Court Opinion

ID: 185418
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:31:50+00
Date Added: 2024-06-11T09:13:25.278493
License: Public Domain

253 F.3d 34 (D.C. Cir. 2001)
United States of America, Appelleev.Microsoft Corporation, Appellant
No. 00-5212 and 00-5213
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 26 and 27, 2001Decided June 28, 2001

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Appeals from the United States District Court  for the District of Columbia (No. 98cv01232) (No. 98cv01233) Richard J. Urowsky and Steven L. Holley argued the  causes for appellant.  With them on the briefs were John L. Warden, Richard C. Pepperman, II, William H. Neukom,  Thomas W. Burt, David A. Heiner, Jr., Charles F. Rule,  Robert A. Long, Jr., and Carter G. Phillips.  Christopher J.  Meyers entered an appearance.
Lars H. Liebeler, Griffin B. Bell, Lloyd N. Cutler, Louis R.  Cohen, C. Boyden Gray, William J. Kolasky, William F.  Adkinson, Jr., Jeffrey D. Ayer, and Jay V. Prabhu were on  the brief of amici curiae The Association for Competitive  Technology and Computing Technology Industry Association  in support of appellant.
David R. Burton was on the brief for amicus curiae  Center for the Moral Defense of Capitalism in support of  appellant.
Robert S. Getman was on the brief for amicus curiae  Association for Objective Law in support of appellant.
Jeffrey P. Minear and David C. Frederick, Assistants to  the Solicitor General, United States Department of Justice,  and John G. Roberts, Jr., argued the causes for appellees. With them on the brief were A. Douglas Melamed, Acting  Assistant Attorney General, United States Department of  Justice, Jeffrey H. Blattner, Deputy Assistant Attorney General, Catherine G. O'Sullivan, Robert B. Nicholson, Adam D.  Hirsh, Andrea Limmer, David Seidman, and Christopher  Sprigman, Attorneys, Eliot Spitzer, Attorney General, State  of New York, Richard L. Schwartz, Assistant Attorney General, and Kevin J. O'Connor, Office of the Attorney General,  State of Wisconsin.
John Rogovin, Kenneth W. Starr, John F. Wood, Elizabeth  Petrela, Robert H. Bork, Jason M. Mahler, Stephen M.  Shapiro, Donald M. Falk, Mitchell S. Pettit, Kevin J. Arquit,  and Michael C. Naughton were on the brief for amici curiae  America Online, Inc., et al., in support of appellee.  Paul T.  Cappuccio entered an appearance.
Lee A. Hollaar, appearing pro se, was on the brief for  amicus curiae Lee A. Hollaar.
Carl Lundgren, appearing pro se, was on the brief for  amicus curiae Carl Lundgren.
Before:  Edwards, Chief Judge, Williams, Ginsburg,  Sentelle, Randolph, Rogers and Tatel, Circuit Judges.
Opinion for the Court filed Per Curiam.

1
Table of Contents
Summary.................................................................44
   I. Introduction......................................................47
      A. Background.....................................................47
      B. Overview.......................................................48
  II. Monopolization....................................................50
      A. Monopoly Power.................................................51
         1. Market Structure............................................51
            a. Market definition........................................51
            b. Market power.............................................54
         2. Direct Proof................................................56
      B. Anticompetitive Conduct........................................58
         1. Licenses Issued to Original Equipment Manufacturers.........59
            a. Anticompetitive effect of the license restrictions.......60
            b. Microsoft's justifications for the license restrictions..62
         2. Integration of IE and Windows...............................64
            a. Anticompetitive effect of integration....................65

2
            b. Microsoft's justifications for integration...............66
         3. Agreements with Internet Access Providers...................67
         4. Dealings with Internet Content Providers, Independent
            Software Vendors, and Apple Computer........................71
         5. Java........................................................74
            a. The incompatible JVM.....................................74
            b. The First Wave Agreements................................75
            c. Deception of Java developers.............................76
            d. The threat to Intel......................................77
         6. Course of Conduct...........................................78
      C. Causation......................................................78
 III. Attempted Monopolization..........................................80
      A. Relevant Market................................................81
      B. Barriers to Entry..............................................82
 IV.  Tying.............................................................84
      A. Separate-Products Inquiry Under the Per Se Test................85
      B. Per Se Analysis Inappropriate for this Case....................89
      C. On Remand......................................................95
   V. Trial Proceedings and Remedy......................................97
      A. Factual Background.............................................98
      B. Trial Proceedings.............................................100
      C. Failure to Hold an Evidentiary Hearing........................101
      D. Failure to Provide an Adequate Explanation....................103
      E. Modification of Liability.....................................103
      F. On Remand.....................................................105
      G. Conclusion....................................................107
 VI.  Judicial Misconduct..............................................107
      A. The District Judge's Communications with the Press............107
      B. Violations of the Code of Conduct for United States Judges....111
      C. Appearance of Partiality......................................114
      D. Remedies for Judicial Misconduct and Appearance of Partiality.116
         1. Disqualification...........................................116
         2. Review of Findings of Fact and Con clusions of Law.........117
VII.  Conclusion.......................................................118

Per Curiam:

3
Microsoft Corporation appeals from judgments of the District Court finding the company in violation  of 1 and 2 of the Sherman Act and ordering various  remedies.

4
The action against Microsoft arose pursuant to a complaint  filed by the United States and separate complaints filed by  individual States.  The District Court determined that Microsoft had maintained a monopoly in the market for Intelcompatible PC operating systems in violation of  2;  attempted to gain a monopoly in the market for internet browsers in  violation of  2;  and illegally tied two purportedly separate  products, Windows and Internet Explorer ("IE"), in violation  of  1.  United States v. Microsoft Corp., 87 F. Supp. 2d 30  (D.D.C. 2000) ("Conclusions of Law").  The District Court  then found that the same facts that established liability under  1 and 2 of the Sherman Act mandated findings of liability  under analogous state law antitrust provisions.  Id.  To remedy the Sherman Act violations, the District Court issued a  Final Judgment requiring Microsoft to submit a proposed  plan of divestiture, with the company to be split into an  operating systems business and an applications business. United States v. Microsoft Corp., 97 F. Supp. 2d 59, 64-65  (D.D.C. 2000) ("Final Judgment").  The District Court's remedial order also contains a number of interim restrictions on  Microsoft's conduct.  Id. at 66-69.

5
Microsoft's appeal contests both the legal conclusions and  the resulting remedial order.  There are three principal  aspects of this appeal.  First, Microsoft challenges the District Court's legal conclusions as to all three alleged antitrust  violations and also a number of the procedural and factual  foundations on which they rest.  Second, Microsoft argues  that the remedial order must be set aside, because the  District Court failed to afford the company an evidentiary  hearing on disputed facts and, also, because the substantive  provisions of the order are flawed.  Finally, Microsoft asserts  that the trial judge committed ethical violations by engaging  in impermissible ex parte contacts and making inappropriate public comments on the merits of the case while it was  pending.  Microsoft argues that these ethical violations compromised the District Judge's appearance of impartiality,  thereby necessitating his disqualification and vacatur of his  Findings of Fact, Conclusions of Law, and Final Judgment.

6
After carefully considering the voluminous record on appeal--including the District Court's Findings of Fact and  Conclusions of Law, the testimony and exhibits submitted at  trial, the parties' briefs, and the oral arguments before this  court--we find that some but not all of Microsoft's liability  challenges have merit.  Accordingly, we affirm in part and  reverse in part the District Court's judgment that Microsoft  violated  2 of the Sherman Act by employing anticompetitive  means to maintain a monopoly in the operating system market;  we reverse the District Court's determination that Microsoft violated  2 of the Sherman Act by illegally attempting to monopolize the internet browser market;  and we  remand the District Court's finding that Microsoft violated   1 of the Sherman Act by unlawfully tying its browser to its  operating system.  Our judgment extends to the District  Court's findings with respect to the state law counterparts of  the plaintiffs' Sherman Act claims.

7
We also find merit in Microsoft's challenge to the Final  Judgment embracing the District Court's remedial order. There are several reasons supporting this conclusion.  First,  the District Court's Final Judgment rests on a number of  liability determinations that do not survive appellate review; therefore, the remedial order as currently fashioned cannot  stand.  Furthermore, we would vacate and remand the remedial order even were we to uphold the District Court's  liability determinations in their entirety, because the District  Court failed to hold an evidentiary hearing to address remedies-specific factual disputes.

8
Finally, we vacate the Final Judgment on remedies, because the trial judge engaged in impermissible ex parte  contacts by holding secret interviews with members of the  media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom,  giving rise to an appearance of partiality.  Although we find  no evidence of actual bias, we hold that the actions of the trial judge seriously tainted the proceedings before the District  Court and called into question the integrity of the judicial  process.  We are therefore constrained to vacate the Final  Judgment on remedies, remand the case for reconsideration  of the remedial order, and require that the case be assigned  to a different trial judge on remand.  We believe that this  disposition will be adequate to cure the cited improprieties.

9
In sum, for reasons more fully explained below, we affirm  in part, reverse in part, and remand in part the District  Court's judgment assessing liability.  We vacate in full the  Final Judgment embodying the remedial order and remand  the case to a different trial judge for further proceedings  consistent with this opinion.

I. Introduction
A. Background

10
In July 1994, officials at the Department of Justice  ("DOJ"), on behalf of the United States, filed suit against  Microsoft, charging the company with, among other things,  unlawfully maintaining a monopoly in the operating system  market through anticompetitive terms in its licensing and  software developer agreements.  The parties subsequently  entered into a consent decree, thus avoiding a trial on the  merits.  See United States v. Microsoft Corp., 56 F.3d 1448  (D.C. Cir. 1995) ("Microsoft I").  Three years later, the  Justice Department filed a civil contempt action against Microsoft for allegedly violating one of the decree's provisions. On appeal from a grant of a preliminary injunction, this court  held that Microsoft's technological bundling of IE 3.0 and 4.0  with Windows 95 did not violate the relevant provision of the  consent decree.  United States v. Microsoft Corp., 147 F.3d  935 (D.C. Cir. 1998) ("Microsoft II").  We expressly reserved  the question whether such bundling might independently  violate 1 or 2 of the Sherman Act.  Id. at 950 n.14.

11
On May 18, 1998, shortly before issuance of the Microsoft  II decision, the United States and a group of State plaintiffs filed separate (and soon thereafter consolidated) complaints,  asserting antitrust violations by Microsoft and seeking preliminary and permanent injunctions against the company's  allegedly unlawful conduct.  The complaints also sought any  "other preliminary and permanent relief as is necessary and  appropriate to restore competitive conditions in the markets  affected by Microsoft's unlawful conduct."  Gov't's Compl. at  53, United States v. Microsoft Corp., No. 98-1232 (D.D.C.  1999).  Relying almost exclusively on Microsoft's varied efforts to unseat Netscape Navigator as the preeminent internet browser, plaintiffs charged four distinct violations of the  Sherman Act:  (1) unlawful exclusive dealing arrangements in  violation of  1;  (2) unlawful tying of IE to Windows 95 and  Windows 98 in violation of  1;  (3) unlawful maintenance of a  monopoly in the PC operating system market in violation of   2;  and (4) unlawful attempted monopolization of the internet browser market in violation of  2.  The States also  brought pendent claims charging Microsoft with violations of  various State antitrust laws.

12
The District Court scheduled the case on a "fast track."  The hearing on the preliminary injunction and the trial on the  merits were consolidated pursuant to Fed. R. Civ. P. 65(a)(2). The trial was then scheduled to commence on September 8,  1998, less than four months after the complaints had been  filed.  In a series of pretrial orders, the District Court limited  each side to a maximum of 12 trial witnesses plus two  rebuttal witnesses.  It required that all trial witnesses' direct  testimony be submitted to the court in the form of written  declarations.  The District Court also made allowances for  the use of deposition testimony at trial to prove subordinate  or predicate issues.  Following the grant of three brief continuances, the trial started on October 19, 1998.

13
After a 76-day bench trial, the District Court issued its  Findings of Fact.  United States v. Microsoft Corp., 84  F. Supp. 2d 9 (D.D.C. 1999) ("Findings of Fact").  This  triggered two independent courses of action.  First, the District Court established a schedule for briefing on possible  legal conclusions, inviting Professor Lawrence Lessig to participate as amicus curiae.  Second, the District Court referred the case to mediation to afford the parties an opportunity to settle their differences. The Honorable Richard A.  Posner, Chief Judge of the United States Court of Appeals  for the Seventh Circuit, was appointed to serve as mediator. The parties concurred in the referral to mediation and in the  choice of mediator.

14
Mediation failed after nearly four months of settlement  talks between the parties.  On April 3, 2000, with the parties'  briefs having been submitted and considered, the District  Court issued its conclusions of law.  The District Court found  Microsoft liable on the  1 tying and  2 monopoly maintenance and attempted monopolization claims, Conclusions of  Law, at 35-51, while ruling that there was insufficient evidence to support a  1 exclusive dealing violation, id. at 5154.  As to the pendent State actions, the District Court found  the State antitrust laws conterminous with 1 and 2 of the  Sherman Act, thereby obviating the need for further Statespecific analysis.  Id. at 54-56.  In those few cases where a  State's law required an additional showing of intrastate impact on competition, the District Court found the requirement  easily satisfied on the evidence at hand.  Id. at 55.

15
Having found Microsoft liable on all but one count, the  District Court then asked plaintiffs to submit a proposed  remedy.  Plaintiffs' proposal for a remedial order was subsequently filed within four weeks, along with six supplemental  declarations and over 50 new exhibits.  In their proposal,  plaintiffs sought specific conduct remedies, plus structural  relief that would split Microsoft into an applications company  and an operating systems company.  The District Court  rejected Microsoft's request for further evidentiary proceedings and, following a single hearing on the merits of the  remedy question, issued its Final Judgment on June 7, 2000. The District Court adopted plaintiffs' proposed remedy without substantive change.

16
Microsoft filed a notice of appeal within a week after the  District Court issued its Final Judgment.  This court then  ordered that any proceedings before it be heard by the court  sitting en banc.  Before any substantive matters were addressed by this court, however, the District Court certified  appeal of the case brought by the United States directly to  the Supreme Court pursuant to 15 U.S.C.  29(b), while  staying the final judgment order in the federal and state  cases pending appeal.  The States thereafter petitioned the  Supreme Court for a writ of certiorari in their case.  The  Supreme Court declined to hear the appeal of the Government's case and remanded the matter to this court;  the Court  likewise denied the States' petition for writ of certiorari. Microsoft Corp. v. United States, 530 U.S. 1301 (2000).  This  consolidated appeal followed.

B. Overview

17
Before turning to the merits of Microsoft's various arguments, we pause to reflect briefly on two matters of note, one  practical and one theoretical.

18
The practical matter relates to the temporal dimension of  this case.  The litigation timeline in this case is hardly  problematic.  Indeed, it is noteworthy that a case of this  magnitude and complexity has proceeded from the filing of  complaints through trial to appellate decision in a mere three  years.  See, e.g., Data Gen. Corp. v. Grumman Sys. Support  Corp., 36 F.3d 1147, 1155 (1st Cir. 1994) (six years from filing  of complaint to appellate decision);  Transamerica Computer  Co., Inc. v. IBM, 698 F.2d 1377, 1381 (9th Cir. 1983) (over  four years from start of trial to appellate decision);  United  States v. United Shoe Mach. Corp., 110 F. Supp. 295, 298 (D.  Mass. 1953) (over five years from filing of complaint to trial  court decision).

19
What is somewhat problematic, however, is that just over  six years have passed since Microsoft engaged in the first  conduct plaintiffs allege to be anticompetitive.  As the record  in this case indicates, six years seems like an eternity in the  computer industry.  By the time a court can assess liability,  firms, products, and the marketplace are likely to have  changed dramatically.  This, in turn, threatens enormous  practical difficulties for courts considering the appropriate  measure of relief in equitable enforcement actions, both in  crafting injunctive remedies in the first instance and reviewing those remedies in the second.  Conduct remedies may be  unavailing in such cases, because innovation to a large degree  has already rendered the anticompetitive conduct obsolete  (although by no means harmless).  And broader structural  remedies present their own set of problems, including how a  court goes about restoring competition to a dramatically  changed, and constantly changing, marketplace.  That is just  one reason why we find the District Court's refusal in the  present case to hold an evidentiary hearing on remedies--to  update and flesh out the available information before seriously entertaining the possibility of dramatic structural relief--so  problematic.  See infra Section V.

20
We do not mean to say that enforcement actions will no  longer play an important role in curbing infringements of the  antitrust laws in technologically dynamic markets, nor do we  assume this in assessing the merits of this case.  Even in  those cases where forward-looking remedies appear limited,  the Government will continue to have an interest in defining  the contours of the antitrust laws so that law-abiding firms  will have a clear sense of what is permissible and what is not. And the threat of private damage actions will remain to deter  those firms inclined to test the limits of the law.

21
The second matter of note is more theoretical in nature. We decide this case against a backdrop of significant debate  amongst academics and practitioners over the extent to  which "old economy"  2 monopolization doctrines should  apply to firms competing in dynamic technological markets  characterized by network effects.  In markets characterized  by network effects, one product or standard tends towards  dominance, because "the utility that a user derives from consumption of the good increases with the number of other  agents consuming the good."  Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility,  75 Am. Econ. Rev. 424, 424 (1985).  For example, "[a]n  individual consumer's demand to use (and hence her benefit  from) the telephone network ... increases with the number  of other users on the network whom she can call or from  whom she can receive calls."  Howard A. Shelanski & J.  Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. Chi. L. Rev. 1, 8 (2001).  Once a product or standard  achieves wide acceptance, it becomes more or less entrenched.  Competition in such industries is "for the field"  rather than "within the field."  See Harold Demsetz, Why  Regulate Utilities?, 11 J.L. & Econ. 55, 57 & n.7 (1968)  (emphasis omitted).

22
In technologically dynamic markets, however, such entrenchment may be temporary, because innovation may alter  the field altogether.  See Joseph A. Schumpeter, Capitalism,  Socialism and Democracy 81-90 (Harper Perennial 1976)  (1942). Rapid technological change leads to markets in which  "firms compete through innovation for temporary market  dominance, from which they may be displaced by the next  wave of product advancements."  Shelanski & Sidak, at 11-12  (discussing Schumpeterian competition, which proceeds "sequentially over time rather than simultaneously across a  market").  Microsoft argues that the operating system market is just such a market.

23
Whether or not Microsoft's characterization of the operating system market is correct does not appreciably alter our  mission in assessing the alleged antitrust violations in the  present case.  As an initial matter, we note that there is no  consensus among commentators on the question of whether,  and to what extent, current monopolization doctrine should be  amended to account for competition in technologically dynamic markets characterized by network effects.  Compare Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 Geo.  Mason L. Rev. 617, 654-55, 663-64 (1999) (arguing that  exclusionary conduct in high-tech networked industries deserves heightened antitrust scrutiny in part because it may  threaten to deter innovation), with Ronald A. Cass & Keith  N. Hylton, Preserving Competition:  Economic Analysis, Legal Standards and Microsoft, 8 Geo. Mason L. Rev. 1, 36-39  (1999) (equivocating on the antitrust implications of network  effects and noting that the presence of network externalities  may actually encourage innovation by guaranteeing more  durable monopolies to innovating winners).  Indeed, there is  some suggestion that the economic consequences of network effects and technological dynamism act to offset one another,  thereby making it difficult to formulate categorical antitrust  rules absent a particularized analysis of a given market.  See  Shelanski & Sidak, at 6-7 ("High profit margins might appear  to be the benign and necessary recovery of legitimate investment returns in a Schumpeterian framework, but they might  represent exploitation of customer lock-in and monopoly power when viewed through the lens of network economics.... The issue is particularly complex because, in network industries characterized by rapid innovation, both forces may be  operating and can be difficult to isolate.").

24
Moreover, it should be clear that Microsoft makes no claim  that anticompetitive conduct should be assessed differently in  technologically dynamic markets.  It claims only that the  measure of monopoly power should be different.  For reasons  fully discussed below, we reject Microsoft's monopoly power  argument.  See infra Section II.A.

