, says the document. Addamax claims that the Software Foundation destroyed the market for Remote Procedure Call technology in the same way and injured Netwise Inc. Addamax also claims the Software Foundation’s formation was, per se, unlawful under the Sherman Antitrust Act and contends
its anti-competitive nature is proven by the fact it never produced any new products or performed any significant research and development. It also claims the Software Foundation was completely in the sway of its sponsors who not only dominated the board but made sure the Software Foundation followed their wishes by installing their own employees – on temporary sabbatical from the sponsors – in key policy-making positions, by staffing technology review committees with former or on-loan sponsor employees and by naming former or on-loan sponsor employees as authors of the technology criteria documents. This total control, coupled with the Software Foundation’s failure to produce a new product, indicates, it says, that OSF was nothing more than a mere instrumentality of its sponsors formed to thwart the movement towards open systems, and quotes the Software Foundation’s head of engineering, Roger Gourd as saying We should not pretend we are here ‘for the good of the industry’ – that does not put bread on [the sponsors’] tables. Addamax notes that the Software Foundation, by reducing both the input and output markets and by the fact that it produced no new products, could not have resulted in enhanced product quality. It says OSF’s own internal documents state that the sponsors’ products offered through OSF were no better and in many cases were not as good as products already on the market.
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Addamax also wonders if the Software Foundation has a right to exist, based as it is on the National Co-operative Research Act of 1984, and comments that at best the Software Foundation is an advertising agency whose mandate is to promote products, developed and integrated primarily by others. Meantime the Foundation will outline its vision of the future for distributed computing in a document called The Open Computing Infrastructure. Open Computing Infrastructure is based on the Distributed Computing Environment and is also likely to include completed elements of the Distributed Management Environment, the Common Desktop Environment, plus other technologies and products providing distributed portability, interoperability and scalability. This includes whatever can be mustered by the Common Open Software Environment folks. The Software Foundation’s Architecture Planning Council, which met in Cambridge, Massachusetts for the first time last month, is working on the project. It will meet again in September, when the User Council will supply it with a list of the technologies that it wants included. The Software Foundation will also establish one of its Pre-Structured Technology processes so that vendors can submit other interoperability and portability solutions. The document will not be ready before the end of September; a detailed technical roadmap will follow.
