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

Heading: The First Wave Agreements

Text: 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