25
With this backdrop in mind, we turn to the specific challenges raised in Microsoft's appeal.

II. Monopolization

26
Section 2 of the Sherman Act makes it unlawful for a firm  to "monopolize."  15 U.S.C.  2.  The offense of monopolization has two elements:  "(1) the possession of monopoly power  in the relevant market and (2) the willful acquisition or  maintenance of that power as distinguished from growth or  development as a consequence of a superior product, business  acumen, or historic accident."  United States v. Grinnell  Corp., 384 U.S. 563, 570-71 (1966).  The District Court applied this test and found that Microsoft possesses monopoly  power in the market for Intel-compatible PC operating systems.  Focusing primarily on Microsoft's efforts to suppress  Netscape Navigator's threat to its operating system monopoly, the court also found that Microsoft maintained its power  not through competition on the merits, but through unlawful  means.  Microsoft challenges both conclusions.  We defer to  the District Court's findings of fact, setting them aside only if  clearly erroneous.  Fed R. Civ. P. 52(a).  We review legal questions de novo.  United States ex rel. Modern Elec., Inc.  v. Ideal Elec. Sec. Co., 81 F.3d 240, 244 (D.C. Cir. 1996).

27
We begin by considering whether Microsoft possesses monopoly power, see infra Section II.A, and finding that it does,  we turn to the question whether it maintained this power  through anticompetitive means.  Agreeing with the District  Court that the company behaved anticompetitively, see infra  Section II.B, and that these actions contributed to the maintenance of its monopoly power, see infra Section II.C, we affirm  the court's finding of liability for monopolization.

A. Monopoly Power

28
While merely possessing monopoly power is not itself an  antitrust violation, see Northeastern Tel. Co. v. AT & T, 651  F.2d 76, 84-85 (2d Cir. 1981), it is a necessary element of a  monopolization charge, see Grinnell, 384 U.S. at 570.  The  Supreme Court defines monopoly power as "the power to  control prices or exclude competition."  United States v. E.I.  du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).  More  precisely, a firm is a monopolist if it can profitably raise  prices substantially above the competitive level.  2A Phillip  E. Areeda et al., Antitrust Law p 501, at 85 (1995);  cf. Ball  Mem'l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d 1325,  1335 (7th Cir. 1986) (defining market power as "the ability to  cut back the market's total output and so raise price"). Where evidence indicates that a firm has in fact profitably  done so, the existence of monopoly power is clear.  See Rebel  Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th Cir.  1995);  see also FTC v. Indiana Fed'n of Dentists, 476 U.S.  447, 460-61 (1986) (using direct proof to show market power  in Sherman Act  1 unreasonable restraint of trade action). Because such direct proof is only rarely available, courts  more typically examine market structure in search of circumstantial evidence of monopoly power.  2A Areeda et al.,  Antitrust Law p 531a, at 156;  see also, e.g., Grinnell, 384 U.S.  at 571.  Under this structural approach, monopoly power may  be inferred from a firm's possession of a dominant share of a  relevant market that is protected by entry barriers.  See Rebel Oil, 51 F.3d at 1434.  "Entry barriers" are factors  (such as certain regulatory requirements) that prevent new  rivals from timely responding to an increase in price above  the competitive level.  See S. Pac. Communications Co. v.  AT & T, 740 F.2d 980, 1001-02 (D.C. Cir. 1984).

29
The District Court considered these structural factors and  concluded that Microsoft possesses monopoly power in a  relevant market.  Defining the market as Intel-compatible  PC operating systems, the District Court found that Microsoft has a greater than 95% share.  It also found the company's market position protected by a substantial entry barrier. Conclusions of Law, at 36.

30
Microsoft argues that the District Court incorrectly defined  the relevant market.  It also claims that there is no barrier to  entry in that market.  Alternatively, Microsoft argues that  because the software industry is uniquely dynamic, direct  proof, rather than circumstantial evidence, more appropriately indicates whether it possesses monopoly power.  Rejecting  each argument, we uphold the District Court's finding of  monopoly power in its entirety.

1. Market Structure

31
a. Market definition

32
"Because the ability of consumers to turn to other suppliers  restrains a firm from raising prices above the competitive  level," Rothery Storage & Van Co. v. Atlas Van Lines, Inc.,  792 F.2d 210, 218 (D.C. Cir. 1986), the relevant market must  include all products "reasonably interchangeable by consumers for the same purposes."  du Pont, 351 U.S. at 395.  In  this case, the District Court defined the market as "the  licensing of all Intel-compatible PC operating systems worldwide," finding that there are "currently no products--and ...  there are not likely to be any in the near future--that a  significant percentage of computer users worldwide could  substitute for [these operating systems] without incurring  substantial costs."  Conclusions of Law, at 36.  Calling this  market definition "far too narrow," Appellant's Opening Br.  at 84, Microsoft argues that the District Court improperly excluded three types of products:  non-Intel compatible operating systems (primarily Apple's Macintosh operating system,  Mac OS), operating systems for non-PC devices (such as  handheld computers and portal websites), and "middleware"  products, which are not operating systems at all.

33
We begin with Mac OS.  Microsoft's argument that Mac  OS should have been included in the relevant market suffers  from a flaw that infects many of the company's monopoly  power claims:  the company fails to challenge the District  Court's factual findings, or to argue that these findings do not  support the court's conclusions.  The District Court found  that consumers would not switch from Windows to Mac OS in  response to a substantial price increase because of the costs  of acquiring the new hardware needed to run Mac OS (an  Apple computer and peripherals) and compatible software  applications, as well as because of the effort involved in  learning the new system and transferring files to its format. Findings of Fact p 20.  The court also found the Apple  system less appealing to consumers because it costs considerably more and supports fewer applications.  Id. p 21.  Microsoft responds only by saying:  "the district court's market  definition is so narrow that it excludes Apple's Mac OS, which  has competed with Windows for years, simply because the  Mac OS runs on a different microprocessor." Appellant's  Opening Br. at 84.  This general, conclusory statement falls  far short of what is required to challenge findings as clearly  erroneous.  Pendleton v. Rumsfeld, 628 F.2d 102, 106 (D.C.  Cir. 1980);  see also Terry v. Reno, 101 F.3d 1412, 1415 (D.C.  Cir. 1996) (holding that claims made but not argued in a brief  are waived).  Microsoft neither points to evidence contradicting the District Court's findings nor alleges that supporting  record evidence is insufficient.  And since Microsoft does not  argue that even if we accept these findings, they do not  support the District Court's conclusion, we have no basis for  upsetting the court's decision to exclude Mac OS from the  relevant market.

34
Microsoft's challenge to the District Court's exclusion of  non-PC based competitors, such as information appliances  (handheld devices, etc.) and portal websites that host serverbased software applications, suffers from the same defect: the company fails to challenge the District Court's key factual  findings.  In particular, the District Court found that because  information appliances fall far short of performing all of the  functions of a PC, most consumers will buy them only as a  supplement to their PCs.  Findings of Fact p 23.  The District Court also found that portal websites do not presently  host enough applications to induce consumers to switch, nor  are they likely to do so in the near future.  Id. p 27.  Again,  because Microsoft does not argue that the District Court's  findings do not support its conclusion that information appliances and portal websites are outside the relevant market, we  adhere to that conclusion.

35
This brings us to Microsoft's main challenge to the District  Court's market definition:  the exclusion of middleware.  Because of the importance of middleware to this case, we pause  to explain what it is and how it relates to the issue before us.

36
Operating systems perform many functions, including allocating computer memory and controlling peripherals such as  printers and keyboards.  See Direct Testimony of Frederick  Warren-Boulton p 20, reprinted in 5 J.A. at 3172-73.  Operating systems also function as platforms for software applications.  They do this by "exposing"--i.e., making available to  software developers--routines or protocols that perform certain widely-used functions.  These are known as Application  Programming Interfaces, or "APIs."  See Direct Testimony  of James Barksdale p 70, reprinted in 5 J.A. at 2895-96.  For  example, Windows contains an API that enables users to  draw a box on the screen.  See Direct Testimony of Michael  T. Devlin p 12, reprinted in 5 J.A. at 3525.  Software developers wishing to include that function in an application need not  duplicate it in their own code.  Instead, they can "call"--i.e.,  use--the Windows API.  See Direct Testimony of James  Barksdale p p 70-71, reprinted in 5 J.A. at 2895-97.  Windows contains thousands of APIs, controlling everything from  data storage to font display.  See Direct Testimony of Michael Devlin p 12, reprinted in 5 J.A. at 3525.

37
Every operating system has different APIs.  Accordingly,  a developer who writes an application for one operating system and wishes to sell the application to users of another  must modify, or "port," the application to the second operating system.  Findings of Fact p 4.  This process is both timeconsuming and expensive.  Id. p 30.

38
"Middleware" refers to software products that expose their  own APIs.  Id. p 28;  Direct Testimony of Paul Maritz  p p 234-36, reprinted in 6 J.A. at 3727-29.  Because of this, a  middleware product written for Windows could take over  some or all of Windows's valuable platform functions--that is,  developers might begin to rely upon APIs exposed by the  middleware for basic routines rather than relying upon the  API set included in Windows.  If middleware were written  for multiple operating systems, its impact could be even  greater.  The more developers could rely upon APIs exposed  by such middleware, the less expensive porting to different  operating systems would be.  Ultimately, if developers could  write applications relying exclusively on APIs exposed by  middleware, their applications would run on any operating  system on which the middleware was also present.  See  Direct Testimony of Avadis Tevanian, Jr. p 45, reprinted in 5  J.A. at 3113.  Netscape Navigator and Java--both at issue in  this case--are middleware products written for multiple operating systems.  Findings of Fact p 28.

39
Microsoft argues that, because middleware could usurp the  operating system's platform function and might eventually  take over other operating system functions (for instance, by  controlling peripherals), the District Court erred in excluding  Navigator and Java from the relevant market.  The District  Court found, however, that neither Navigator, Java, nor any  other middleware product could now, or would soon, expose  enough APIs to serve as a platform for popular applications,  much less take over all operating system functions.  Id.  p p 28-29.  Again, Microsoft fails to challenge these findings,  instead simply asserting middleware's "potential" as a competitor.  Appellant's Opening Br. at 86.  The test of reasonable interchangeability, however, required the District Court  to consider only substitutes that constrain pricing in the  reasonably foreseeable future, and only products that can  enter the market in a relatively short time can perform this  function.  See Rothery, 792 F.2d at 218 ("Because the ability of consumers to turn to other suppliers restrains a firm from  raising prices above the competitive level, the definition of the  'relevant market' rests on a determination of available substitutes.");  see also Findings of Fact p 29 ("[I]t would take  several years for middleware ... to evolve" into a product  that can constrain operating system pricing.).  Whatever  middleware's ultimate potential, the District Court found that  consumers could not now abandon their operating systems  and switch to middleware in response to a sustained price for  Windows above the competative level.  Findings of Fact  p p 28, 29.  Nor is middleware likely to overtake the operating system as the primary platform for software development  any time in the near future.  Id.

40
Alternatively, Microsoft argues that the District Court  should not have excluded middleware from the relevant market because the primary focus of the plaintiffs'  2 charge is  on Microsoft's attempts to suppress middleware's threat to its  operating system monopoly.  According to Microsoft, it is  "contradict[ory]," 2/26/2001 Ct. Appeals Tr. at 20, to define  the relevant market to exclude the "very competitive threats  that gave rise" to the action.  Appellant's Opening Br. at 84. The purported contradiction lies between plaintiffs'  2 theory, under which Microsoft preserved its monopoly against  middleware technologies that threatened to become viable  substitutes for Windows, and its theory of the relevant market, under which middleware is not presently a viable substitute for Windows.  Because middleware's threat is only nascent, however, no contradiction exists.  Nothing in  2 of the  Sherman Act limits its prohibition to actions taken against  threats that are already well-developed enough to serve as  present substitutes.  See infra Section II.C.  Because market  definition is meant to identify products "reasonably interchangeable by consumers," du Pont, 351 U.S. at 395, and  because middleware is not now interchangeable with Windows, the District Court had good reason for excluding  middleware from the relevant market.

41
b. Market power

42
Having thus properly defined the relevant market, the  District Court found that Windows accounts for a greater  than 95% share.  Findings of Fact p 35.  The court also found that even if Mac OS were included, Microsoft's share  would exceed 80%.  Id. Microsoft challenges neither finding,  nor does it argue that such a market share is not predominant.  Cf. Grinnell, 384 U.S. at 571 (87% is predominant); Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S.  451, 481 (1992) (80%);  du Pont, 351 U.S. at 379, 391 (75%).

43
Instead, Microsoft claims that even a predominant market  share does not by itself indicate monopoly power.  Although  the "existence of [monopoly] power ordinarily may be inferred from the predominant share of the market," Grinnell,  384 U.S. at 571, we agree with Microsoft that because of the  possibility of competition from new entrants, see Ball Mem'l  Hosp., Inc., 784 F.2d at 1336, looking to current market share  alone can be "misleading."  Hunt-Wesson Foods, Inc. v.  Ragu Foods, Inc., 627 F.2d 919, 924 (9th Cir. 1980);  see also  Ball Mem'l Hosp., Inc., 784 F.2d at 1336 ("Market share  reflects current sales, but today's sales do not always indicate  power over sales and price tomorrow.")  In this case, however, the District Court was not misled.  Considering the  possibility of new rivals, the court focused not only on Microsoft's present market share, but also on the structural barrier  that protects the company's future position.  Conclusions of  Law, at 36.  That barrier--the "applications barrier to entry"--stems from two characteristics of the software market: (1) most consumers prefer operating systems for which a  large number of applications have already been written;  and  (2) most developers prefer to write for operating systems that  already have a substantial consumer base.  See Findings of  Fact p p 30, 36.  This "chicken-and-egg" situation ensures  that applications will continue to be written for the already  dominant Windows, which in turn ensures that consumers will  continue to prefer it over other operating systems.  Id.

44
Challenging the existence of the applications barrier to  entry, Microsoft observes that software developers do write  applications for other operating systems, pointing out that at  its peak IBM's OS/2 supported approximately 2,500 applications.  Id. p 46.  This misses the point.  That some developers write applications for other operating systems is not at all  inconsistent with the finding that the applications barrier to  entry discourages many from writing for these less popular  platforms.  Indeed, the District Court found that IBM's difficulty in attracting a larger number of software developers  to write for its platform seriously impeded OS/2's success. Id. p 46.

45
Microsoft does not dispute that Windows supports many  more applications than any other operating system.  It argues instead that "[i]t defies common sense" to suggest that  an operating system must support as many applications as  Windows does (more than 70,000, according to the District  Court, id. p 40) to be competitive.  Appellant's Opening Br. at  96.  Consumers, Microsoft points out, can only use a very  small percentage of these applications.  Id.  As the District  Court explained, however, the applications barrier to entry  gives consumers reason to prefer the dominant operating  system even if they have no need to use all applications  written for it:

46
The consumer wants an operating system that runs not only types of applications that he knows he will want to use, but also those types in which he might develop an interest later.  Also, the consumer knows that if he chooses an operating system with enough demand to support multiple applications in each product category, he will be less likely to find himself straitened later by having to use an application whose features disappoint him.  Finally, the average user knows that, generally speaking, applications improve through successive versions.  He thus wants an operating system for which successive generations of his favorite applications will be released--promptly at that.  The fact that a vastly larger number of applications are written for Windows than for other PC operating systems attracts consumers to Windows, because it reassures them that their interests will be met as long as they use Microsoft's product.

47
Findings of Fact p 37.  Thus, despite the limited success of  its rivals, Microsoft benefits from the applications barrier to  entry.

48
Of course, were middleware to succeed, it would erode the  applications barrier to entry.  Because applications written  for multiple operating systems could run on any operating system on which the middleware product was present with  little, if any, porting, the operating system market would  become competitive.  Id. p p 29, 72.  But as the District Court  found, middleware will not expose a sufficient number of  APIs to erode the applications barrier to entry in the foreseeable future.  See id. p p 28-29.

49
Microsoft next argues that the applications barrier to entry  is not an entry barrier at all, but a reflection of Windows'  popularity.  It is certainly true that Windows may have  gained its initial dominance in the operating system market  competitively--through superior foresight or quality.  But  this case is not about Microsoft's initial acquisition of monopoly power.  It is about Microsoft's efforts to maintain this  position through means other than competition on the merits. Because the applications barrier to entry protects a dominant  operating system irrespective of quality, it gives Microsoft  power to stave off even superior new rivals.  The barrier is  thus a characteristic of the operating system market, not of  Microsoft's popularity, or, as asserted by a Microsoft witness,  the company's efficiency.  See Direct Testimony of Richard  Schmalensee p 115, reprinted in 25 J.A. at 16153-14.

50
Finally, Microsoft argues that the District Court should not  have considered the applications barrier to entry because it  reflects not a cost borne disproportionately by new entrants,  but one borne by all participants in the operating system  market.  According to Microsoft, it had to make major investments to convince software developers to write for its new  operating system, and it continues to "evangelize" the Windows platform today.  Whether costs borne by all market  participants should be considered entry barriers is the subject of much debate.  Compare 2A Areeda & Hovenkamp,  Antitrust Law  420c, at 61 (arguing that these costs are  entry barriers), and Joe S. Bain, Barriers to New Competition:  Their Character and Consequences in Manufacturing  Industries 6-7 (1956) (considering these costs entry barriers),  with L.A. Land Co. v. Brunswick Corp., 6 F.3d 1422, 1428  (9th Cir. 1993) (evaluating cost based on "[t]he disadvantage  of new entrants as compared to incumbents"), and George  Stigler, The Organization of Industry 67 (1968) (excluding these costs).  We need not resolve this issue, however, for  even under the more narrow definition it is clear that there  are barriers.  When Microsoft entered the operating system  market with MS-DOS and the first version of Windows, it did  not confront a dominant rival operating system with as massive an installed base and as vast an existing array of  applications as the Windows operating systems have since  enjoyed.  Findings of Fact p p 6, 7, 43.  Moreover, when  Microsoft introduced Windows 95 and 98, it was able to  bypass the applications barrier to entry that protected the  incumbent Windows by including APIs from the earlier version in the new operating systems.  See id. p 44.  This made  porting existing Windows applications to the new version of  Windows much less costly than porting them to the operating  systems of other entrants who could not freely include APIs  from the incumbent Windows with their own.

2. Direct Proof

51
Having sustained the District Court's conclusion that circumstantial evidence proves that Microsoft possesses monopoly power, we turn to Microsoft's alternative argument that it  does not behave like a monopolist.  Claiming that software  competition is uniquely "dynamic," Appellant's Opening Br. at  84 (quoting Findings of Fact p 59), the company suggests a  new rule:  that monopoly power in the software industry  should be proven directly, that is, by examining a company's  actual behavior to determine if it reveals the existence of  monopoly power.  According to Microsoft, not only does no  such proof of its power exist, but record evidence demonstrates the absence of monopoly power.  The company claims  that it invests heavily in research and development, id. at 88-89 (citing Direct Testimony of Paul Maritz p 155, reprinted in  6 J.A. at 3698 (testifying that Microsoft invests approximately  17% of its revenue in R&D)), and charges a low price for  Windows (a small percentage of the price of an Intelcompatible PC system and less than the price of its rivals, id.  at 90 (citing Findings of Fact p p 19, 21, 46)).

52
Microsoft's argument fails because, even assuming that the  software market is uniquely dynamic in the long term, the  District Court correctly applied the structural approach to  determine if the company faces competition in the short term. Structural market power analyses are meant to determine  whether potential substitutes constrain a firm's ability to  raise prices above the competitive level;  only threats that are  likely to materialize in the relatively near future perform this  function to any significant degree.  Rothery, 792 F.2d at 218  (quoting Lawrence Sullivan, Antitrust  12, at 41 (1977))  (only substitutes that can enter the market "promptly" should  be considered).  The District Court expressly considered and  rejected Microsoft's claims that innovations such as handheld  devices and portal websites would soon expand the relevant  market beyond Intel-compatible PC operating systems.  Because the company does not challenge these findings, we have  no reason to believe that prompt substitutes are available. The structural approach, as applied by the District Court, is  thus capable of fulfilling its purpose even in a changing  market.  Microsoft cites no case, nor are we aware of one,  requiring direct evidence to show monopoly power in any  market.  We decline to adopt such a rule now.

