Opinion ID: 185418
Heading Depth: 3
Heading Rank: 5

Heading: Java

Text: 137 Java, a set of technologies developed by Sun Microsystems, is another type of middleware posing a potential threat to Windows' position as the ubiquitous platform for software development. Findings of Fact p 28. The Java technologies include: (1) a programming language; (2) a set of programs written in that language, called the Java class libraries, which expose APIs; (3) a compiler, which translates code written by a developer into bytecode; and (4) a Java Virtual Machine (JVM), which translates bytecode into instructions to the operating system. Id. p 73. Programs calling upon the Java APIs will run on any machine with a Java runtime environment, that is, Java class libraries and a JVM. Id. p p 73, 74. 138 In May 1995 Netscape agreed with Sun to distribute a copy of the Java runtime environment with every copy of Navigator, and Navigator quickly became the principal vehicle by which Sun placed copies of its Java runtime environment on the PC systems of Windows users. Id. p 76. Microsoft, too, agreed to promote the Java technologies--or so it seemed. For at the same time, Microsoft took steps to maximize the difficulty with which applications written in Java could be ported from Windows to other platforms, and vice versa. Conclusions of Law, at 43. Specifically, the District Court found that Microsoft took four steps to exclude Java from developing as a viable cross-platform threat: (a) designing a JVM incompatible with the one developed by Sun; (b) entering into contracts, the so-called First Wave Agreements, requiring major ISVs to promote Microsoft's JVM exclusively; (c) deceiving Java developers about the Windows-specific nature of the tools it distributed to them; and (d) coercing Intel to stop aiding Sun in improving the Java technologies. 139
140 The District Court held that Microsoft engaged in exclusionary conduct by developing and promoting its own JVM. Conclusions of Law, at 43-44. Sun had already developed a JVM for the Windows operating system when Microsoft began work on its version. The JVM developed by Microsoft allows Java applications to run faster on Windows than does Sun's JVM, Findings of Fact p 389, but a Java application designed to work with Microsoft's JVM does not work with Sun's JVM and vice versa. Id. p 390. The District Court found that Microsoft made a large investment of engineering resources to develop a high-performance Windows JVM, id. p 396, and, [b]y bundling its ... JVM with every copy of [IE] ... Microsoft endowed its Java runtime environment with the unique attribute of guaranteed, enduring ubiquity across the enormous Windows installed base, id. p 397. As explained above, however, a monopolist does not violate the antitrust laws simply by developing a product that is incompatible with those of its rivals. See supra Section II.B.1. In order to violate the antitrust laws, the incompatible product must have an anticompetitive effect that outweighs any procompetitive justification for the design. Microsoft's JVM is not only incompatible with Sun's, it allows Java applications to run faster on Windows than does Sun's JVM. Microsoft's faster JVM lured Java developers into using Microsoft's developer tools, and Microsoft offered those tools deceptively, as we discuss below. The JVM, however, does allow applications to run more swiftly and does not itself have any anticompetitive effect. Therefore, we reverse the District Court's imposition of liability for Microsoft's development and promotion of its JVM. 141
142 The District Court also found that Microsoft entered into First Wave Agreements with dozens of ISVs to use Microsoft's JVM. See Findings of Fact p 401 ([I]n exchange for costly technical support and other blandishments, Microsoft induced dozens of important ISVs to make their Java applications reliant on Windows-specific technologies and to refrain from distributing to Windows users JVMs that complied with Sun's standards.). Again, we reject the District Court's condemnation of low but non-predatory pricing by Microsoft. 143 To the extent Microsoft's First Wave Agreements with the ISVs conditioned receipt of Windows technical information upon the ISVs' agreement to promote Microsoft's JVM exclusively, they raise a different competitive concern. The District Court found that, although not literally exclusive, the deals were exclusive in practice because they required developers to make Microsoft's JVM the default in the software they developed. Id. p 401. 144 While the District Court did not enter precise findings as to the effect of the First Wave Agreements upon the overall distribution of rival JVMs, the record indicates that Microsoft's deals with the major ISVs had a significant effect upon JVM promotion. As discussed above, the products of First Wave ISVs reached millions of consumers. Id. p 340. The First Wave ISVs included such prominent developers as Rational Software, see GX 970, reprinted in 15 J.A. at 999410000, a world leader in software development tools, see Direct Testimony of Michael Devlin p 2, reprinted in 5 J.A. at 3520, and Symantec, see GX 2071, reprinted in 22 J.A. at 14960-66 (sealed), which, according to Microsoft itself, is the leading supplier of utilities such as anti-virus software, Defendant's Proposed Findings of Fact p 276, reprinted in 3 J.A. at 1689. Moreover, Microsoft's exclusive deals with the leading ISVs took place against a backdrop of foreclosure: the District Court found that [w]hen Netscape announced in May 1995 [prior to Microsoft's execution of the First Wave Agreements] that it would include with every copy of Navigator a copy of a Windows JVM that complied with Sun's standards, it appeared that Sun's Java implementation would achieve the necessary ubiquity on Windows. Findings of Fact p 394. As discussed above, however, Microsoft undertook a number of anticompetitive actions that seriously reduced the distribution of Navigator, and the District Court found that those actions thereby seriously impeded distribution of Sun's JVM. Conclusions of Law, at 43-44. Because Microsoft's agreements foreclosed a substantial portion of the field for JVM distribution and because, in so doing, they protected Microsoft's monopoly from a middleware threat, they are anticompetitive. 145 Microsoft offered no procompetitive justification for the default clause that made the First Wave Agreements exclusive as a practical matter. See Findings of Fact p 401. Because the cumulative effect of the deals is anticompetitive and because Microsoft has no procompetitive justification for them, we hold that the provisions in the First Wave Agreements requiring use of Microsoft's JVM as the default are exclusionary, in violation of the Sherman Act. 146
