Opinion ID: 185418
Heading Depth: 4
Heading Rank: 2

Heading: Microsoft's justifications for the license restrictions

Text: 80 Microsoft argues that the license restrictions are legally justified because, in imposing them, Microsoft is simply exercising its rights as the holder of valid copyrights. Appellant's Opening Br. at 102. Microsoft also argues that the licenses do not unduly restrict the opportunities of Netscape to distribute Navigator in any event. Id. 81 Microsoft's primary copyright argument borders upon the frivolous. The company claims an absolute and unfettered right to use its intellectual property as it wishes: [I]f intellectual property rights have been lawfully acquired, it says, then their subsequent exercise cannot give rise to antitrust liability. Appellant's Opening Br. at 105. That is no more correct than the proposition that use of one's personal property, such as a baseball bat, cannot give rise to tort liability. As the Federal Circuit succinctly stated: Intellectual property rights do not confer a privilege to violate the antitrust laws. In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000). 82 Although Microsoft never overtly retreats from its bold and incorrect position on the law, it also makes two arguments to the effect that it is not exercising its copyright in an unreasonable manner, despite the anticompetitive consequences of the license restrictions discussed above. In the first variation upon its unqualified copyright defense, Microsoft cites two cases indicating that a copyright holder may limit a licensee's ability to engage in significant and deleterious alterations of a copyrighted work. See Gilliam v. ABC, 538 F.2d 14, 21 (2d Cir. 1976); WGN Cont'l Broad. Co. v. United Video, Inc., 693 F.2d 622, 625 (7th Cir. 1982). The relevance of those two cases for the present one is limited, however, both because those cases involved substantial alterations of a copyrighted work, see Gilliam, 538 F.2d at 18, and because in neither case was there any claim that the copyright holder was, in asserting its rights, violating the antitrust laws, see WGN Cont'l Broad., 693 F.2d at 626; see also Cmty. for Creative NonViolence v. Reid, 846 F.2d 1485, 1498 (D.C. Cir. 1988) (noting, again in a context free of any antitrust concern, that an author [ ] may have rights against a licensee that excessively mutilated or altered the copyrighted work). 83 The only license restriction Microsoft seriously defends as necessary to prevent a substantial alteration of its copyrighted work is the prohibition on OEMs automatically launching a substitute user interface upon completion of the boot process. See Findings of Fact p 211 ([A] few large OEMs developed programs that ran automatically at the conclusion of a new PC system's first boot sequence. These programs replaced the Windows desktop either with a user interface designed by the OEM or with Navigator's user interface.). We agree that a shell that automatically prevents the Windows desktop from ever being seen by the user is a drastic alteration of Microsoft's copyrighted work, and outweighs the marginal anticompetitive effect of prohibiting the OEMs from substituting a different interface automatically upon completion of the initial boot process. We therefore hold that this particular restriction is not an exclusionary practice that violates 2 of the Sherman Act. 84 In a second variation upon its copyright defense, Microsoft argues that the license restrictions merely prevent OEMs from taking actions that would reduce substantially the value of Microsoft's copyrighted work: that is, Microsoft claims each license restriction in question is necessary to prevent OEMs from so altering Windows as to undermine the principal value of Windows as a stable and consistent platform that supports a broad range of applications and that is familiar to 85 users. Appellant's Opening Br. at 102. Microsoft, however, never substantiates this claim, and, because an OEM's altering the appearance of the desktop or promoting programs in the boot sequence does not affect the code already in the product, the practice does not self-evidently affect either the stability or the consistency of the platform. See Conclusions of Law, at 41; Findings of Fact p 227. Microsoft cites only one item of evidence in support of its claim that the OEMs' alterations were decreasing the value of Windows. Defendant's Trial Exhibit (DX) 2395 at MSV0009378A, reprinted in 19 J.A. at 12575. That document, prepared by Microsoft itself, states: there are quality issues created by OEMs who are too liberal with the pre-install process, referring to the OEMs' installation of Windows and additional software on their PCs, which the document says may result in user concerns and confusion. To the extent the OEMs' modifications cause consumer confusion, of course, the OEMs bear the additional support costs. See Findings of Fact p 159. Therefore, we conclude Microsoft has not shown that the OEMs' liberality reduces the value of Windows except in the sense that their promotion of rival browsers undermines Microsoft's monopoly--and that is not a permissible justification for the license restrictions. 86 Apart from copyright, Microsoft raises one other defense of the OEM license agreements: It argues that, despite the restrictions in the OEM license, Netscape is not completely blocked from distributing its product. That claim is insufficient to shield Microsoft from liability for those restrictions because, although Microsoft did not bar its rivals from all means of distribution, it did bar them from the cost-efficient ones. 87 In sum, we hold that with the exception of the one restriction prohibiting automatically launched alternative interfaces, all the OEM license restrictions at issue represent uses of Microsoft's market power to protect its monopoly, unredeemed by any legitimate justification. The restrictions therefore violate 2 of the Sherman Act.