53
Even if we were to require direct proof, moreover, Microsoft's behavior may well be sufficient to show the existence of  monopoly power.  Certainly, none of the conduct Microsoft  points to--its investment in R&D and the relatively low price  of Windows--is inconsistent with the possession of such power.  Conclusions of Law, at 37.  The R&D expenditures  Microsoft points to are not simply for Windows, but for its  entire company, which most likely does not possess a monopoly for all of its products.  Moreover, because innovation can  increase an already dominant market share and further delay  the emergence of competition, even monopolists have reason  to invest in R&D.  Findings of Fact p 61.  Microsoft's pricing  behavior is similarly equivocal.  The company claims only  that it never charged the short-term profit-maximizing price  for Windows.  Faced with conflicting expert testimony, the  District Court found that it could not accurately determine  what this price would be.  Id. p 65.  In any event, the court  found, a price lower than the short-term profit-maximizing  price is not inconsistent with possession or improper use of  monopoly power.  Id. p p 65-66.  Cf. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 274 (2d Cir. 1979) ("[I]f  monopoly power has been acquired or maintained through  improper means, the fact that the power has not been used to  extract [a monopoly price] provides no succor to the monopolist.").  Microsoft never claims that it did not charge the longterm monopoly price.  Micosoft does argue that the price of  Windows is a fraction of the price of an Intel-compatible PC  system and lower than that of rival operating systems, but  these facts are not inconsistent with the District Court's  finding that Microsoft has monopoly power.  See Findings of  Fact p 36 ("Intel-compatible PC operating systems other than  Windows [would not] attract[ ] significant demand ... even if  Micosoft held its prices substantially above the competitive  level.").

54
More telling, the District Court found that some aspects of  Microsoft's behavior are difficult to explain unless Windows is  a monopoly product.  For instance, according to the District  Court, the company set the price of Windows without considering rivals' prices, Findings of Fact p 62, something a firm  without a monopoly would have been unable to do.  The  District Court also found that Microsoft's pattern of exclusionary conduct could only be rational "if the firm knew that  it possessed monopoly power." Conclusions of Law, at 37.  It  is to that conduct that we now turn.

B. Anticompetitive Conduct

55
As discussed above, having a monopoly does not by itself  violate  2.  A firm violates  2 only when it acquires or  maintains, or attempts to acquire or maintain, a monopoly by  engaging in exclusionary conduct "as distinguished from  growth or development as a consequence of a superior product, business acumen, or historic accident."  Grinnell, 384  U.S. at 571;  see also United States v. Aluminum Co. of Am.,  148 F.2d 416, 430 (2d Cir. 1945) (Hand, J.) ("The successful  competitor, having been urged to compete, must not be  turned upon when he wins.").

56
In this case, after concluding that Microsoft had monopoly  power, the District Court held that Microsoft had violated  2  by engaging in a variety of exclusionary acts (not including  predatory pricing), to maintain its monopoly by preventing  the effective distribution and use of products that might  threaten that monopoly.  Specifically, the District Court held  Microsoft liable for:  (1) the way in which it integrated IE into Windows;  (2) its various dealings with Original Equipment  Manufacturers ("OEMs"), Internet Access Providers  ("IAPs"), Internet Content Providers ("ICPs"), Independent  Software Vendors ("ISVs"), and Apple Computer;  (3) its  efforts to contain and to subvert Java technologies;  and (4)  its course of conduct as a whole.  Upon appeal, Microsoft  argues that it did not engage in any exclusionary conduct.

57
Whether any particular act of a monopolist is exclusionary,  rather than merely a form of vigorous competition, can be  difficult to discern:  the means of illicit exclusion, like the  means of legitimate competition, are myriad.  The challenge  for an antitrust court lies in stating a general rule for  distinguishing between exclusionary acts, which reduce social  welfare, and competitive acts, which increase it.

58
From a century of case law on monopolization under  2,  however, several principles do emerge.  First, to be condemned as exclusionary, a monopolist's act must have an  "anticompetitive effect."  That is, it must harm the competitive process and thereby harm consumers.  In contrast, harm  to one or more competitors will not suffice.  "The [Sherman  Act] directs itself not against conduct which is competitive,  even severely so, but against conduct which unfairly tends to  destroy competition itself."  Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993);  see also Brooke Group Ltd. v.  Brown & Williamson Tobacco Corp., 509 U.S. 209, 225 (1993)  ("Even an act of pure malice by one business competitor  against another does not, without more, state a claim under  the federal antitrust laws....").

59
Second, the plaintiff, on whom the burden of proof of  course rests, see, e.g., Monsanto Co. v. Spray-Rite Serv.  Corp., 465 U.S. 752, 763 (1984);  see also United States v.  Arnold, Schwinn & Co., 388 U.S. 365, 374 n.5 (1967), overruled on other grounds, Cont'l T.V., Inc. v. GTE Sylvania  Inc., 433 U.S. 36 (1977), must demonstrate that the monopolist's conduct indeed has the requisite anticompetitive effect. See generally Brooke Group, 509 U.S. at 225-26.  In a case  brought by a private plaintiff, the plaintiff must show that its  injury is "of 'the type that the statute was intended to forestall,' " Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429  U.S. 477, 487-88 (1977) (quoting Wyandotte Transp. v. United  States, 389 U.S. 191, 202 (1967));  no less in a case brought by  the Government, it must demonstrate that the monopolist's  conduct harmed competition, not just a competitor.

60
Third, if a plaintiff successfully establishes a prima facie  case under  2 by demonstrating anticompetitive effect, then  the monopolist may proffer a "procompetitive justification"  for its conduct.  See Eastman Kodak, 504 U.S. at 483.  If the  monopolist asserts a procompetitive justification--a nonpretextual claim that its conduct is indeed a form of competition  on the merits because it involves, for example, greater efficiency or enhanced consumer appeal--then the burden shifts  back to the plaintiff to rebut that claim.  Cf. Capital Imaging  Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc., 996 F.2d  537, 543 (2d Cir. 1993).

61
Fourth, if the monopolist's procompetitive justification  stands unrebutted, then the plaintiff must demonstrate that  the anticompetitive harm of the conduct outweighs the procompetitive benefit.  In cases arising under  1 of the Sherman Act, the courts routinely apply a similar balancing  approach under the rubric of the "rule of reason."  The  source of the rule of reason is Standard Oil Co. v. United  States, 221 U.S. 1 (1911), in which the Supreme Court used  that term to describe the proper inquiry under both sections  of the Act.  See id. at 61-62 ("[W]hen the second section [of  the Sherman Act] is thus harmonized with ... the first, it  becomes obvious that the criteria to be resorted to in any  given case for the purpose of ascertaining whether violations  of the section have been committed, is the rule of reason  guided by the established law....").  As the Fifth Circuit  more recently explained, "[i]t is clear ... that the analysis  under section 2 is similar to that under section 1 regardless  whether the rule of reason label is applied...."  Mid-Texas  Communications Sys., Inc. v. AT & T, 615 F.2d 1372, 1389  n.13 (5th Cir. 1980) (citing Byars v. Bluff City News Co., 609  F.2d 843, 860 (6th Cir. 1979));  see also Cal. Computer Prods.,  Inc. v. IBM Corp., 613 F.2d 727, 737 (9th Cir. 1979).

62
Finally, in considering whether the monopolist's conduct on  balance harms competition and is therefore condemned as  exclusionary for purposes of  2, our focus is upon the effect  of that conduct, not upon the intent behind it.  Evidence of  the intent behind the conduct of a monopolist is relevant only  to the extent it helps us understand the likely effect of the  monopolist's conduct.  See, e.g., Chicago Bd. of Trade v.  United States, 246 U.S. 231, 238 (1918) ("knowledge of intent  may help the court to interpret facts and to predict consequences");  Aspen Skiing Co. v. Aspen Highlands Skiing  Corp., 472 U.S. 585, 603 (1985).

63
With these principles in mind, we now consider Microsoft's  objections to the District Court's holding that Microsoft violated  2 of the Sherman Act in a variety of ways.

64
1. Licenses Issued to Original Equipment Manufacturers

65
The District Court condemned a number of provisions in  Microsoft's agreements licensing Windows to OEMs, because  it found that Microsoft's imposition of those provisions (like  many of Microsoft's other actions at issue in this case) serves  to reduce usage share of Netscape's browser and, hence,  protect Microsoft's operating system monopoly.  The reason  market share in the browser market affects market power in  the operating system market is complex, and warrants some  explanation.

66
Browser usage share is important because, as we explained  in Section II.A above, a browser (or any middleware product,  for that matter) must have a critical mass of users in order to  attract software developers to write applications relying upon  the APIs it exposes, and away from the APIs exposed by  Windows.  Applications written to a particular browser's  APIs, however, would run on any computer with that browser, regardless of the underlying operating system.  "The  overwhelming majority of consumers will only use a PC  operating system for which there already exists a large and  varied set of ... applications, and for which it seems relatively certain that new types of applications and new versions of  existing applications will continue to be marketed...."

67
Findings of Fact p 30.  If a consumer could have access to  the applications he desired--regardless of the operating system he uses--simply by installing a particular browser on his  computer, then he would no longer feel compelled to select  Windows in order to have access to those applications;  he  could select an operating system other than Windows based  solely upon its quality and price.  In other words, the market  for operating systems would be competitive.

68
Therefore, Microsoft's efforts to gain market share in one  market (browsers) served to meet the threat to Microsoft's  monopoly in another market (operating systems) by keeping  rival browsers from gaining the critical mass of users necessary to attract developer attention away from Windows as the  platform for software development.  Plaintiffs also argue that  Microsoft's actions injured competition in the browser market--an argument we will examine below in relation to their  specific claims that Microsoft attempted to monopolize the  browser market and unlawfully tied its browser to its operating system so as to foreclose competition in the browser  market.  In evaluating the  2 monopoly maintenance claim,  however, our immediate concern is with the anticompetitive  effect of Microsoft's conduct in preserving its monopoly in the  operating system market.

69
In evaluating the restrictions in Microsoft's agreements  licensing Windows to OEMs, we first consider whether plaintiffs have made out a prima facie case by demonstrating that  the restrictions have an anticompetitive effect.  In the next  subsection, we conclude that plaintiffs have met this burden  as to all the restrictions.  We then consider Microsoft's  proffered justifications for the restrictions and, for the most  part, hold those justifications insufficient.

70
a. Anticompetitive effect of the license restrictions

71
The restrictions Microsoft places upon Original Equipment  Manufacturers are of particular importance in determining  browser usage share because having an OEM pre-install a  browser on a computer is one of the two most cost-effective  methods by far of distributing browsing software.  (The other  is bundling the browser with internet access software distributed by an IAP.)  Findings of Fact p 145.  The District  Court found that the restrictions Microsoft imposed in licensing Windows to OEMs prevented many OEMs from distributing browsers other than IE. Conclusions of Law, at 39-40. In particular, the District Court condemned the license provisions prohibiting the OEMs from:  (1) removing any desktop  icons, folders, or "Start" menu entries;  (2) altering the initial  boot sequence;  and (3) otherwise altering the appearance of  the Windows desktop.  Findings of Fact p 213.

72
The District Court concluded that the first license restriction--the prohibition upon the removal of desktop icons,  folders, and Start menu entries--thwarts the distribution of a  rival browser by preventing OEMs from removing visible  means of user access to IE.  Id. p 203.  The OEMs cannot  practically install a second browser in addition to IE, the  court found, in part because "[p]re-installing more than one  product in a given category ... can significantly increase an  OEM's support costs, for the redundancy can lead to confusion among novice users."  Id. p 159;  see also id. p 217.  That  is, a certain number of novice computer users, seeing two  browser icons, will wonder which to use when and will call the  OEM's support line.  Support calls are extremely expensive  and, in the highly competitive original equipment market,  firms have a strong incentive to minimize costs.  Id. p 210.

73
Microsoft denies the "consumer confusion" story;  it observes that some OEMs do install multiple browsers and that  executives from two OEMs that do so denied any knowledge  of consumers being confused by multiple icons.  See 11/5/98  pm Tr. at 41-42 (trial testimony of Avadis Tevanian of Apple),  reprinted in 9 J.A. at 5493-94;  11/18/99 am Tr. at 69 (trial  testimony of John Soyring of IBM), reprinted in 10 J.A. at  6222.

74
Other testimony, however, supports the District Court's  finding that fear of such confusion deters many OEMs from  pre-installing multiple browsers.  See, e.g., 01/13/99 pm Tr. at  614-15 (deposition of Microsoft's Gayle McClain played to the  court) (explaining that redundancy of icons may be confusing  to end users);  02/18/99 pm Tr. at 46-47 (trial testimony of John Rose of Compaq), reprinted in 21 J.A. at 14237-38  (same);  11/17/98 am Tr. at 68 (deposition of John Kies of  Packard Bell-NEC played to the court), reprinted in 9 J.A.  at 6016 (same);  11/17/98 am Tr. at 67-72 (trial testimony of  Glenn Weadock), reprinted in 9 J.A. at 6015-20 (same).  Most  telling, in presentations to OEMs, Microsoft itself represented that having only one icon in a particular category would be  "less confusing for endusers."  See Government's Trial Exhibit ("GX") 319 at MS98 0109453.  Accordingly, we reject  Microsoft's argument that we should vacate the District  Court's Finding of Fact 159 as it relates to consumer confusion.

75
As noted above, the OEM channel is one of the two  primary channels for distribution of browsers.  By preventing  OEMs from removing visible means of user access to IE, the  license restriction prevents many OEMs from pre-installing a  rival browser and, therefore, protects Microsoft's monopoly  from the competition that middleware might otherwise present.  Therefore, we conclude that the license restriction at  issue is anticompetitive.  We defer for the moment the question whether that anticompetitive effect is outweighed by  Microsoft's proffered justifications.

76
The second license provision at issue prohibits OEMs from  modifying the initial boot sequence--the process that occurs  the first time a consumer turns on the computer.  Prior to  the imposition of that restriction, "among the programs that  many OEMs inserted into the boot sequence were Internet  sign-up procedures that encouraged users to choose from a  list of IAPs assembled by the OEM."  Findings of Fact  p 210.  Microsoft's prohibition on any alteration of the boot  sequence thus prevents OEMs from using that process to  promote the services of IAPs, many of which--at least at the  time Microsoft imposed the restriction--used Navigator rather than IE in their internet access software.  See id. p 212; GX 295, reprinted in 12 J.A. at 14533 (Upon learning of OEM  practices including boot sequence modification, Microsoft's  Chairman, Bill Gates, wrote:  "Apparently a lot of OEMs are  bundling non-Microsoft browsers and coming up with offerings together with [IAPs] that get displayed on their machines in a FAR more prominent way than MSN or our  Internet browser.").  Microsoft does not deny that the prohibition on modifying the boot sequence has the effect of  decreasing competition against IE by preventing OEMs from  promoting rivals' browsers.  Because this prohibition has a  substantial effect in protecting Microsoft's market power, and  does so through a means other than competition on the  merits, it is anticompetitive.  Again the question whether the  provision is nonetheless justified awaits later treatment.

77
Finally, Microsoft imposes several additional provisions  that, like the prohibition on removal of icons, prevent OEMs  from making various alterations to the desktop:  Microsoft  prohibits OEMs from causing any user interface other than  the Windows desktop to launch automatically, from adding  icons or folders different in size or shape from those supplied  by Microsoft, and from using the "Active Desktop" feature to  promote third-party brands.  These restrictions impose significant costs upon the OEMs;  prior to Microsoft's prohibiting the practice, many OEMs would change the appearance of  the desktop in ways they found beneficial.  See, e.g., Findings  of Fact p 214;  GX 309, reprinted in 22 J.A. at 14551 (March  1997 letter from Hewlett-Packard to Microsoft:  "We are  responsible for the cost of technical support of our customers,  including the 33% of calls we get related to the lack of quality  or confusion generated by your product....  We must have  more ability to decide how our system is presented to our end  users.  If we had a choice of another supplier, based on your  actions in this area, I assure you [that you] would not be our  supplier of choice.").

78
The dissatisfaction of the OEM customers does not, of  course, mean the restrictions are anticompetitive.  The anticompetitive effect of the license restrictions is, as Microsoft  itself recognizes, that OEMs are not able to promote rival  browsers, which keeps developers focused upon the APIs in  Windows.  Findings of Fact p 212 (quoting Microsoft's Gates  as writing, "[w]inning Internet browser share is a very very  important goal for us," and emphasizing the need to prevent  OEMs from promoting both rival browsers and IAPs that  might use rivals' browsers);  see also 01/13/99 Tr. at 305-06 (excerpts from deposition of James Von Holle of Gateway)  (prior to restriction Gateway had pre-installed non-IE internet registration icon that was larger than other desktop  icons).  This kind of promotion is not a zero-sum game;  but  for the restrictions in their licenses to use Windows, OEMs  could promote multiple IAPs and browsers.  By preventing  the OEMs from doing so, this type of license restriction, like  the first two restrictions, is anticompetitive:  Microsoft reduced rival browsers' usage share not by improving its own  product but, rather, by preventing OEMs from taking actions  that could increase rivals' share of usage.

79
b. Microsoft's justifications for the license restrictions

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.

2. Integration of IE and Windows

88
Although Microsoft's license restrictions have a significant  effect in closing rival browsers out of one of the two primary  channels of distribution, the District Court found that "Microsoft's executives believed ... its contractual restrictions  placed on OEMs would not be sufficient in themselves to  reverse the direction of Navigator's usage share.  Consequently, in late 1995 or early 1996, Microsoft set out to bind  [IE] more tightly to Windows 95 as a technical matter." Findings of Fact p 160.

89
Technologically binding IE to Windows, the District Court  found, both prevented OEMs from pre-installing other browsers and deterred consumers from using them.  In particular,  having the IE software code as an irremovable part of  Windows meant that pre-installing a second browser would  "increase an OEM's product testing costs," because an OEM  must test and train its support staff to answer calls related to  every software product preinstalled on the machine;  moreover, pre-installing a browser in addition to IE would to many  OEMs be "a questionable use of the scarce and valuable space  on a PC's hard drive."  Id. p 159.

90
Although the District Court, in its Conclusions of Law,  broadly condemned Microsoft's decision to bind "Internet  Explorer to Windows with ... technological shackles," Conclusions of Law, at 39, its findings of fact in support of that  conclusion center upon three specific actions Microsoft took to  weld IE to Windows:  excluding IE from the "Add/Remove  Programs" utility;  designing Windows so as in certain circumstances to override the user's choice of a default browser  other than IE;  and commingling code related to browsing  and other code in the same files, so that any attempt to delete  the files containing IE would, at the same time, cripple the  operating system.  As with the license restrictions, we consider first whether the suspect actions had an anticompetitive  effect, and then whether Microsoft has provided a procompetitive justification for them.

91
a. Anticompetitive effect of integration

92
As a general rule, courts are properly very skeptical about  claims that competition has been harmed by a dominant firm's product design changes.  See, e.g., Foremost Pro Color,  Inc. v. Eastman Kodak Co., 703 F.2d 534, 544-45 (9th Cir.  1983).  In a competitive market, firms routinely innovate in  the hope of appealing to consumers, sometimes in the process  making their products incompatible with those of rivals;  the  imposition of liability when a monopolist does the same thing  will inevitably deter a certain amount of innovation.  This is  all the more true in a market, such as this one, in which the  product itself is rapidly changing.  See Findings of Fact p 59. Judicial deference to product innovation, however, does not  mean that a monopolist's product design decisions are per se  lawful.  See Foremost Pro Color, 703 F.2d at 545;  see also  Cal. Computer Prods., 613 F.2d at 739, 744;  In re IBM  Peripheral EDP Devices Antitrust Litig., 481 F. Supp. 965,  1007-08 (N.D. Cal. 1979).

93
The District Court first condemned as anticompetitive Microsoft's decision to exclude IE from the "Add/Remove Programs" utility in Windows 98.  Findings of Fact p 170.  Microsoft had included IE in the Add/Remove Programs utility  in Windows 95, see id. p p 175-76, but when it modified  Windows 95 to produce Windows 98, it took IE out of the  Add/Remove Programs utility.  This change reduces the usage share of rival browsers not by making Microsoft's own  browser more attractive to consumers but, rather, by discouraging OEMs from distributing rival products.  See id. p 159. Because Microsoft's conduct, through something other than  competition on the merits, has the effect of significantly  reducing usage of rivals' products and hence protecting its  own operating system monopoly, it is anticompetitive;  we  defer for the moment the question whether it is nonetheless  justified.