147 Microsoft's Java implementation included, in addition to a JVM, a set of software development tools it created to assist ISVs in designing Java applications. The District Court found that, not only were these tools incompatible with Sun's cross-platform aspirations for Java--no violation, to be sure-but Microsoft deceived Java developers regarding the Windows-specific nature of the tools. Microsoft's tools included certain 'keywords' and 'compiler directives' that could only be executed properly by Microsoft's version of the Java runtime environment for Windows. Id. p 394; see also Direct Testimony of James Gosling p 58, reprinted in 21 J.A. at 13959 (Microsoft added programming instructions ... that alter the behavior of the code.). As a result, even Java developers who were opting for portability over performance ... unwittingly [wrote] Java applications that [ran] only on Windows. Conclusions of Law, at 43. That is, developers who relied upon Microsoft's public commitment to cooperate with Sun and who used Microsoft's tools to develop what Microsoft led them to believe were cross-platform applications ended up producing applications that would run only on the Windows operating system. 148 When specifically accused by a PC Week reporter of fragmenting Java standards so as to prevent cross-platform uses, Microsoft denied the accusation and indicated it was only adding rich platform support to what remained a crossplatform implementation. An e-mail message internal to Microsoft, written shortly after the conversation with the reporter, shows otherwise: 149 [O]k, i just did a followup call.... [The reporter] liked that i kept pointing customers to w3c standards [(commonly observed internet protocols)].... [but] he accused us of being schizo with this vs. our java approach, i said he misunderstood [--] that [with Java] we are merely trying to add rich platform support to an interop layer.... this plays well.... at this point its [sic] not good to create MORE noise around our win32 java classes. instead we should just quietly grow j [(Microsoft's development tools)] share and assume that people will take more advantage of our classes without ever realizing they are building win32-only java apps. 150 GX 1332, reprinted in 22 J.A. at 14922-23. 151 Finally, other Microsoft documents confirm that Microsoft intended to deceive Java developers, and predicted that the effect of its actions would be to generate Windows-dependent Java applications that their developers believed would be cross-platform; these documents also indicate that Microsoft's ultimate objective was to thwart Java's threat to Microsoft's monopoly in the market for operating systems. One Microsoft document, for example, states as a strategic goal: Kill cross-platform Java by grow[ing] the polluted Java market. GX 259, reprinted in 22 J.A. at 14514; see also id. (Cross-platform capability is by far the number one reason for choosing/using Java.) (emphasis in original). 152 Microsoft's conduct related to its Java developer tools served to protect its monopoly of the operating system in a manner not attributable either to the superiority of the operating system or to the acumen of its makers, and therefore was anticompetitive. Unsurprisingly, Microsoft offers no procompetitive explanation for its campaign to deceive developers. Accordingly, we conclude this conduct is exclusionary, in violation of 2 of the Sherman Act. 153
154 The District Court held that Microsoft also acted unlawfully with respect to Java by using its monopoly power to prevent firms such as Intel from aiding in the creation of cross-platform interfaces. Conclusions of Law, at 43. In 1995 Intel was in the process of developing a highperformance, Windows-compatible JVM. Microsoft wanted Intel to abandon that effort because a fast, cross-platform JVM would threaten Microsoft's monopoly in the operating system market. At an August 1995 meeting, Microsoft's Gates told Intel that its cooperation with Sun and Netscape to develop a Java runtime environment ... was one of the issues threatening to undermine cooperation between Intel and Microsoft. Findings of Fact p 396. Three months later, Microsoft's Paul Maritz told a senior Intel executive that Intel's [adaptation of its multimedia software to comply with] Sun's Java standards was as inimical to Microsoft as Microsoft's support for non-Intel microprocessors would be to Intel. Id. p 405. 155 Intel nonetheless continued to undertake initiatives related to Java. By 1996 Intel had developed a JVM designed to run well ... while complying with Sun's cross-platform standards. Id. p 396. In April of that year, Microsoft again urged Intel not to help Sun by distributing Intel's fast, Suncompliant JVM. Id. And Microsoft threatened Intel that if it did not stop aiding Sun on the multimedia front, then Microsoft would refuse to distribute Intel technologies bundled with Windows. Id. p 404. 156 Intel finally capitulated in 1997, after Microsoft delivered the coup de grace. 157 [O]ne of Intel's competitors, called AMD, solicited support from Microsoft for its 3DX technology.... Microsoft's Allchin asked Gates whether Microsoft should support 3DX, despite the fact that Intel would oppose it. Gates responded: If Intel has a real problem with us supporting this then they will have to stop supporting Java Multimedia the way they are. I would gladly give up supporting this if they would back off from their work on JAVA. 158 Id. p 406. 159 Microsoft's internal documents and deposition testimony confirm both the anticompetitive effect and intent of its actions. See, e.g., GX 235, reprinted in 22 J.A. at 14502 (Microsoft executive, Eric Engstrom, included among Microsoft's goals for Intel: Intel to stop helping Sun create Java 160 Multimedia APIs, especially ones that run well ... on Windows.); Deposition of Eric Engstrom at 179 (We were successful [in convincing Intel to stop aiding Sun] for some period of time.). 161 Microsoft does not deny the facts found by the District Court, nor does it offer any procompetitive justification for pressuring Intel not to support cross-platform Java. Microsoft lamely characterizes its threat to Intel as advice. The District Court, however, found that Microsoft's advice to Intel to stop aiding cross-platform Java was backed by the threat of retaliation, and this conclusion is supported by the evidence cited above. Therefore we affirm the conclusion that Microsoft's threats to Intel were exclusionary, in violation of 2 of the Sherman Act.