94
Second, the District Court found that Microsoft designed  Windows 98 "so that using Navigator on Windows 98 would  have unpleasant consequences for users" by, in some circumstances, overriding the user's choice of a browser other than  IE as his or her default browser.  Id. p p 171-72.  Plaintiffs  argue that this override harms the competitive process by  deterring consumers from using a browser other than IE  even though they might prefer to do so, thereby reducing  rival browsers' usage share and, hence, the ability of rival browsers to draw developer attention away from the APIs  exposed by Windows.  Microsoft does not deny, of course,  that overriding the user's preference prevents some people  from using other browsers.  Because the override reduces  rivals' usage share and protects Microsoft's monopoly, it too  is anticompetitive.

95
Finally, the District Court condemned Microsoft's decision  to bind IE to Windows 98 "by placing code specific to Web  browsing in the same files as code that provided operating  system functions."  Id. p 161;  see also id. p p 174, 192.  Putting code supplying browsing functionality into a file with  code supplying operating system functionality "ensure[s] that  the deletion of any file containing browsing-specific routines  would also delete vital operating system routines and thus  cripple Windows...."  Id. p 164.  As noted above, preventing  an OEM from removing IE deters it from installing a second  browser because doing so increases the OEM's product testing and support costs;  by contrast, had OEMs been able to  remove IE, they might have chosen to pre-install Navigator  alone.  See id. p 159.

96
Microsoft denies, as a factual matter, that it commingled  browsing and non-browsing code, and it maintains the District Court's findings to the contrary are clearly erroneous. According to Microsoft, its expert "testified without contradiction that '[t]he very same code in Windows 98 that provides Web browsing functionality' also performs essential  operating system functions--not code in the same files, but  the very same software code."  Appellant's Opening Br. at 79  (citing 5 J.A. 3291-92).

97
Microsoft's expert did not testify to that effect "without  contradiction," however.  A Government expert, Glenn Weadock, testified that Microsoft "design[ed] [IE] so that some of  the code that it uses co-resides in the same library files as  other code needed for Windows."  Direct Testimony p 30. Another Government expert likewise testified that one library  file, SHDOCVW.DLL, "is really a bundle of separate functions.  It contains some functions that have to do specifically  with Web browsing, and it contains some general user interface functions as well."  12/14/98 am Tr. at 60-61 (trial  testimony of Edward Felten), reprinted in 11 J.A. at 6953-54. One of Microsoft's own documents suggests as much.  See  Plaintiffs' Proposed Findings of Fact p 131.2.vii (citing GX  1686 (under seal) (Microsoft document indicating some functions in SHDOCVW.DLL can be described as "IE only,"  others can be described as "shell only" and still others can be  described as providing both "IE" and "shell" functions)).

98
In view of the contradictory testimony in the record, some  of which supports the District Court's finding that Microsoft  commingled browsing and non-browsing code, we cannot conclude that the finding was clearly erroneous.  See Anderson  v. City of Bessemer City, 470 U.S. 564, 573-74 (1985) ("If the  district court's account of the evidence is plausible in light of  the record viewed in its entirety, the court of appeals may not  reverse it even though convinced that had it been sitting as  the trier of fact, it would have weighed the evidence differently.").  Accordingly, we reject Microsoft's argument that we  should vacate Finding of Fact 159 as it relates to the commingling of code, and we conclude that such commingling has  an anticompetitive effect;  as noted above, the commingling  deters OEMs from pre-installing rival browsers, thereby reducing the rivals' usage share and, hence, developers' interest  in rivals' APIs as an alternative to the API set exposed by  Microsoft's operating system.

99
b. Microsoft's justifications for integration

100
Microsoft proffers no justification for two of the three  challenged actions that it took in integrating IE into Windows--excluding IE from the Add/Remove Programs utility  and commingling browser and operating system code.  Although Microsoft does make some general claims regarding  the benefits of integrating the browser and the operating  system, see, e.g., Direct Testimony of James Allchin p 94,  reprinted in 5 J.A. at 3321 ("Our vision of deeper levels of  technical integration is highly efficient and provides substantial benefits to customers and developers."), it neither specifies nor substantiates those claims.  Nor does it argue that  either excluding IE from the Add/Remove Programs utility or  commingling code achieves any integrative benefit.  Plaintiffs  plainly made out a prima facie case of harm to competition in  the operating system market by demonstrating that Microsoft's actions increased its browser usage share and thus protected its operating system monopoly from a middleware  threat and, for its part, Microsoft failed to meet its burden of  showing that its conduct serves a purpose other than protecting its operating system monopoly.  Accordingly, we hold  that Microsoft's exclusion of IE from the Add/Remove Programs utility and its commingling of browser and operating  system code constitute exclusionary conduct, in violation of   2.

101
As for the other challenged act that Microsoft took in  integrating IE into Windows--causing Windows to override  the user's choice of a default browser in certain circumstances--Microsoft argues that it has "valid technical reasons."  Specifically, Microsoft claims that it was necessary to  design Windows to override the user's preferences when he  or she invokes one of "a few" out "of the nearly 30 means of  accessing the Internet."  Appellant's Opening Br. at 82. According to Microsoft:

102
The Windows 98 Help system and Windows Update feature depend on ActiveX controls not supported by Navigator, and the now-discontinued Channel Bar utilized Microsoft's Channel Definition Format, which Navigator also did not support.  Lastly, Windows 98 does not invoke Navigator if a user accesses the Internet through "My Computer" or "Windows Explorer" because doing so would defeat one of the purposes of those features-enabling users to move seamlessly from local storage devices to the Web in the same browsing window.

103
Id. (internal citations omitted).  The plaintiff bears the burden not only of rebutting a proffered justification but also of  demonstrating that the anticompetitive effect of the challenged action outweighs it.  In the District Court, plaintiffs  appear to have done neither, let alone both;  in any event,  upon appeal, plaintiffs offer no rebuttal whatsoever.  Accordingly, Microsoft may not be held liable for this aspect of its  product design.

104
3. Agreements with Internet Access Providers

105
The District Court also condemned as exclusionary Microsoft's agreements with various IAPs.  The IAPs include both  Internet Service Providers, which offer consumers internet  access, and Online Services ("OLSs") such as America Online ("AOL"), which offer proprietary content in addition to internet access and other services.  Findings of Fact p 15.  The  District Court deemed Microsoft's agreements with the IAPs  unlawful because:

106
Microsoft licensed [IE] and the [IE] Access Kit [(of which, more below)] to hundreds of IAPs for no charge. [Findings of Fact] p p 250-51.  Then, Microsoft extended valuable promotional treatment to the ten most important IAPs in exchange for their commitment to promote and distribute [IE] and to exile Navigator from the desktop.  Id. p p 255-58, 261, 272, 288-90, 305-06.  Finally, in exchange for efforts to upgrade existing subscribers to client software that came bundled with [IE] instead of Navigator, Microsoft granted rebates--and in some cases made outright payments--to those same IAPs. Id. p p 259-60, 295.

107
Conclusions of Law, at 41.

108
The District Court condemned Microsoft's actions in (1)  offering IE free of charge to IAPs and (2) offering IAPs a  bounty for each customer the IAP signs up for service using  the IE browser.  In effect, the court concluded that Microsoft  is acting to preserve its monopoly by offering IE to IAPs at  an attractive price.  Similarly, the District Court held Microsoft liable for (3) developing the IE Access Kit ("IEAK"), a  software package that allows an IAP to "create a distinctive  identity for its service in as little as a few hours by customizing the [IE] title bar, icon, start and search pages," Findings  of Fact p 249, and (4) offering the IEAK to IAPs free of  charge, on the ground that those acts, too, helped Microsoft  preserve its monopoly.  Conclusions of Law, at 41-42.  Finally, the District Court found that (5) Microsoft agreed to  provide easy access to IAPs' services from the Windows  desktop in return for the IAPs' agreement to promote IE  exclusively and to keep shipments of internet access software  using Navigator under a specific percentage, typically 25%. See Conclusions of Law, at 42 (citing Findings of Fact  p p 258, 262, 289).  We address the first four items--Microsoft's inducements--and then its exclusive agreements with  IAPs.

109
Although offering a customer an attractive deal is the  hallmark of competition, the Supreme Court has indicated that in very rare circumstances a price may be unlawfully  low, or "predatory."  See generally Brooke Group, 509 U.S. at  220-27.  Plaintiffs argued before the District Court that  Microsoft's pricing was indeed predatory;  but instead of  making the usual predatory pricing argument--that the predator would drive out its rivals by pricing below cost on a  particular product and then, sometime in the future, raise its  prices on that product above the competitive level in order to  recoup its earlier losses--plaintiffs argued that by pricing  below cost on IE (indeed, even paying people to take it),  Microsoft was able simultaneously to preserve its stream of  monopoly profits on Windows, thereby more than recouping  its investment in below-cost pricing on IE.  The District  Court did not assign liability for predatory pricing, however,  and plaintiffs do not press this theory on appeal.

110
The rare case of price predation aside, the antitrust laws do  not condemn even a monopolist for offering its product at an  attractive price, and we therefore have no warrant to condemn Microsoft for offering either IE or the IEAK free of  charge or even at a negative price.  Likewise, as we said  above, a monopolist does not violate the Sherman Act simply  by developing an attractive product.  See Grinnell, 384 U.S.  at 571 ("[G]rowth or development as a consequence of a  superior product [or] business acumen" is no violation.). Therefore, Microsoft's development of the IEAK does not  violate the Sherman Act.

111
We turn now to Microsoft's deals with IAPs concerning  desktop placement.  Microsoft concluded these exclusive  agreements with all "the leading IAPs," Findings of Fact  p 244, including the major OLSs.  Id. p 245;  see also id.  p p 305, 306.  The most significant of the OLS deals is with  AOL, which, when the deal was reached, "accounted for a  substantial portion of all existing Internet access subscriptions and ... attracted a very large percentage of new IAP  subscribers."  Id. p 272.  Under that agreement Microsoft  puts the AOL icon in the OLS folder on the Windows desktop  and AOL does not promote any non-Microsoft browser, nor  provide software using any non-Microsoft browser except at the customer's request, and even then AOL will not supply  more than 15% of its subscribers with a browser other than  IE.  Id. p 289.

112
The Supreme Court most recently considered an antitrust  challenge to an exclusive contract in Tampa Electric Co. v.  Nashville Coal Co., 365 U.S. 320 (1961).  That case, which  involved a challenge to a requirements contract, was brought  under  3 of the Clayton Act and 1 and 2 of the Sherman  Act.  The Court held that an exclusive contract does not  violate the Clayton Act unless its probable effect is to "foreclose competition in a substantial share of the line of commerce affected."  Id. at 327.  The share of the market  foreclosed is important because, for the contract to have an  adverse effect upon competition, "the opportunities for other  traders to enter into or remain in that market must be  significantly limited."  Id. at 328.  Although "[n]either the  Court of Appeals nor the District Court [had] considered in  detail the question of the relevant market," id. at 330, the  Court in Tampa Electric examined the record and, after  defining the relevant market, determined that the contract  affected less than one percent of that market.  Id. at 333. After concluding, under the Clayton Act, that this share was  "conservatively speaking, quite insubstantial," id., the Court  went on summarily to reject the Sherman Act claims.  Id. at  335 ("[I]f [the contract] does not fall within the broader  prescription of  3 of the Clayton Act it follows that it is not  forbidden by those of the [Sherman Act].").

113
Following Tampa Electric, courts considering antitrust  challenges to exclusive contracts have taken care to identify  the share of the market foreclosed.  Some courts have indicated that  3 of the Clayton Act and  1 of the Sherman Act  require an equal degree of foreclosure before prohibiting  exclusive contracts.  See, e.g., Roland Mach. Co. v. Dresser  Indus., Inc., 749 F.2d 380, 393 (7th Cir. 1984) (Posner, J.). Other courts, however, have held that a higher market share  must be foreclosed in order to establish a violation of the  Sherman Act as compared to the Clayton Act.  See, e.g., Barr  Labs. v. Abbott Labs., 978 F.2d 98, 110 (3d Cir.1992);  11  Herbert Hovenkamp, Antitrust Law p 1800c4 (1998) ("[T]he  cases are divided, with a likely majority stating that the Clayton Act requires a smaller showing of anticompetitive  effects.").

114
Though what is "significant" may vary depending upon the  antitrust provision under which an exclusive deal is challenged, it is clear that in all cases the plaintiff must both  define the relevant market and prove the degree of foreclosure.  This is a prudential requirement;  exclusivity provisions in contracts may serve many useful purposes.  See, e.g.,  Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1162 (9th  Cir. 1997) ("There are, however, well-recognized economic  benefits to exclusive dealing arrangements, including the  enhancement of interbrand competition.");  Barry Wright  Corp. v. ITT Grinnell Corp., 724 F.2d 227, 236 (1st Cir. 1983)  (Breyer, J.) ("[V]irtually every contract to buy 'forecloses' or  'excludes' alternative sellers from some portion of the market,  namely the portion consisting of what was bought.").  Permitting an antitrust action to proceed any time a firm enters into  an exclusive deal would both discourage a presumptively  legitimate business practice and encourage costly antitrust  actions.  Because an exclusive deal affecting a small fraction  of a market clearly cannot have the requisite harmful effect  upon competition, the requirement of a significant degree of  foreclosure serves a useful screening function.  Cf. Frank H.  Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1, 2123 (1984) (discussing use of presumptions in antitrust law to  screen out cases in which loss to consumers and economy is  likely outweighed by cost of inquiry and risk of deterring  procompetitive behavior).

115
In this case, plaintiffs challenged Microsoft's exclusive dealing arrangements with the IAPs under both 1 and 2 of the  Sherman Act.  The District Court, in analyzing the  1 claim,  stated, "unless the evidence demonstrates that Microsoft's  agreements excluded Netscape altogether from access to  roughly forty percent of the browser market, the Court  should decline to find such agreements in violation of  1." Conclusions of Law, at 52.  The court recognized that Microsoft had substantially excluded Netscape from "the most  efficient channels for Navigator to achieve browser usage  share," id. at 53;  see also Findings of Fact p 145 ("[N]o other distribution channel for browsing software even approaches  the efficiency of OEM pre-installation and IAP bundling."),  and had relegated it to more costly and less effective methods  (such as mass mailing its browser on a disk or offering it for  download over the internet);  but because Microsoft has not  "completely excluded Netscape" from reaching any potential  user by some means of distribution, however ineffective, the  court concluded the agreements do not violate  1.  Conclusions of Law, at 53.  Plaintiffs did not cross-appeal this  holding.

116
Turning to  2, the court stated:  "the fact that Microsoft's  arrangements with various [IAPs and other] firms did not  foreclose enough of the relevant market to constitute a  1  violation in no way detracts from the Court's assignment of  liability for the same arrangements under  2....  [A]ll of  Microsoft's agreements, including the non-exclusive ones, severely restricted Netscape's access to those distribution channels leading most efficiently to the acquisition of browser  usage share."  Conclusions of Law, at 53.

117
On appeal Microsoft argues that "courts have applied the  same standard to alleged exclusive dealing agreements under  both Section 1 and Section 2," Appellant's Opening Br. at 109,  and it argues that the District Court's holding of no liability  under  1 necessarily precludes holding it liable under  2. The District Court appears to have based its holding with  respect to  1 upon a "total exclusion test" rather than the  40% standard drawn from the caselaw.  Even assuming the  holding is correct, however, we nonetheless reject Microsoft's  contention.

118
The basic prudential concerns relevant to 1 and 2 are  admittedly the same:  exclusive contracts are commonplace-particularly in the field of distribution--in our competitive,  market economy, and imposing upon a firm with market  power the risk of an antitrust suit every time it enters into  such a contract, no matter how small the effect, would create  an unacceptable and unjustified burden upon any such firm. At the same time, however, we agree with plaintiffs that a  monopolist's use of exclusive contracts, in certain circumstances, may give rise to a  2 violation even though the  contracts foreclose less than the roughly 40% or 50% share  usually required in order to establish a  1 violation.  See  generally Dennis W. Carlton, A General Analysis of Exclusionary Conduct and Refusal to Deal--Why Aspen and  Kodak Are Misguided, 68 Antitrust L.J. 659 (2001) (explaining various scenarios under which exclusive dealing, particularly by a dominant firm, may raise legitimate concerns about  harm to competition).

119
In this case, plaintiffs allege that, by closing to rivals a  substantial percentage of the available opportunities for browser distribution, Microsoft managed to preserve its monopoly  in the market for operating systems.  The IAPs constitute  one of the two major channels by which browsers can be  distributed.  Findings of Fact p 242.  Microsoft has exclusive  deals with "fourteen of the top fifteen access providers in  North America[, which] account for a large majority of all  Internet access subscriptions in this part of the world."  Id.  p 308.  By ensuring that the "majority" of all IAP subscribers  are offered IE either as the default browser or as the only  browser, Microsoft's deals with the IAPs clearly have a  significant effect in preserving its monopoly;  they help keep  usage of Navigator below the critical level necessary for  Navigator or any other rival to pose a real threat to Microsoft's monopoly.  See, e.g., id. p 143 (Microsoft sought to  "divert enough browser usage from Navigator to neutralize it  as a platform.");  see also Carlton, at 670.

120
Plaintiffs having demonstrated a harm to competition, the  burden falls upon Microsoft to defend its exclusive dealing  contracts with IAPs by providing a procompetitive justification for them.  Significantly, Microsoft's only explanation for  its exclusive dealing is that it wants to keep developers  focused upon its APIs--which is to say, it wants to preserve  its power in the operating system market.  02/26/01 Ct.  Appeals Tr. at 45-47.  That is not an unlawful end, but  neither is it a procompetitive justification for the specific  means here in question, namely exclusive dealing contracts  with IAPs.  Accordingly, we affirm the District Court's decision holding that Microsoft's exclusive contracts with IAPs  are exclusionary devices, in violation of  2 of the Sherman  Act.

121
4. Dealings with Internet Content Providers, Independent Software Vendors, and Apple Computer

122
The District Court held that Microsoft engages in exclusionary conduct in its dealings with ICPs, which develop  websites;  ISVs, which develop software;  and Apple, which is  both an OEM and a software developer.  See Conclusions of  Law, at 42-43 (deals with ICPs, ISVs, and Apple "supplemented Microsoft's efforts in the OEM and IAP channels"). The District Court condemned Microsoft's deals with ICPs  and ISVs, stating:  "By granting ICPs and ISVs free licenses  to bundle [IE] with their offerings, and by exchanging other  valuable inducements for their agreement to distribute, promote[,] and rely on [IE] rather than Navigator, Microsoft  directly induced developers to focus on its own APIs rather  than ones exposed by Navigator."  Id. (citing Findings of  Fact p p 334-35, 340).

123
With respect to the deals with ICPs, the District Court's  findings do not support liability.  After reviewing the ICP  agreements, the District Court specifically stated that "there  is not sufficient evidence to support a finding that Microsoft's  promotional restrictions actually had a substantial, deleterious impact on Navigator's usage share."  Findings of Fact  p 332. Because plaintiffs failed to demonstrate that Microsoft's deals with the ICPs have a substantial effect upon  competition, they have not proved the violation of the Sherman Act.

124
As for Microsoft's ISV agreements, however, the District  Court did not enter a similar finding of no substantial effect. The District Court described Microsoft's deals with ISVs as  follows:

125
In dozens of "First Wave" agreements signed between the fall of 1997 and the spring of 1998, Microsoft has promised to give preferential support, in the form of early Windows 98 and Windows NT betas, other technical information, and the right to use certain Microsoft  seals of approval, to important ISVs that agree to certain conditions.  One of these conditions is that the ISVs use Internet Explorer as the default browsing software for any software they develop with a hypertext-based user interface. Another condition is that the ISVs use Microsoft's "HTML Help," which is accessible only with Internet Explorer, to implement their applications' help systems.

126
Id. p 339.  The District Court further found that the effect of  these deals is to "ensure [ ] that many of the most popular  Web-centric applications will rely on browsing technologies  found only in Windows," id. p 340, and that Microsoft's deals  with ISVs therefore "increase[ ] the likelihood that the millions of consumers using [applications designed by ISVs that  entered into agreements with Microsoft] will use Internet  Explorer rather than Navigator."  Id. p 340.

127
The District Court did not specifically identify what share  of the market for browser distribution the exclusive deals  with the ISVs foreclose.  Although the ISVs are a relatively  small channel for browser distribution, they take on greater  significance because, as discussed above, Microsoft had largely foreclosed the two primary channels to its rivals.  In that  light, one can tell from the record that by affecting the  applications used by "millions" of consumers, Microsoft's exclusive deals with the ISVs had a substantial effect in further  foreclosing rival browsers from the market.  (Data introduced by Microsoft, see Direct Testimony of Cameron Myhrvold p 84, reprinted in 6 J.A. at 3922-23, and subsequently  relied upon by the District Court in its findings, see, e.g.,  Findings of Fact p 270, indicate that over the two-year period  1997-98, when Microsoft entered into the First Wave agreements, there were 40 million new users of the internet.) Because, by keeping rival browsers from gaining widespread  distribution (and potentially attracting the attention of developers away from the APIs in Windows), the deals have a  substantial effect in preserving Microsoft's monopoly, we hold  that plaintiffs have made a prima facie showing that the deals  have an anticompetitive effect.

128
Of course, that Microsoft's exclusive deals have the anticompetitive effect of preserving Microsoft's monopoly does  not, in itself, make them unlawful.  A monopolist, like a  competitive firm, may have a perfectly legitimate reason for  wanting an exclusive arrangement with its distributors.  Accordingly, Microsoft had an opportunity to, but did not,  present the District Court with evidence demonstrating that  the exclusivity provisions have some such procompetitive  justification.  See Conclusions of Law, at 43 (citing Findings  of Fact p p 339-40) ("With respect to the ISV agreements,  Microsoft has put forward no procompetitive business ends  whatsoever to justify their exclusionary terms.").  On appeal  Microsoft likewise does not claim that the exclusivity required  by the deals serves any legitimate purpose;  instead, it states  only that its ISV agreements reflect an attempt "to persuade  ISVs to utilize Internet-related system services in Windows  rather than Navigator."  Appellant's Opening Br. at 114.  As  we explained before, however, keeping developers focused  upon Windows--that is, preserving the Windows monopoly-is a competitively neutral goal.  Microsoft having offered no  procompetitive justification for its exclusive dealing arrangements with the ISVs, we hold that those arrangements violate   2 of the Sherman Act.

129
Finally, the District Court held that Microsoft's dealings  with Apple violated the Sherman Act.  See Conclusions of  Law, at 42-43.  Apple is vertically integrated:  it makes both  software (including an operating system, Mac OS), and hardware (the Macintosh line of computers).  Microsoft primarily  makes software, including, in addition to its operating system, a number of popular applications.  One, called "Office," is a  suite of business productivity applications that Microsoft has  ported to Mac OS.  The District Court found that "ninety  percent of Mac OS users running a suite of office productivity  applications [use] Microsoft's Mac Office."  Findings of Fact  p 344.  Further, the District Court found that:

130
In 1997, Apple's business was in steep decline, and many doubted that the company would survive much long er....  [M]any ISVs questioned the wisdom of continuing to spend time and money developing applications for the Mac OS.  Had Microsoft announced in the midst of this atmosphere that it was ceasing to develop new versions of Mac Office, a great number of ISVs, customers, developers, and investors would have interpreted the announcement as Apple's death notice.

131
Id. p 344.  Microsoft recognized the importance to Apple of  its continued support of Mac Office.  See id. p 347 (quoting  internal Microsoft e-mail) ("[We] need a way to push these  guys[, i.e., Apple] and [threatening to cancel Mac Office] is  the only one that seems to make them move.");  see also id.  ("[Microsoft Chairman Bill] Gates asked whether Microsoft  could conceal from Apple in the coming month the fact that  Microsoft was almost finished developing Mac Office 97."); id. at p 354 ("I think ... Apple should be using [IE] everywhere and if they don't do it, then we can use Office as a  club.").

132
In June 1997 Microsoft Chairman Bill Gates determined  that the company's negotiations with Apple " 'have not been  going well at all....  Apple let us down on the browser by  making Netscape the standard install.'  Gates then reported  that he had already called Apple's CEO ... to ask 'how we  should announce the cancellation of Mac Office....' "  Id. at  p 349.  The District Court further found that, within a month  of Gates' call, Apple and Microsoft had reached an agreement  pursuant to which

133
Microsoft's primary obligation is to continue releasing up-to-date versions of Mac Office for at least five years.... [and] Apple has agreed ... to "bundle the most current version of [IE] ... with [Mac OS]"... [and to] "make [IE] the default [browser]"....  Navigator is not installed on the computer hard drive during the default installation, which is the type of installation most users elect to employ....  [The] Agreement further provides that ... Apple may not position icons for nonMicrosoft browsing software on the desktop of new Macintosh PC systems or Mac OS upgrades.

134
Id. p p 350-52.  The agreement also prohibits Apple from  encouraging users to substitute another browser for IE, and  states that Apple will "encourage its employees to use [IE]." Id. p 352.

135
This exclusive deal between Microsoft and Apple has a  substantial effect upon the distribution of rival browsers.  If a  browser developer ports its product to a second operating  system, such as the Mac OS, it can continue to display a  common set of APIs.  Thus, usage share, not the underlying  operating system, is the primary determinant of the platform  challenge a browser may pose.  Pre-installation of a browser  (which can be accomplished either by including the browser  with the operating system or by the OEM installing the  browser) is one of the two most important methods of browser distribution, and Apple had a not insignificant share of  worldwide sales of operating systems.  See id. p 35 (Microsoft  has 95% of the market not counting Apple and "well above"  80% with Apple included in the relevant market).  Because  Microsoft's exclusive contract with Apple has a substantial  effect in restricting distribution of rival browsers, and because (as we have described several times above) reducing  usage share of rival browsers serves to protect Microsoft's  monopoly, its deal with Apple must be regarded as anticompetitive.  See Conclusions of Law, at 42 (citing Findings of  Fact p 356) ("By extracting from Apple terms that significantly diminished the usage of Navigator on the Mac OS, Microsoft helped to ensure that developers would not view Navigator as truly cross-platform middleware.").

136
Microsoft offers no procompetitive justification for the exclusive dealing arrangement.  It makes only the irrelevant  claim that the IE-for-Mac Office deal is part of a multifaceted  set of agreements between itself and Apple, see Appellant's  Opening Br. at 61 ("Apple's 'browsing software' obligation  was [not] the quid pro quo for Microsoft's Mac Office obligation[;]  ... all of the various obligations ... were part of  one 'overall agreement' between the two companies.");  that  does not mean it has any procompetitive justification.  Accordingly, we hold that the exclusive deal with Apple is  exclusionary, in violation of  2 of the Sherman Act.

5. Java

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
a. The incompatible JVM

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
b. The First Wave Agreements

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
c. Deception of Java developers

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
d. The threat to Intel

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.

6. Course of Conduct

162
The District Court held that, apart from Microsoft's specific acts, Microsoft was liable under  2 based upon its general  "course of conduct."  In reaching this conclusion the court  relied upon Continental Ore Co. v. Union Carbide & Carbon  Corp., 370 U.S. 690, 699 (1962), where the Supreme Court  stated, "[i]n [Sherman Act cases], plaintiffs should be given  the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean  after scrutiny of each."

163
Microsoft points out that Continental Ore and the other  cases cited by plaintiffs in support of "course of conduct"  liability all involve conspiracies among multiple firms, not the  conduct of a single firm;  in that setting the "course of  conduct" is the conspiracy itself, for which all the participants  may be held liable.  See Appellant's Opening Br. at 112-13. Plaintiffs respond that, as a policy matter, a monopolist's  unilateral "campaign of [acts intended to exclude a rival] that  in the aggregate has the requisite impact" warrants liability  even if the acts viewed individually would be lawful for want  of a significant effect upon competition.  Appellees' Br. at 8283.

164
We need not pass upon plaintiffs' argument, however,  because the District Court did not point to any series of acts,  each of which harms competition only slightly but the cumulative effect of which is significant enough to form an independent basis for liability.  The "course of conduct" section of the  District Court's opinion contains, with one exception, only  broad, summarizing conclusions.  See, e.g., Conclusions of  Law, at 44 ("Microsoft placed an oppressive thumb on the  scale of competitive fortune....").  The only specific acts to  which the court refers are Microsoft's expenditures in promoting its browser, see id. ("Microsoft has expended wealth  and foresworn opportunities to realize more...."), which we  have explained are not in themselves unlawful.  Because the  District Court identifies no other specific acts as a basis for  "course of conduct" liability, we reverse its conclusion that  Microsoft's course of conduct separately violates  2 of the  Sherman Act.

C. Causation

165
As a final parry, Microsoft urges this court to reverse on  the monopoly maintenance claim, because plaintiffs never  established a causal link between Microsoft's anticompetitive  conduct, in particular its foreclosure of Netscape's and Java's  distribution channels, and the maintenance of Microsoft's  operating system monopoly.  See Findings of Fact p 411  ("There is insufficient evidence to find that, absent Microsoft's actions, Navigator and Java already would have ignited  genuine competition in the market for Intel-compatible PC  operating systems.").  This is the flip side of Microsoft's  earlier argument that the District Court should have included  middleware in the relevant market.  According to Microsoft,  the District Court cannot simultaneously find that middleware is not a reasonable substitute and that Microsoft's  exclusionary conduct contributed to the maintenance of monopoly power in the operating system market.  Microsoft  claims that the first finding depended on the court's view that  middleware does not pose a serious threat to Windows, see  supra Section II.A, while the second finding required the  court to find that Navigator and Java would have developed  into serious enough cross-platform threats to erode the applications barrier to entry.  We disagree.

166
Microsoft points to no case, and we can find none, standing  for the proposition that, as to  2 liability in an equitable  enforcement action, plaintiffs must present direct proof that a  defendant's continued monopoly power is precisely attributable to its anticompetitive conduct.  As its lone authority,  Microsoft cites the following passage from Professor Areeda's  antitrust treatise:  "The plaintiff has the burden of pleading,  introducing evidence, and presumably proving by a preponderance of the evidence that reprehensible behavior has  contributed significantly to the ... maintenance of the monopoly."  3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law p 650c, at 69 (1996) (emphasis added).

167
But, with respect to actions seeking injunctive relief, the  authors of that treatise also recognize the need for courts to  infer "causation" from the fact that a defendant has engaged  in anticompetitive conduct that "reasonably appear[s] capable  of making a significant contribution to ... maintaining monopoly power."  Id. p 651c, at 78;  see also Morgan v. Ponder,  892 F.2d 1355, 1363 (8th Cir. 1989);  Barry Wright, 724 F.2d  at 230.  To require that  2 liability turn on a plaintiff's  ability or inability to reconstruct the hypothetical marketplace  absent a defendant's anticompetitive conduct would only encourage monopolists to take more and earlier anticompetitive  action.

168
We may infer causation when exclusionary conduct is aimed  at producers of nascent competitive technologies as well as  when it is aimed at producers of established substitutes. Admittedly, in the former case there is added uncertainty,  inasmuch as nascent threats are merely potential substitutes. But the underlying proof problem is the same--neither plaintiffs nor the court can confidently reconstruct a product's  hypothetical technological development in a world absent the  defendant's exclusionary conduct.  To some degree, "the defendant is made to suffer the uncertain consequences of its  own undesirable conduct."  3 Areeda & Hovenkamp, Antitrust Law p 651c, at 78.

169
Given this rather edentulous test for causation, the question in this case is not whether Java or Navigator would actually have developed into viable platform substitutes, but  (1) whether as a general matter the exclusion of nascent  threats is the type of conduct that is reasonably capable of  contributing significantly to a defendant's continued monopoly  power and (2) whether Java and Navigator reasonably constituted nascent threats at the time Microsoft engaged in the  anticompetitive conduct at issue.  As to the first, suffice it to  say that it would be inimical to the purpose of the Sherman  Act to allow monopolists free reign to squash nascent, albeit  unproven, competitors at will--particularly in industries  marked by rapid technological advance and frequent paradigm shifts.  Findings of Fact p p 59-60.  As to the second,  the District Court made ample findings that both Navigator  and Java showed potential as middleware platform threats. Findings of Fact p p 68-77.  Counsel for Microsoft admitted  as much at oral argument.  02/26/01 Ct. Appeals Tr. at 27  ("There are no constraints on output.  Marginal costs are  essentially zero.  And there are to some extent network  effects.  So a company like Netscape founded in 1994 can be  by the middle of 1995 clearly a potentially lethal competitor to  Windows because it can supplant its position in the market  because of the characteristics of these markets.").

170
Microsoft's concerns over causation have more purchase in  connection with the appropriate remedy issue, i.e., whether  the court should impose a structural remedy or merely enjoin  the offensive conduct at issue.  As we point out later in this  opinion, divestiture is a remedy that is imposed only with  great caution, in part because its long-term efficacy is rarely  certain.  See infra Section V.E.  Absent some measure of  confidence that there has been an actual loss to competition  that needs to be restored, wisdom counsels against adopting  radical structural relief.  See 3 Areeda & Hovenkamp, Antitrust Law p 653b, at 91-92 ("[M]ore extensive equitable relief,  particularly remedies such as divestiture designed to eliminate the monopoly altogether, raise more serious questions  and require a clearer indication of a significant causal connection between the conduct and creation or maintenance of the  market power.").  But these queries go to questions of remedy, not liability.  In short, causation affords Microsoft no defense to liability for its unlawful actions undertaken to  maintain its monopoly in the operating system market.

III. Attempted Monopolization

171
Microsoft further challenges the District Court's determination of liability for "attempt[ing] to monopolize ... any part  of the trade or commerce among the several States."  15  U.S.C.  2 (1997).  To establish a  2 violation for attempted  monopolization, "a plaintiff must prove (1) that the defendant  has engaged in predatory or anticompetitive conduct with (2)  a specific intent to monopolize and (3) a dangerous probability  of achieving monopoly power."  Spectrum Sports, Inc. v.  McQuillan, 506 U.S. 447, 456 (1993);  see also Times Picayune Pub. Co. v. United States, 345 U.S. 594, 626 (1953); Lorain Journal Co. v. United States, 342 U.S. 143, 153-55  (1951).  Because a deficiency on any one of the three will  defeat plaintiffs' claim, we look no further than plaintiffs'  failure to prove a dangerous probability of achieving monopoly power in the putative browser market.

172
The determination whether a dangerous probability of success exists is a particularly fact-intensive inquiry.  Because  the Sherman Act does not identify the activities that constitute the offense of attempted monopolization, the court "must  examine the facts of each case, mindful that the determination  of what constitutes an attempt, as Justice Holmes explained,  'is a question of proximity and degree.' "  United States v.  Am. Airlines, Inc., 743 F.2d 1114, 1118 (5th Cir. 1984)  (quoting Swift & Co. v. United States, 196 U.S. 375, 402  (1904)).  The District Court determined that "[t]he evidence  supports the conclusion that Microsoft's actions did pose such  a danger."  Conclusions of Law, at 45.  Specifically, the  District Court concluded that "Netscape's assent to Microsoft's market division proposal would have, instanter, resulted  in Microsoft's attainment of monopoly power in a second  market," and that "the proposal itself created a dangerous  probability of that result."  Conclusions of Law, at 46 (citation omitted).  The District Court further concluded that "the  predatory course of conduct Microsoft has pursued since June of 1995 has revived the dangerous probability that Microsoft  will attain monopoly power in a second market."  Id.

173
At the outset we note a pervasive flaw in the District  Court's and plaintiffs' discussion of attempted monopolization. Simply put, plaintiffs have made the same argument under  two different headings--monopoly maintenance and attempted monopolization. They have relied upon Microsoft's  2  liability for monopolization of the operating system market as  a presumptive indicator of attempted monopolization of an  entirely different market.  The District Court implicitly accepted this approach:  It agreed with plaintiffs that the events  that formed the basis for the  2 monopolization claim "warrant[ed] additional liability as an illegal attempt to amass  monopoly power in 'the browser market.' "  Id. at 45 (emphasis added).  Thus, plaintiffs and the District Court failed to  recognize the need for an analysis wholly independent of the  conclusions and findings on monopoly maintenance.

174
To establish a dangerous probability of success, plaintiffs  must as a threshold matter show that the browser market can  be monopolized, i.e., that a hypothetical monopolist in that  market could enjoy market power.  This, in turn, requires  plaintiffs (1) to define the relevant market and (2) to demonstrate that substantial barriers to entry protect that market. Because plaintiffs have not carried their burden on either  prong, we reverse without remand.

A. Relevant Market

175
A court's evaluation of an attempted monopolization claim  must include a definition of the relevant market.  See Spectrum Sports, 506 U.S. at 455-56.  Such a definition establishes a context for evaluating the defendant's actions as well  as for measuring whether the challenged conduct presented a  dangerous probability of monopolization.  See id.  The District Court omitted this element of the Spectrum Sports  inquiry.

176
Defining a market for an attempted monopolization claim  involves the same steps as defining a market for a monopoly  maintenance claim, namely a detailed description of the purpose of a browser--what functions may be included and what are not--and an examination of the substitutes that are part  of the market and those that are not.  See also supra Section  II.A.  The District Court never engaged in such an analysis  nor entered detailed findings defining what a browser is or  what products might constitute substitutes.  In the Findings  of Fact, the District Court (in a section on whether IE and  Windows are separate products) stated only that "a Web  browser provides the ability for the end user to select,  retrieve, and perceive resources on the Web."  Findings of  Fact p 150.  Furthermore, in discussing attempted monopolization in its Conclusions of Law, the District Court failed to  demonstrate analytical rigor when it employed varying and  imprecise references to the "market for browsing technology  for Windows," "the browser market," and "platform-level  browsing software."  Conclusions of Law, at 45.

177
Because the determination of a relevant market is a factual  question to be resolved by the District Court, see, e.g., All  Care Nursing Serv., Inc. v. High Tech Staffing Servs., Inc.,  135 F.3d 740, 749 (11th Cir. 1998);  Tunis Bros. Co., Inc. v.  Ford Motor Co., 952 F.2d 715, 722-23 (3d Cir. 1991);  Westman Comm'n Co. v. Hobart Int'l, Inc., 796 F.2d 1216, 1220  (10th Cir. 1986), we would normally remand the case so that  the District Court could formulate an appropriate definition. See Pullman-Standard v. Swint, 456 U.S. 273, 291-92 & n.22  (1982);  Janini v. Kuwait Univ., 43 F.3d 1534, 1537 (D.C. Cir.  1995);  Palmer v. Shultz, 815 F.2d 84, 103 (D.C. Cir. 1987).  A  remand on market definition is unnecessary, however, because the District Court's imprecision is directly traceable to  plaintiffs' failure to articulate and identify evidence before the  District Court as to (1) what constitutes a browser (i.e., what  are the technological components of or functionalities provided by a browser) and (2) why certain other products are not  reasonable substitutes (e.g., browser shells or viewers for  individual internet extensions, such as Real Audio Player or  Adobe Acrobat Reader).  See Plaintiffs' Joint Proposed Findings of Fact, at 817-19, reprinted in 2 J.A. at 1480-82; Plaintiffs' Joint Proposed Conclusions of Law  IV (No. 981232); see also Lee v. Interstate Fire & Cas. Co., 86 F.3d 101, 105 (7th Cir. 1996) (stating that remand for development of a  factual record is inappropriate where plaintiff failed to meet  burden of persuasion and never suggested that additional  evidence was necessary).  Indeed, when plaintiffs in their  Proposed Findings of Fact attempted to define a relevant  market for the attempt claim, they pointed only to their  separate products analysis for the tying claim.  See, e.g.,  Plaintiffs' Joint Proposed Findings of Fact, at 818, reprinted  in 2 J.A. at 1481.  However, the separate products analysis  for tying purposes is not a substitute for the type of market  definition that Spectrum Sports requires.  See infra Section  IV.A.

178
Plaintiffs' proposed findings and the District Court's actual  findings on attempted monopolization pale in comparison to  their counterparts on the monopoly maintenance claim. Compare Findings of Fact p 150, and Plaintiffs' Joint Proposed Findings of Fact, at 817-819, reprinted in 2 J.A. at  1480-82, with Findings of Fact p p 18-66, and Plaintiffs' Joint  Proposed Findings of Fact, at 20-31, reprinted in 1 J.A. at  658-69.  Furthermore, in their brief and at oral argument  before this court, plaintiffs did nothing to clarify or ameliorate this deficiency.  See, e.g., Appellees' Br. at 93-94.`

B. Barriers to Entry

179
Because a firm cannot possess monopoly power in a market  unless that market is also protected by significant barriers to  entry, see supra Section II.A, it follows that a firm cannot  threaten to achieve monopoly power in a market unless that  market is, or will be, similarly protected.  See Spectrum  Sports, 506 U.S. at 456 ("In order to determine whether there  is a dangerous probability of monopolization, courts have  found it necessary to consider ... the defendant's ability to  lessen or destroy competition in that market.") (citing cases). Plaintiffs have the burden of establishing barriers to entry  into a properly defined relevant market.  See 2A Phillip E.  Areeda et al., Antitrust Law p 420b, at 57-59 (1995);  3A  Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law  p 807g, at 361-62 (1996);  see also Neumann v. Reinforced Earth Co., 786 F.2d 424, 429 (D.C. Cir. 1986).  Plaintiffs must  not only show that barriers to entry protect the properly  defined browser market, but that those barriers are "significant."  See United States v. Baker Hughes Inc., 908 F.2d 981,  987 (D.C. Cir. 1990).  Whether there are significant barriers  to entry cannot, of course, be answered absent an appropriate  market definition;  thus, plaintiffs' failure on that score alone  is dispositive.  But even were we to assume a properly  defined market, for example browsers consisting of a graphical interface plus internet protocols, plaintiffs nonetheless  failed to carry their burden on barriers to entry.

180
Contrary to plaintiffs' contention on appeal, see Appellees'  Br. at 91-93, none of the District Court's statements constitutes a finding of barriers to entry into the web browser  market.  Finding of Fact 89 states:

181
At the time Microsoft presented its proposal, Navigator was the only browser product with a significant share of the market and thus the only one with the potential to weaken the applications barrier to entry.  Thus, had it convinced Netscape to accept its offer of a "special relationship," Microsoft quickly would have gained such control over the extensions and standards that networkcentric applications (including Web sites) employ as to make it all but impossible for any future browser rival to lure appreciable developer interest away from Microsoft's platform.

182
This finding is far too speculative to establish that competing browsers would be unable to enter the market, or that  Microsoft would have the power to raise the price of its  browser above, or reduce the quality of its browser below, the  competitive level.  Moreover, it is ambiguous insofar as it  appears to focus on Microsoft's response to the perceived  platform threat rather than the browser market.  Finding of  Fact 144, on which plaintiffs also rely, is part of the District  Court's discussion of Microsoft's alleged anticompetitive actions to eliminate the platform threat posed by Netscape  Navigator.  This finding simply describes Microsoft's reliance on studies indicating consumers' reluctance to switch browsers, a reluctance not shown to be any more than that which  stops consumers from switching brands of cereal.  Absent  more extensive and definitive factual findings, the District  Court's legal conclusions about entry barriers amount to  nothing more than speculation.

183
In contrast to their minimal effort on market definition,  plaintiffs did at least offer proposed findings of fact suggesting that the possibility of network effects could potentially  create barriers to entry into the browser market.  See Plaintiffs' Joint Proposed Findings of Fact, at 822-23, 825-27,  reprinted in 2 J.A. at 1485-86, 1488-90.  The District Court  did not adopt those proposed findings.  See Findings of Fact  p 89.  However, the District Court did acknowledge the possibility of a different kind of entry barrier in its Conclusions of  Law:

184
In the time it would have taken an aspiring entrant to launch a serious effort to compete against Internet Explorer, Microsoft could have erected the same type of barrier that protects its existing monopoly power by adding proprietary extensions to the browsing software under its control and by extracting commitments from OEMs, IAPs and others similar to the ones discussed in [the monopoly maintenance section].

185
Conclusions of Law, at 46 (emphasis added).

186
Giving plaintiffs and the District Court the benefit of the  doubt, we might remand if the possible existence of entry  barriers resulting from the possible creation and exploitation  of network effects in the browser market were the only  concern.  That is not enough to carry the day, however,  because the District Court did not make two key findings:  (1)  that network effects were a necessary or even probable,  rather than merely possible, consequence of high market  share in the browser market and (2) that a barrier to entry  resulting from network effects would be "significant" enough  to confer monopoly power.  Again, these deficiencies are in  large part traceable to plaintiffs' own failings.  As to the first  point, the District Court's use of the phrase "could have" reflects the same uncertainty articulated in testimony cited in  plaintiffs' proposed findings.  See Plaintiffs' Joint Proposed  Findings of Fact, at 822 (citing testimony of Frederick Warren-Boulton), at 826 (citing testimony of Franklin Fisher),  reprinted in 2 J.A. at 1485, 1489.  As to the second point, the  cited testimony in plaintiffs' proposed findings offers little  more than conclusory statements.  See id. at 822-27, reprinted in 2 J.A. at 1485-90.  The proffered testimony contains no  evidence regarding the cost of "porting" websites to different  browsers or the potentially different economic incentives facing ICPs, as opposed to ISVs, in their decision to incur costs  to do so.  Simply invoking the phrase "network effects"  without pointing to more evidence does not suffice to carry  plaintiffs' burden in this respect.

187
Any doubt that we may have had regarding remand instead  of outright reversal on the barriers to entry question was  dispelled by plaintiffs' arguments on attempted monopolization before this court.  Not only did plaintiffs fail to articulate  a website barrier to entry theory in either their brief or at  oral argument, they failed to point the court to evidence in  the record that would support a finding that Microsoft would  likely erect significant barriers to entry upon acquisition of a  dominant market share.

188
Plaintiffs did not devote the same resources to the attempted monopolization claim as they did to the monopoly maintenance claim.  But both claims require evidentiary and theoretical rigor.  Because plaintiffs failed to make their case on  attempted monopolization both in the District Court and  before this court, there is no reason to give them a second  chance to flesh out a claim that should have been fleshed out  the first time around.  Accordingly, we reverse the District  Court's determination of  2 liability for attempted monopolization.

IV. Tying

189
Microsoft also contests the District Court's determination  of liability under  1 of the Sherman Act.  The District Court  concluded that Microsoft's contractual and technological bundling of the IE web browser (the "tied" product) with its  Windows operating system ("OS") (the "tying" product) resulted in a tying arrangement that was per se unlawful. Conclusions of Law, at 47-51.  We hold that the rule of  reason, rather than per se analysis, should govern the legality  of tying arrangements involving platform software products. The Supreme Court has warned that " '[i]t is only after  considerable experience with certain business relationships  that courts classify them as per se violations....' "  Broad.  Music, Inc. v. CBS, 441 U.S. 1, 9 (1979) (quoting United  States v. Topco Assocs., 405 U.S. 596, 607-08 (1972)).  While  every "business relationship" will in some sense have unique  features, some represent entire, novel categories of dealings. As we shall explain, the arrangement before us is an example  of the latter, offering the first up-close look at the technological integration of added functionality into software that serves  as a platform for third-party applications.  There being no  close parallel in prior antitrust cases, simplistic application of  per se tying rules carries a serious risk of harm.  Accordingly, we vacate the District Court's finding of a per se tying  violation and remand the case.  Plaintiffs may on remand  pursue their tying claim under the rule of reason.

190
The facts underlying the tying allegation substantially overlap with those set forth in Section II.B in connection with the   2 monopoly maintenance claim.  The key District Court  findings are that (1) Microsoft required licensees of Windows  95 and 98 also to license IE as a bundle at a single price,  Findings of Fact p p 137, 155, 158;  (2) Microsoft refused to  allow OEMs to uninstall or remove IE from the Windows  desktop, id. p p 158, 203, 213;  (3) Microsoft designed Windows 98 in a way that withheld from consumers the ability to  remove IE by use of the Add/Remove Programs utility, id.  p 170;  cf. id. p 165 (stating that IE was subject to Add/Remove Programs utility in Windows 95);  and (4) Microsoft designed Windows 98 to override the user's choice of default  web browser in certain circumstances, id. p p 171, 172.  The  court found that these acts constituted a per se tying violation.  Conclusions of Law, at 47-51.  Although the District  Court also found that Microsoft commingled operating system-only and browser-only routines in the same library files,  Findings of Fact p p 161, 164, it did not include this as a basis  for tying liability despite plaintiffs' request that it do so,  Plaintiffs' Proposed Findings of Fact, p p 131-32, reprinted in  2 J.A. at 941-47.

191
There are four elements to a per se tying violation:  (1) the  tying and tied goods are two separate products;  (2) the  defendant has market power in the tying product market;  (3)  the defendant affords consumers no choice but to purchase  the tied product from it;  and (4) the tying arrangement  forecloses a substantial volume of commerce.  See Eastman  Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 461-62  (1992);  Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S.  2, 12-18 (1984).

192
Microsoft does not dispute that it bound Windows and IE  in the four ways the District Court cited.  Instead it argues  that Windows (the tying good) and IE browsers (the tied  good) are not "separate products," Appellant's Opening Br. at  69-79, and that it did not substantially foreclose competing  browsers from the tied product market, id. at 79-83.  (Microsoft also contends that it does not have monopoly power in  the tying product market, id. at 84-96, but, for reasons given  in Section II.A, we uphold the District Court's finding to the  contrary.)

193
We first address the separate-products inquiry, a source of  much argument between the parties and of confusion in the  cases.  Our purpose is to highlight the poor fit between the  separate-products test and the facts of this case.  We then  offer further reasons for carving an exception to the per se  rule when the tying product is platform software.  In the  final section we discuss the District Court's inquiry if plaintiffs pursue a rule of reason claim on remand.

194
A. Separate-Products Inquiry Under the Per Se Test

195
The requirement that a practice involve two separate products before being condemned as an illegal tie started as a  purely linguistic requirement:  unless products are separate,  one cannot be "tied" to the other.  Indeed, the nature of the products involved in early tying cases--intuitively distinct  items such as a movie projector and a film, Motion Picture  Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502 (1917)-led courts either to disregard the separate-products question,  see, e.g., United Shoe Mach. Corp. v. United States, 258 U.S.  451 (1922), or to discuss it only in passing, see, e.g., Motion  Picture Patents, 243 U.S. at 508, 512, 518.  It was not until  Times-Picayune Publishing Co. v. United States, 345 U.S.  594 (1953), that the separate-products issue became a distinct  element of the test for an illegal tie.  Id. at 614.  Even that  case engaged in a rather cursory inquiry into whether ads  sold in the morning edition of a paper were a separate  product from ads sold in the evening edition.

196
The first case to give content to the separate-products test  was Jefferson Parish, 466 U.S. 2.  That case addressed a  tying arrangement in which a hospital conditioned surgical  care at its facility on the purchase of anesthesiological services from an affiliated medical group.  The facts were a  challenge for casual separate-products analysis because the  tied service--anesthesia--was neither intuitively distinct from  nor intuitively contained within the tying service--surgical  care.  A further complication was that, soon after the Court  enunciated the per se rule for tying liability in International  Salt Co. v. United States, 332 U.S. 392, 396 (1947), and  Northern Pacific Railway Co. v. United States, 356 U.S. 1, 57 (1958), new economic research began to cast doubt on the  assumption, voiced by the Court when it established the rule,  that " 'tying agreements serve hardly any purpose beyond the  suppression of competition,' " id. at 6 (quoting Standard Oil  of Cal. v. United States, 337 U.S. 293, 305-06 (1949));  see also  Jefferson Parish, 466 U.S. at 15 n.23 (citing materials);  Fortner Enters. v. U.S. Steel Corp., 394 U.S. 495, 524-25 (1969)  (Fortas, J., dissenting) ("Fortner I").

197
The Jefferson Parish Court resolved the matter in two  steps.  First, it clarified that "the answer to the question  whether one or two products are involved" does not turn "on  the functional relation between them...."  Jefferson Parish,  466 U.S. at 19;  see also id. at 19 n.30.  In other words, the  mere fact that two items are complements, that "one ... is useless without the other," id., does not make them a single  "product" for purposes of tying law.  Accord Eastman Kodak, 504 U.S. at 463.  Second, reasoning that the "definitional  question [whether two distinguishable products are involved]  depends on whether the arrangement may have the type of  competitive consequences addressed by the rule [against tying]," Jefferson Parish, 466 U.S. at 21, the Court decreed that  "no tying arrangement can exist unless there is a sufficient  demand for the purchase of anesthesiological services separate from hospital services to identify a distinct product  market in which it is efficient to offer anesthesiological services separately from hospital service," id. at 21-22 (emphasis  added);  accord Eastman Kodak, 504 U.S. at 462.

198
The Court proceeded to examine direct and indirect evidence of consumer demand for the tied product separate from  the tying product.  Direct evidence addresses the question  whether, when given a choice, consumers purchase the tied  good from the tying good maker, or from other firms.  The  Court took note, for example, of testimony that patients and  surgeons often requested specific anesthesiologists not associated with a hospital.  Jefferson Parish, 466 U.S. at 22. Indirect evidence includes the behavior of firms without  market power in the tying good market, presumably on the  notion that (competitive) supply follows demand.  If competitive firms always bundle the tying and tied goods, then they  are a single product.  See id. at 22 n.36;  see also Eastman  Kodak, 504 U.S. at 462;  Fortner I, 394 U.S. at 525 (Fortas,  J., dissenting), cited in Jefferson Parish, 466 U.S. at 12, 22  n.35;  United States v. Jerrold Elecs. Corp., 187 F. Supp. 545,  559 (E.D. Pa. 1960), aff'd per curiam, 365 U.S. 567 (1961);  10  Phillip E. Areeda et al., Antitrust Law p 1744, at 197-201  (1996).  Here the Court noted that only 27% of anesthesiologists in markets other than the defendant's had financial  relationships with hospitals, and that, unlike radiologists and  pathologists, anesthesiologists were not usually employed by  hospitals, i.e., bundled with hospital services.  Jefferson Parish, 466 U.S. at 22 n.36.  With both direct and indirect evidence concurring, the Court determined that hospital surgery and anesthesiological services were distinct goods.

199
To understand the logic behind the Court's consumer demand test, consider first the postulated harms from tying. The core concern is that tying prevents goods from competing  directly for consumer choice on their merits, i.e., being selected as a result of "buyers' independent judgment," id. at 13  (internal quotes omitted).  With a tie, a buyer's "freedom to  select the best bargain in the second market [could be]  impaired by his need to purchase the tying product, and  perhaps by an inability to evaluate the true cost of either  product...."  Id. at 15.  Direct competition on the merits of  the tied product is foreclosed when the tying product either is  sold only in a bundle with the tied product or, though offered  separately, is sold at a bundled price, so that the buyer pays  the same price whether he takes the tied product or not.  In  both cases, a consumer buying the tying product becomes  entitled to the tied product;  he will therefore likely be  unwilling to buy a competitor's version of the tied product  even if, making his own price/quality assessment, that is what  he would prefer.

200
But not all ties are bad.  Bundling obviously saves distribution and consumer transaction costs.  9 Phillip E. Areeda,  Antitrust Law p 1703g2, at 51-52 (1991).  This is likely to be  true, to take some examples from the computer industry, with  the integration of math co-processors and memory into microprocessor chips and the inclusion of spell checkers in word  processors.  11/10/98 pm Tr. at 18-19 (trial testimony of  Steven McGeady of Intel), reprinted in 9 J.A. at 5581-82  (math co-processor);  Cal. Computer Prods., Inc. v. IBM  Corp., 613 F.2d 727, 744 & n.29 (9th Cir. 1979) (memory). Bundling can also capitalize on certain economies of scope.  A  possible example is the "shared" library files that perform OS  and browser functions with the very same lines of code and  thus may save drive space from the clutter of redundant  routines and memory when consumers use both the OS and  browser simultaneously.  11/16/98 pm Tr. at 44 (trial testimony of Glenn Weadock), reprinted in 9 J.A. at 5892;  Direct  Testimony of Microsoft's James Allchin p p 10, 97, 100, 106116, app. A (excluding p p f, g.vi), reprinted in 5 J.A. at 3292,  3322-30, 3412-17.  Indeed, if there were no efficiencies from  a tie (including economizing on consumer transaction costs  such as the time and effort involved in choice), we would  expect distinct consumer demand for each individual component of every good.  In a competitive market with zero  transaction costs, the computers on which this opinion was  written would only be sold piecemeal--keyboard, monitor,  mouse, central processing unit, disk drive, and memory all  sold in separate transactions and likely by different manufacturers.

201
Recognizing the potential benefits from tying, see Jefferson  Parish, 466 U.S. at 21 n.33, the Court in Jefferson Parish  forged a separate-products test that, like those of market  power and substantial foreclosure, attempts to screen out  false positives under per se analysis.  The consumer demand  test is a rough proxy for whether a tying arrangement may,  on balance, be welfare-enhancing, and unsuited to per se  condemnation.  In the abstract, of course, there is always  direct separate demand for products:  assuming choice is  available at zero cost, consumers will prefer it to no choice. Only when the efficiencies from bundling are dominated by  the benefits to choice for enough consumers, however, will we  actually observe consumers making independent purchases. In other words, perceptible separate demand is inversely  proportional to net efficiencies.  On the supply side, firms  without market power will bundle two goods only when the  cost savings from joint sale outweigh the value consumers  place on separate choice.  So bundling by all competitive  firms implies strong net efficiencies.  If a court finds either  that there is no noticeable separate demand for the tied  product or, there being no convincing direct evidence of  separate demand, that the entire "competitive fringe" engages in the same behavior as the defendant, 10 Areeda et  al., Antitrust Law p 1744c4, at 200, then the tying and tied  products should be declared one product and per se liability  should be rejected.

202
Before concluding our exegesis of Jefferson Parish's  separate-products test, we should clarify two things.  First,  Jefferson Parish does not endorse a direct inquiry into the efficiencies of a bundle.  Rather, it proposes easy-toadminister proxies for net efficiency.  In describing the separate-products test we discuss efficiencies only to explain the  rationale behind the consumer demand inquiry.  To allow the  separate-products test to become a detailed inquiry into  possible welfare consequences would turn a screening test  into the very process it is expected to render unnecessary. 10 Areeda et al., Antitrust Law p p 1741b & c, at 180-85;  see  also Jefferson Parish, 466 U.S. at 34-35 (O'Connor, J., concurring).

203
Second, the separate-products test is not a one-sided inquiry into the cost savings from a bundle.  Although Jefferson  Parish acknowledged that prior lower court cases looked at  cost-savings to decide separate products, see id. at 22 n.35,  the Court conspicuously did not adopt that approach in its  disposition of tying arrangement before it.  Instead it chose  proxies that balance costs savings against reduction in consumer choice.

204
With this background, we now turn to the separateproducts inquiry before us.  The District Court found that  many consumers, if given the option, would choose their  browser separately from the OS.  Findings of Fact p 151  (noting that "corporate consumers ... prefer to standardize  on the same browser across different [OSs]" at the workplace).  Turning to industry custom, the court found that,  although all major OS vendors bundled browsers with their  OSs, these companies either sold versions without a browser,  or allowed OEMs or end-users either not to install the  bundled browser or in any event to "uninstall" it.  Id. p 153. The court did not discuss the record evidence as to whether  OS vendors other than Microsoft sold at a bundled price, with  no discount for a browserless OS, perhaps because the record  evidence on the issue was in conflict.  Compare, e.g., Direct  Testimony of Richard Schmalensee p 241, reprinted in 7 J.A.  at 4315 ("[A]ll major operating system vendors do in fact  include Web-browsing software with the operating system at  no extra charge.") (emphasis added), with, e.g., 1/6/99 pm Tr.  at 42 (trial testimony of Franklin Fisher of MIT) (suggesting  all OSs but Microsoft offer discounts).

205
Microsoft does not dispute that many consumers demand  alternative browsers.  But on industry custom Microsoft contends that no other firm requires non-removal because no  other firm has invested the resources to integrate web browsing as deeply into its OS as Microsoft has.  Appellant's  Opening Br. at 25;  cf. Direct Testimony of James Allchin  p p 262-72, reprinted in 5 J.A. at 3385-89 (Apple, IBM); 11/5/98 pm Tr. at 55-58 (trial testimony of Apple's Avadis  Tevanian, Jr.), reprinted in 9 J.A. at 5507-10 (Apple).  (We  here use the term "integrate" in the rather simple sense of  converting individual goods into components of a single physical object (e.g., a computer as it leaves the OEM, or a disk or  sets of disks), without any normative implication that such  integration is desirable or achieves special advantages.  Cf.  United States v. Microsoft Corp., 147 F.3d 935, 950 (D.C. Cir.  1998) ("Microsoft II").) Microsoft contends not only that its  integration of IE into Windows is innovative and beneficial  but also that it requires non-removal of IE.  In our discussion  of monopoly maintenance we find that these claims fail the  efficiency balancing applicable in that context.  But the separate-products analysis is supposed to perform its function as a  proxy without embarking on any direct analysis of efficiency. Accordingly, Microsoft's implicit argument--that in this case  looking to a competitive fringe is inadequate to evaluate fully  its potentially innovative technological integration, that such a  comparison is between apples and oranges--poses a legitimate objection to the operation of Jefferson Parish's  separate-products test for the per se rule.

206
In fact there is merit to Microsoft's broader argument that  Jefferson Parish's consumer demand test would "chill innovation to the detriment of consumers by preventing firms from  integrating into their products new functionality previously  provided by standalone products--and hence, by definition,  subject to separate consumer demand."  Appellant's Opening  Br. at 69.  The per se rule's direct consumer demand and indirect industry custom inquiries are, as a general matter,  backward-looking and therefore systematically poor proxies  for overall efficiency in the presence of new and innovative  integration.  See 10 Areeda et al., Antitrust Law p 1746, at  224-29;  Amicus Brief of Lawrence Lessig at 24-25, and  sources cited therein (brief submitted regarding Conclusions  of Law).  The direct consumer demand test focuses on historic consumer behavior, likely before integration, and the indirect industry custom test looks at firms that, unlike the  defendant, may not have integrated the tying and tied goods. Both tests compare incomparables--the defendant's decision  to bundle in the presence of integration, on the one hand, and  consumer and competitor calculations in its absence, on the  other.  If integration has efficiency benefits, these may be  ignored by the Jefferson Parish proxies.  Because one cannot  be sure beneficial integration will be protected by the other  elements of the per se rule, simple application of that rule's  separate-products test may make consumers worse off.

207
In light of the monopoly maintenance section, obviously, we  do not find that Microsoft's integration is welfare-enhancing  or that it should be absolved of tying liability.  Rather, we  heed Microsoft's warning that the separate-products element  of the per se rule may not give newly integrated products a  fair shake.

208
B. Per Se Analysis Inappropriate for this Case.

209
We now address directly the larger question as we see it: whether standard per se analysis should be applied "off the  shelf" to evaluate the defendant's tying arrangement, one  which involves software that serves as a platform for thirdparty applications.  There is no doubt that "[i]t is far too late  in the history of our antitrust jurisprudence to question the  proposition that certain tying arrangements pose an unacceptable risk of stifling competition and therefore are unreasonable 'per se.' "  Jefferson Parish, 466 U.S. at 9 (emphasis  added).  But there are strong reasons to doubt that the  integration of additional software functionality into an OS  falls among these arrangements.  Applying per se analysis to such an amalgamation creates undue risks of error and of  deterring welfare-enhancing innovation.

210
The Supreme Court has warned that " '[i]t is only after  considerable experience with certain business relationships  that courts classify them as per se violations....' "  Broad.  Music, 441 U.S. at 9 (quoting Topco Assocs., 405 U.S. at 60708);  accord Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S.  36, 47-59 (1977);  White Motor Co. v. United States, 372 U.S.  253, 263 (1963);  Jerrold Elecs., 187 F. Supp. at 555-58, 56061;  see also Frank H. Easterbrook, Allocating Antitrust  Decisionmaking Tasks, 76 Geo. L.J. 305, 308 (1987).  Yet the  sort of tying arrangement attacked here is unlike any the  Supreme Court has considered.  The early Supreme Court  cases on tying dealt with arrangements whereby the sale or  lease of a patented product was conditioned on the purchase  of certain unpatented products from the patentee.  See Motion Picture Patents, 243 U.S. 502 (1917);  United Shoe  Mach., 258 U.S. 451 (1922);  IBM Corp. v. United States, 298  U.S. 131 (1936);  Int'l Salt, 332 U.S. 392 (1947).  Later  Supreme Court tying cases did not involve market power  derived from patents, but continued to involve contractual  ties.  See Times-Picayune, 345 U.S. 594 (1953) (defendant  newspaper conditioned the purchase of ads in its evening  edition on the purchase of ads in its morning edition);  N. Pac.  Ry., 356 U.S. 1 (1958) (defendant railroad leased land only on  the condition that products manufactured on the land be  shipped on its railways);  United States v. Loew's Inc., 371  U.S. 38 (1962) (defendant distributor of copyrighted feature  films conditioned the sale of desired films on the purchase of  undesired films);  U.S. Steel Corp. v. Fortner Enters., Inc.,  429 U.S. 610 (1977) ("Fortner II") (defendant steel company  conditioned access to low interest loans on the purchase of the  defendant's prefabricated homes);  Jefferson Parish, 466 U.S.  2 (1984) (defendant hospital conditioned use of its operating  rooms on the purchase of anesthesiological services from a  medical group associated with the hospital);  Eastman Kodak,  504 U.S. 451 (1992) (defendant photocopying machine manufacturer conditioned the sale of replacement parts for its  machines on the use of the defendant's repair services).

211
In none of these cases was the tied good physically and  technologically integrated with the tying good.  Nor did the  defendants ever argue that their tie improved the value of the  tying product to users and to makers of complementary  goods.  In those cases where the defendant claimed that use  of the tied good made the tying good more valuable to users,  the Court ruled that the same result could be achieved via  quality standards for substitutes of the tied good.  See, e.g.,  Int'l Salt, 332 U.S. at 397-98;  IBM, 298 U.S. at 138-40. Here Microsoft argues that IE and Windows are an integrated physical product and that the bundling of IE APIs with  Windows makes the latter a better applications platform for  third-party software.  It is unclear how the benefits from IE  APIs could be achieved by quality standards for different  browser manufacturers.  We do not pass judgment on Microsoft's claims regarding the benefits from integration of its  APIs.  We merely note that these and other novel, purported  efficiencies suggest that judicial "experience" provides little  basis for believing that, "because of their pernicious effect on  competition and lack of any redeeming virtue," a software  firm's decisions to sell multiple functionalities as a package  should be "conclusively presumed to be unreasonable and  therefore illegal without elaborate inquiry as to the precise  harm they have caused or the business excuse for their use." N. Pac. Ry., 356 U.S. at 5 (emphasis added).

212
Nor have we found much insight into software integration  among the decisions of lower federal courts.  Most tying  cases in the computer industry involve bundling with hardware.  See, e.g., Digital Equip. Corp. v. Uniq Digital Techs.,  Inc., 73 F.3d 756, 761 (7th Cir. 1996) (Easterbrook, J.)  (rejecting with little discussion the notion that bundling of OS  with a computer is a tie of two separate products);  Datagate,  Inc. v. Hewlett-Packard Co., 941 F.2d 864, 870 (9th Cir. 1991)  (holding that plaintiff's allegation that defendant conditioned  its software on purchase of its hardware was sufficient to  survive summary judgment);  Digidyne Corp. v. Data Gen.  Corp., 734 F.2d 1336, 1341-47 (9th Cir. 1984) (holding that  defendant's conditioning the sale of its OS on the purchase of  its CPU constitutes a per se tying violation);  Cal. Computer Prods., 613 F.2d at 743-44 (holding that defendant's integration into its CPU of a disk controller designed for its own  disk drives was a useful innovation and not an impermissible  attempt to monopolize);  ILC Peripherals Leasing Corp. v.  IBM Corp., 448 F. Supp. 228, 233 (N.D. Cal. 1978) (finding  that defendant's integration of magnetic disks and a head/disk  assembly was not an unlawful tie), aff'd per curiam sub. nom.  Memorex Corp. v. IBM Corp., 636 F.2d 1188 (9th Cir. 1980); see also Transamerica Computer Co. v. IBM Corp., 698 F.2d  1377, 1382-83 (9th Cir. 1983) (finding lawful defendant's  design changes that rendered plaintiff peripheral maker's  tape drives incompatible with the defendant's CPU).  The  hardware case that most resembles the present one is Telex  Corp. v. IBM Corp., 367 F. Supp. 258 (N.D. Okla. 1973), rev'd  on other grounds, 510 F.2d 894 (10th Cir. 1975).  Just as  Microsoft integrated web browsing into its OS, IBM in the  1970s integrated memory into its CPUs, a hardware platform. A peripheral manufacturer alleged a tying violation, but the  District Court dismissed the claim because it thought it  inappropriate to enmesh the courts in product design decisions.  Id. at 347.  The court's discussion of the tying claim  was brief and did not dwell on the effects of the integration  on competition or efficiencies.  Nor did the court consider  whether per se analysis of the alleged tie was wise.

213
We have found four antitrust cases involving arrangements  in which a software program is tied to the purchase of a  software platform--two district court cases and two appellate  court cases, including one from this court.  The first case,  Innovation Data Processing, Inc. v. IBM Corp., 585 F. Supp.  1470 (D.N.J. 1984), involved an allegation that IBM bundled  with its OS a utility used to transfer data from a tape drive to  a computer's disk drive.  Although the court mentioned the  efficiencies achieved by bundling, it ultimately dismissed the  per se tying claim because IBM sold a discounted version of  the OS without the utility.  Id. at 1475-76.  The second case,  A.I. Root Co. v. Computer/Dynamics, Inc., 806 F.2d 673 (6th  Cir. 1986), was brought by a business customer who claimed  that an OS manufacturer illegally conditioned the sale of its  OS on the purchase of other software applications.  The court quickly disposed of the case on the ground that defendant  Computer/Dynamics had no market power.  Id. at 675-77. There was no mention of the efficiencies from the tie.  The  third case, Caldera, Inc. v. Microsoft Corp., 72 F. Supp. 2d  1295 (D. Utah 1999), involved a complaint that the technological integration of MS-DOS and Windows 3.1 into Windows 95  constituted a per se tying violation.  The court formulated the  "single product" issue in terms of whether the tie constituted  a technological improvement, ultimately concluding that Microsoft was not entitled to summary judgment on that issue. Id. at 1322-28.

214
The software case that bears the greatest resemblance to  that at bar is, not surprisingly, Microsoft II, 147 F.3d 935,  where we examined the bundling of IE with Windows 95. But the issue there was whether the bundle constituted an  "integrated product" as the term was used in a 1994 consent  decree between the Department of Justice and Microsoft.  Id.  at 939.  We did not consider whether Microsoft's bundling  should be condemned as per se illegal.  We certainly did not  make any finding that bundling IE with Windows had "no  purpose except stifling of competition," White Motor, 372 U.S.  at 263, an important consideration in defining the scope of  any of antitrust law's per se rules, see Cont'l T.V., 433 U.S. at  57-59.  While we believed our interpretation of the term  "integrated product" was consistent with the test for separate  products under tying law, we made clear that the "antitrust  question is of course distinct."  Microsoft II, 147 F.3d at 950  n.14.  We even cautioned that our conclusion that IE and  Windows 95 were integrated was "subject to reexamination  on a more complete record."  Id. at 952.  To the extent that  the decision completely disclaimed judicial capacity to evaluate "high-tech product design," id., it cannot be said to  conform to prevailing antitrust doctrine (as opposed to resolution of the decree-interpretation issue then before us).  In  any case, mere review of asserted breaches of a consent  decree hardly constitutes enough "experience" to warrant  application of per se analysis.  See Broad. Music, 441 U.S. at  10-16 (refusing to apply per se analysis to defendant's blanket licenses even though those licenses had been thoroughly

215
investigated by the Department of Justice and were the  subject of a consent decree that had been reviewed by  numerous courts).

216
While the paucity of cases examining software bundling  suggests a high risk that per se analysis may produce inaccurate results, the nature of the platform software market  affirmatively suggests that per se rules might stunt valuable  innovation.  We have in mind two reasons.

217
First, as we explained in the previous section, the separateproducts test is a poor proxy for net efficiency from newly  integrated products.  Under per se analysis the first firm to  merge previously distinct functionalities (e.g., the inclusion of  starter motors in automobiles) or to eliminate entirely the  need for a second function (e.g., the invention of the stainresistant carpet) risks being condemned as having tied two  separate products because at the moment of integration there  will appear to be a robust "distinct" market for the tied  product.  See 10 Areeda et al., Antitrust Law p 1746, at 224. Rule of reason analysis, however, affords the first mover an  opportunity to demonstrate that an efficiency gain from its  "tie" adequately offsets any distortion of consumer choice. See Grappone, Inc. v. Subaru of New England, Inc., 858 F.2d  792, 799 (1st Cir. 1988) (Breyer, J.);  see also Town Sound &  Custom Tops, Inc. v. Chrysler Motor Corp., 959 F.2d 468, 482  (3d Cir. 1992);  Kaiser Aluminum & Chem. Sales, Inc. v.  Avondale Shipyards, Inc., 677 F.2d 1045, 1048-49 n.5 (5th  Cir. 1982).

218
The failure of the separate-products test to screen out  certain cases of productive integration is particularly troubling in platform software markets such as that in which the  defendant competes.  Not only is integration common in such  markets, but it is common among firms without market  power.  We have already reviewed evidence that nearly all  competitive OS vendors also bundle browsers.  Moreover,  plaintiffs do not dispute that OS vendors can and do incorporate basic internet plumbing and other useful functionality  into their OSs.  See Direct Testimony of Richard Schmalensee p 508, reprinted in 7 J.A. at 4462-64 (disk defragmentation, memory management, peer-to-peer networking or file  sharing);  11/19/98 am Tr. at 82-83 (trial testimony of Frederick Warren-Boulton), reprinted in 10 J.A. at 6427-28  (TCP/IP stacks).  Firms without market power have no incentive to package different pieces of software together unless there are efficiency gains from doing so.  The ubiquity of  bundling in competitive platform software markets should  give courts reason to pause before condemning such behavior  in less competitive markets.

219
Second, because of the pervasively innovative character of  platform software markets, tying in such markets may produce efficiencies that courts have not previously encountered  and thus the Supreme Court had not factored into the per se  rule as originally conceived.  For example, the bundling of a  browser with OSs enables an independent software developer  to count on the presence of the browser's APIs, if any, on  consumers' machines and thus to omit them from its own  package.  See Direct Testimony of Richard Schmalensee  p p 230-31, 234, reprinted in 7 J.A. at 4309-11, 4312;  Direct  Testimony of Michael Devlin p p 12-21, reprinted in 5 J.A. at  3525-29;  see also Findings of Fact p 2.  It is true that  software developers can bundle the browser APIs they need  with their own products, see id. p 193, but that may force  consumers to pay twice for the same API if it is bundled with  two different software programs.  It is also true that OEMs  can include APIs with the computers they sell, id., but  diffusion of uniform APIs by that route may be inferior. First, many OEMs serve special subsets of Windows consumers, such as home or corporate or academic users.  If just one  of these OEMs decides not to bundle an API because it does  not benefit enough of its clients, ISVs that use that API  might have to bundle it with every copy of their program. Second, there may be a substantial lag before all OEMs  bundle the same set of APIs--a lag inevitably aggravated by  the first phenomenon.  In a field where programs change  very rapidly, delays in the spread of a necessary element  (here, the APIs) may be very costly.  Of course, these  arguments may not justify Microsoft's decision to bundle  APIs in this case, particularly because Microsoft did not  merely bundle with Windows the APIs from IE, but an entire  browser application (sometimes even without APIs, see id.). A justification for bundling a component of software may not  be one for bundling the entire software package, especially  given the malleability of software code.  See id. p p 162-63; 12/9/98 am Tr. at 17 (trial testimony of David Farber);  1/6/99  am Tr. at 6-7 (trial testimony of Franklin Fisher), reprinted  in 11 J.A. at 7192-93;  Direct Testimony of Joachim Kempin  p 286, reprinted in 6 J.A. at 3749.  Furthermore, the interest  in efficient API diffusion obviously supplies a far stronger  justification for simple price-bundling than for Microsoft's  contractual or technological bars to subsequent removal of  functionality.  But our qualms about redefining the boundaries of a defendant's product and the possibility of consumer  gains from simplifying the work of applications developers  makes us question any hard and fast approach to tying in OS  software markets.

220
There may also be a number of efficiencies that, although  very real, have been ignored in the calculations underlying  the adoption of a per se rule for tying.  We fear that these  efficiencies are common in technologically dynamic markets  where product development is especially unlikely to follow an  easily foreseen linear pattern.  Take the following example  from ILC Peripherals, 448 F. Supp. 228, a case concerning  the evolution of disk drives for computers.  When IBM first  introduced such drives in 1956, it sold an integrated product  that contained magnetic disks and disk heads that read and  wrote data onto disks.  Id. at 231.  Consumers of the drives  demanded two functions--to store data and to access it all at  once.  In the first few years consumers' demand for storage  increased rapidly, outpacing the evolution of magnetic disk  technology.  To satisfy that demand IBM made it possible for  consumers to remove the magnetic disks from drives, even  though that meant consumers would not have access to data  on disks removed from the drive.  This componentization  enabled makers of computer peripherals to sell consumers  removable disks.  Id. at 231-32.  Over time, however, the  technology of magnetic disks caught up with demand for  capacity, so that consumers needed few removable disks to  store all their data.  At this point IBM reintegrated disks  into their drives, enabling consumers to once again have immediate access to all their data without a sacrifice in  capacity.  Id.  A manufacturer of removable disks sued.  But  the District Court found the tie justified because it satisfied  consumer demand for immediate access to all data, and ruled  that disks and disk heads were one product.  Id. at 233.  A  court hewing more closely to the truncated analysis contemplated by Northern Pacific Railway would perhaps have  overlooked these consumer benefits.

221
These arguments all point to one conclusion:  we cannot  comfortably say that bundling in platform software markets  has so little "redeeming virtue," N. Pac. Ry., 356 U.S. at 5,  and that there would be so "very little loss to society" from  its ban, that "an inquiry into its costs in the individual case  [can be] considered [ ] unnecessary."  Jefferson Parish, 466  U.S. at 33-34 (O'Connor, J., concurring).  We do not have  enough empirical evidence regarding the effect of Microsoft's  practice on the amount of consumer surplus created or consumer choice foreclosed by the integration of added functionality into platform software to exercise sensible judgment  regarding that entire class of behavior.  (For some issues we  have no data.)  "We need to know more than we do about the  actual impact of these arrangements on competition to decide  whether they ... should be classified as per se violations of  the Sherman Act."  White Motor, 372 U.S. at 263.  Until  then, we will heed the wisdom that "easy labels do not always  supply ready answers," Broad. Music, 441 U.S. at 8, and  vacate the District Court's finding of per se tying liability  under Sherman Act  1.  We remand the case for evaluation  of Microsoft's tying arrangements under the rule of reason. See Pullman-Standard v. Swint, 456 U.S. 273, 292 (1982)  ("[W]here findings are infirm because of an erroneous view of  the law, a remand is the proper course unless the record  permits only one resolution of the factual issue.").  That rule  more freely permits consideration of the benefits of bundling  in software markets, particularly those for OSs, and a balancing of these benefits against the costs to consumers whose  ability to make direct price/quality tradeoffs in the tied  market may have been impaired.  See Jefferson Parish, 466  U.S. at 25 nn.41-42 (noting that per se rule does not broadly permit consideration of procompetitive justifications);  id. at  34-35 (O'Connor, J., concurring);  N. Pac. Ry., 356 U.S. at 5.

222
Our judgment regarding the comparative merits of the per  se rule and the rule of reason is confined to the tying  arrangement before us, where the tying product is software  whose major purpose is to serve as a platform for third-party  applications and the tied product is complementary software  functionality.  While our reasoning may at times appear to  have broader force, we do not have the confidence to speak to  facts outside the record, which contains scant discussion of  software integration generally.  Microsoft's primary justification for bundling IE APIs is that their inclusion with Windows increases the value of third-party software (and Windows) to consumers.  See Appellant's Opening Br. at 41-43. Because this claim applies with distinct force when the tying  product is platform software, we have no present basis for  finding the per se rule inapplicable to software markets  generally.  Nor should we be interpreted as setting a precedent for switching to the rule of reason every time a court  identifies an efficiency justification for a tying arrangement. Our reading of the record suggests merely that integration of  new functionality into platform software is a common practice  and that wooden application of per se rules in this litigation  may cast a cloud over platform innovation in the market for  PCs, network computers and information appliances.

C. On Remand

223
Should plaintiffs choose to pursue a tying claim under the  rule of reason, we note the following for the benefit of the  trial court:

224
First, on remand, plaintiffs must show that Microsoft's  conduct unreasonably restrained competition.  Meeting that  burden "involves an inquiry into the actual effect" of Microsoft's conduct on competition in the tied good market, Jefferson Parish, 466 U.S. at 29, the putative market for browsers. To the extent that certain aspects of tying injury may depend  on a careful definition of the tied good market and a showing  of barriers to entry other than the tying arrangement itself, plaintiffs would have to establish these points.  See Jefferson  Parish, 466 U.S. at 29 ("This competition [among anesthesiologists] takes place in a market that has not been defined."); id. at 29 n.48 ("[N]either the District Court nor the Court of  Appeals made any findings concerning the contract's effect on  entry barriers.").  But plaintiffs were required--and had  every incentive--to provide both a definition of the browser  market and barriers to entry to that market as part of their   2 attempted monopolization claim;  yet they failed to do so. See supra Section III.  Accordingly, on remand of the  1  tying claim, plaintiffs will be precluded from arguing any  theory of harm that depends on a precise definition of browsers or barriers to entry (for example, network effects from  Internet protocols and extensions embedded in a browser)  other than what may be implicit in Microsoft's tying arrangement.

225
Of the harms left, plaintiffs must show that Microsoft's  conduct was, on balance, anticompetitive.  Microsoft may of  course offer procompetitive justifications, and it is plaintiffs'  burden to show that the anticompetitive effect of the conduct  outweighs its benefit.

226
Second, the fact that we have already considered some of  the behavior plaintiffs allege to constitute tying violations in  the monopoly maintenance section does not resolve the  1  inquiry.  The two practices that plaintiffs have most ardently  claimed as tying violations are, indeed, a basis for liability  under plaintiffs'  2 monopoly maintenance claim.  These are  Microsoft's refusal to allow OEMs to uninstall IE or remove  it from the Windows desktop, Findings of Fact p p 158, 203,  213, and its removal of the IE entry from the Add/Remove  Programs utility in Windows 98, id. p 170.  See supra Section  II.B.  In order for the District Court to conclude these  practices also constitute  1 tying violations, plaintiffs must  demonstrate that their benefits--if any, see supra Sections  II.B.1.b and II.B.2.b;  Findings of Fact p p 176, 186, 193--are  outweighed by the harms in the tied product market.  See  Jefferson Parish, 466 U.S. at 29.  If the District Court is  convinced of net harm, it must then consider whether any  additional remedy is necessary.

227
In Section II.B we also considered another alleged tying  violation--the Windows 98 override of a consumer's choice of  default web browser.  We concluded that this behavior does  not provide a distinct basis for  2 liability because plaintiffs  failed to rebut Microsoft's proffered justification by demonstrating that harms in the operating system market outweigh  Microsoft's claimed benefits.  See supra Section II.B.  On  remand, however, although Microsoft may offer the same procompetitive justification for the override, plaintiffs must have  a new opportunity to rebut this claim, by demonstrating that  the anticompetitive effect in the browser market is greater  than these benefits.

228
Finally, the District Court must also consider an alleged  tying violation that we did not consider under  2 monopoly  maintenance:  price bundling.  First, the court must determine if Microsoft indeed price bundled--that is, was Microsoft's charge for Windows and IE higher than its charge  would have been for Windows alone?  This will require  plaintiffs to resolve the tension between Findings of Fact  p p 136-37, which Microsoft interprets as saying that no part  of the bundled price of Windows can be attributed to IE, and  Conclusions of Law, at 50, which says the opposite.  Compare Direct Testimony of Paul Maritz p p 37, 296, reprinted in  6 J.A. at 3656, 3753-54 (Microsoft did not "charge separately"  for IE, but like all other major OS vendors included browsing  software at "no extra charge"), with GX 202 at MS7 004343,  esp. 004347, reprinted in 22 J.A. at 14459, esp. 14463 (memo  from Christian Wildfeuer describing focus group test used to  price Windows 98 with IE 4), and GX 1371 at MS7 003729-30,  003746, 003748, esp. 003750, reprinted in 15 J.A. at 10306-07,  10323, 10325, esp. 10327 (Windows 98 pricing and marketing  memo), and Findings of Fact p 63 (identifying GX 202 as the  basis for Windows 98 pricing).

229
If there is a positive price increment in Windows associated  with IE (we know there is no claim of price predation),  plaintiffs must demonstrate that the anticompetitive effects of  Microsoft's price bundling outweigh any procompetitive justifications the company provides for it.  In striking this balance, the District Court should consider, among other things, indirect evidence of efficiency provided by "the competitive  fringe."  See supra Section IV.A.  Although this inquiry may  overlap with the separate-products screen under the per se  rule, that is not its role here. Because courts applying the  rule of reason are free to look at both direct and indirect  evidence of efficiencies from a tie, there is no need for a  screening device as such;  thus the separate-products inquiry  serves merely to classify arrangements as subject to tying  law, as opposed to, say, liability for exclusive dealing.  See  Times-Picayune, 345 U.S. at 614 (finding a single product  and then turning to a general rule of reason analysis under   1, though not using the term "tying");  Foster v. Md. State  Sav. & Loan Ass'n, 590 F.2d 928, 931, 933 (D.C. Cir. 1978),  cited in Jefferson Parish, 466 U.S. at 40 (O'Connor, J.,  concurring) (same);  see also Chawla v. Shell Oil Co., 75 F.  Supp. 2d 626, 635, 643-44 (S.D. Tex. 1999) (considering a rule  of reason tying claim after finding a single product under the  per se rule);  Montgomery County Ass'n of Realtors v. Realty  Photo Master Corp., 783 F. Supp. 952, 961 & n.26 (D. Md.  1992), aff'd mem. 993 F.2d 1538 (4th Cir. 1993) (same).

230
If OS vendors without market power also sell their software bundled with a browser, the natural inference is that  sale of the items as a bundle serves consumer demand and  that unbundled sale would not, for otherwise a competitor  could profitably offer the two products separately and capture  sales of the tying good from vendors that bundle.  See 10  Areeda et al., Antitrust Law p 1744b, at 197-98.  It does  appear that most if not all firms have sold a browser with  their OSs at a bundled price, beginning with IBM and its  OS/2 Warp OS in September 1994, Findings of Fact p 140; see also Direct Testimony of Richard Schmalensee p 212,  reprinted in 7 J.A. at 4300-01, and running to current  versions of Apple's Mac OS, Caldera and Red Hat's Linux  OS, Sun's Solaris OS, Be's BeOS, Santa Cruz Operation's  UnixWare, Novell's NetWare OS, and others, see Findings of  Fact p 153;  Direct Testimony of Richard Schmalensee  p p 215-23, 230, esp. table 5, reprinted in 7 J.A. at 4302-05, 4310;  Direct Testimony of James Allchin p p 261-77, reprinted in 5 J.A. at 3384-92.

231
Of course price bundling by competitive OS makers would  tend to exonerate Microsoft only if the sellers in question sold  their browser/OS combinations exclusively at a bundled price. If a competitive seller offers a discount for a browserless  version, then--at least as to its OS and browser--the gains  from bundling are outweighed by those from separate choice. The evidence on discounts appears to be in conflict.  Compare  Direct Testimony of Richard Schmalensee p 241, reprinted in  7 J.A. at 4315, with 1/6/99 pm Tr. at 42 (trial testimony of  Franklin Fisher).  If Schmalensee is correct that nearly all  OS makers do not offer a discount, then the harm from  tying--obstruction of direct consumer choice--would be theoretically created by virtually all sellers:  a customer who  would prefer an alternate browser is forced to pay the full  price of that browser even though its value to him is only the  increment in value over the bundled browser.  (The result is  similar to that from non-removal, which forces consumers  who want the alternate browser to surrender disk space  taken up by the unused, bundled browser.)  If the failure to  offer a price discount were universal, any impediment to  direct consumer choice created by Microsoft's price-bundled  sale of IE with Windows would be matched throughout the  market;  yet these OS suppliers on the competitive fringe  would have evidently found this price bundling on balance  efficient.  If Schmalensee's assertions are ill-founded, of  course, no such inference could be drawn.

V. Trial Proceedings and Remedy

232
Microsoft additionally challenges the District Court's procedural rulings on two fronts.  First, with respect to the trial  phase, Microsoft proposes that the court mismanaged its  docket by adopting an expedited trial schedule and receiving  evidence through summary witnesses.  Second, with respect  to the remedies decree, Microsoft argues that the court  improperly ordered that it be divided into two separate  companies.  Only the latter claim will long detain us.  The  District Court's trial-phase procedures were comfortably  within the bounds of its broad discretion to conduct trials as it  sees fit. We conclude, however, that the District Court's remedies decree must be vacated for three independent reasons:  (1) the court failed to hold a remedies-specific evidentiary hearing when there were disputed facts;  (2) the court  failed to provide adequate reasons for its decreed remedies; and (3) this Court has revised the scope of Microsoft's liability  and it is impossible to determine to what extent that should  affect the remedies provisions.

A. Factual Background

233
On April 3, 2000, the District Court concluded the liability  phase of the proceedings by the filing of its Conclusions of  Law holding that Microsoft had violated 1 and 2 of the  Sherman Act.  The court and the parties then began discussions of the procedures to be followed in the imposition of  remedies.  Initially, the District Court signaled that it would  enter relief only after conducting a new round of proceedings. In its Conclusions of Law, the court stated that it would issue  a remedies order "following proceedings to be established by  further Order of the Court."  Conclusions of Law, at 57. And, when during a post-trial conference, Microsoft's counsel  asked whether the court "contemplate[d] further proceedings," the judge replied, "Yes.  Yes.  I assume that there  would be further proceedings."  4/4/00 Tr. at 8-9, 11, reprinted in 4 J.A. at 2445-46, 2448.  The District Court further  speculated that those proceedings might "replicate the procedure at trial with testimony in written form subject to crossexamination."  Id. at 11, reprinted in 4 J.A. at 2448.

234
On April 28, 2000, plaintiffs submitted their proposed final  judgment, accompanied by six new supporting affidavits and  several exhibits.  In addition to a series of temporary conduct  restrictions, plaintiffs proposed that Microsoft be split into  two independent corporations, with one continuing Microsoft's  operating systems business and the other undertaking the  balance of Microsoft's operations.  Plaintiffs' Proposed Final  Judgment at 2-3, reprinted in 4 J.A. at 2473-74.  Microsoft  filed a "summary response" on May 10, contending both that  the proposed decree was too severe and that it would be  impossible to resolve certain remedies-specific factual disputes "on a highly expedited basis."  Defendant's Summary Response at 6-7, reprinted in 4 J.A. at 2587-88.  Another  May 10 submission argued that if the District Court considered imposing plaintiffs' proposed remedy, "then substantial  discovery, adequate time for preparation and a full trial on  relief will be required."  Defendant's Position as to Future  Proceedings at 2, reprinted in 4 J.A. at 2646.

235
After the District Court revealed during a May 24 hearing  that it was prepared to enter a decree without conducting  "any further process," 5/24/00 pm Tr. at 33, reprinted in 14  J.A. at 9866, Microsoft renewed its argument that the underlying factual disputes between the parties necessitated a  remedies-specific evidentiary hearing.  In two separate offers  of proof, Microsoft offered to produce a number of pieces of  evidence, including the following:

236
* Testimony from Dr. Robert Crandall, a Senior Fellow at the Brookings Institution, that divestiture and dissolution orders historically have "failed to improve economic welfare by reducing prices or increasing output."  Defendant's Offer of Proof at 2, reprinted in 4 J.A. at 2743.

237
* Testimony from Professor Kenneth Elzinga, Professor of Economics at the University of Virginia, that plaintiffs' proposed remedies would not induce entry into the operating systems market.  Id. at 4, reprinted in 4 J.A. at 2745.

238
* Testimony from Dean Richard Schmalensee, Dean of MIT's Sloan School of Management, that dividing Microsoft likely would "harm consumers through higher prices, lower output, reduced efficiency, and less innovation" and would "produce immediate, substantial increases in the prices of both Windows and Office."  Id. at 8, reprinted in 4 J.A. at 2749.  Indeed, it would cause the price of Windows to triple. Id. . Testimony from Goldman, Sachs & Co. and from Morgan Stanley Dean Witter that dissolution would adversely affect shareholder value.  Id. at 17, 19, reprinted in 4 J.A. at 2758, 2760.

239
* Testimony from Microsoft Chairman Bill Gates that dividing Microsoft "along the arbitrary lines proposed by the Government" would devastate the company's proposed Next Generation Windows Services platform, which would allow software developers to write web-based applications that users could access from a wide range of devices.  Id. at 21-22, reprinted in 4 J.A. at 2762-63.

240
* Testimony from Steve Ballmer, Microsoft's President and CEO, that Microsoft is organized as a unified company and that "there are no natural lines along which Microsoft could be broken up without causing serious problems."  Id. at 23, reprinted in 4 J.A. at 2764.

241
* Testimony from Michael Capellas, CEO of Compaq, that splitting Microsoft in two "will make it more difficult for OEMs to provide customers with the tightly integrated product offerings they demand" in part because "complementary products created by unrelated companies do not work as well together as products created by a single company."  Defendant's Supplemental Offer of Proof at 2, reprinted in 4 J.A. at 2823.

242
Over Microsoft's objections, the District Court proceeded to  consider the merits of the remedy and on June 7, 2000  entered its final judgment.  The court explained that it would  not conduct "extended proceedings on the form a remedy  should take," because it doubted that an evidentiary hearing  would "give any significantly greater assurance that it will be  able to identify what might be generally regarded as an  optimum remedy."  Final Judgment, at 62.  The bulk of  Microsoft's proffered facts were simply conjectures about  future events, and "[i]n its experience the Court has found  testimonial predictions of future events generally less reliable  even than testimony as to historical fact, and crossexamination to be of little use in enhancing or detracting from  their accuracy."  Id.  Nor was the court swayed by Microsoft's "profession of surprise" at the possibility of structural  relief.  Id. at 61.  "From the inception of this case Microsoft knew, from well-established Supreme Court precedents dating from the beginning of the last century, that a mandated  divestiture was a possibility, if not a probability, in the event  of an adverse result at trial."  Id.

243
The substance of the District Court's remedies order is  nearly identical to plaintiffs' proposal.  The decree's centerpiece is the requirement that Microsoft submit a proposed  plan of divestiture, with the company to be split into an  "Operating Systems Business," or "OpsCo," and an "Applications Business," or "AppsCo."  Final Judgment, Decree  1.a, l.c.i, at 64.  OpsCo would receive all of Microsoft's  operating systems, such as Windows 98 and Windows 2000,  while AppsCo would receive the remainder of Microsoft's  businesses, including IE and Office.  The District Court  identified four reasons for its "reluctant[ ]" conclusion that "a  structural remedy has become imperative."  Id. at 62.  First,  Microsoft "does not yet concede that any of its business  practices violated the Sherman Act."  Id.  Second, the company consequently "continues to do business as it has in the  past."  Id.  Third, Microsoft "has proved untrustworthy in  the past."  Id.  And fourth, the Government, whose officials  "are by reason of office obliged and expected to consider-and to act in--the public interest," won the case, "and for that  reason alone have some entitlement to a remedy of their  choice."  Id. at 62-63.

244
The decree also contains a number of interim restrictions  on Microsoft's conduct.  For instance, Decree  3.b requires  Microsoft to disclose to third-party developers the APIs and  other technical information necessary to ensure that software  effectively interoperates with Windows.  Id. at 67.  "To facilitate compliance,"  3.b further requires that Microsoft establish "a secure facility" at which third-party representatives  may "study, interrogate and interact with relevant and necessary portions of [Microsoft platform software] source code." Id.  Section 3.e, entitled "Ban on Exclusive Dealing," forbids  Microsoft from entering contracts which oblige third parties  to restrict their "development, production, distribution, promotion or use of, or payment for" non-Microsoft platformlevel software.  Id. at 68.  Under Decree  3.f--"Ban on Contractual Tying"--the company may not condition its grant  of a Windows license on a party's agreement "to license,  promote, or distribute any other Microsoft software product." Id.  And  3.g imposes a "Restriction on Binding Middleware  Products to Operating System Products" unless Microsoft  also offers consumers "an otherwise identical version" of the  operating system without the middleware.  Id.

B. Trial Proceedings

245
Microsoft's first contention--that the District Court erred  by adopting an expedited trial schedule and receiving evidence through summary witnesses--is easily disposed of. Trial courts have extraordinarily broad discretion to determine the manner in which they will conduct trials. "This is  particularly true in a case such as the one at bar where the  proceedings are being tried to the court without a jury."  Eli  Lilly & Co., Inc. v. Generix Drug Sales, Inc., 460 F.2d 1096,  1105 (5th Cir. 1972).  In such cases, "[a]n appellate court will  not interfere with the trial court's exercise of its discretion to  control its docket and dispatch its business ... except upon  the clearest showing that the procedures have resulted in  actual and substantial prejudice to the complaining litigant." Id.  Microsoft fails to clear this high hurdle.  Although the  company claims that setting an early trial date inhibited its  ability to conduct discovery, it never identified a specific  deposition or document it was unable to obtain.  And while  Microsoft now argues that the use of summary witnesses  made inevitable the improper introduction of hearsay evidence, the company actually agreed to the District Court's  proposal to limit each side to 12 summary witnesses.  12/2/98  am Tr. at 11, reprinted in 21 J.A. at 14083 (court admonishing Microsoft's counsel to "[k]eep in mind that both sides  agreed to the number of witnesses").  Even absent Microsoft's agreement, the company's challenge fails to show that  this use of summary witnesses falls outside the trial court's  wide latitude to receive evidence as it sees fit.  General Elec.  Co. v. Joiner, 522 U.S. 136, 141-42 (1997).  This is particularly true given the presumption that a judge who conducts a  bench trial has ignored any inadmissible evidence, Harris v.  Rivera, 454 U.S. 339, 346 (1981)--a presumption that Microsoft makes no serious attempt to overcome.  Indeed, under  appropriate circumstances with appropriate instructions, we  have in the past approved the use of summary witnesses even  in jury trials.  See, e.g., United States v. Lemire, 720 F.2d  1327 (D.C. Cir. 1983).  Therefore, neither the use of the  summary witnesses nor any other aspect of the District  Court's conduct of the trial phase amounted to an abuse of  discretion.

C. Failure to Hold an Evidentiary Hearing

246
The District Court's remedies-phase proceedings are a  different matter.  It is a cardinal principle of our system of  justice that factual disputes must be heard in open court and  resolved through trial-like evidentiary proceedings.  Any other course would be contrary "to the spirit which imbues our  judicial tribunals prohibiting decision without hearing."  Sims  v. Greene, 161 F.2d 87, 88 (3d Cir. 1947).

247
A party has the right to judicial resolution of disputed facts  not just as to the liability phase, but also as to appropriate  relief.  "Normally, an evidentiary hearing is required before  an injunction may be granted."  United States v. McGee, 714  F.2d 607, 613 (6th Cir. 1983);  see also Charlton v. Estate of  Charlton, 841 F.2d 988, 989 (9th Cir. 1988) ("Generally the  entry or continuation of an injunction requires a hearing. Only when the facts are not in dispute, or when the adverse  party has waived its right to a hearing, can that significant  procedural step be eliminated." (citation and internal quotation marks omitted)).  Other than a temporary restraining  order, no injunctive relief may be entered without a hearing. See generally Fed. R. Civ. P. 65.  A hearing on the merits-i.e., a trial on liability--does not substitute for a relief-specific  evidentiary hearing unless the matter of relief was part of the  trial on liability, or unless there are no disputed factual issues  regarding the matter of relief.

248
This rule is no less applicable in antitrust cases.  The  Supreme Court "has recognized that a 'full exploration of  facts is usually necessary in order (for the District Court)  properly to draw (an antitrust) decree' so as 'to prevent  future violations and eradicate existing evils.' "  United States

249
v. Ward Baking Co., 376 U.S. 327, 330-31 (1964) (quoting  Associated Press v. United States, 326 U.S. 1, 22 (1945)). Hence a remedies decree must be vacated whenever there is  "a bona fide disagreement concerning substantive items of  relief which could be resolved only by trial."  Id. at 334;  cf.  Sims, 161 F.2d at 89 ("It has never been supposed that a  temporary injunction could issue under the Clayton Act without giving the party against whom the injunction was sought  an opportunity to present evidence on his behalf.").

250
Despite plaintiffs' protestations, there can be no serious  doubt that the parties disputed a number of facts during the  remedies phase.  In two separate offers of proof, Microsoft  identified 23 witnesses who, had they been permitted to  testify, would have challenged a wide range of plaintiffs'  factual representations, including the feasibility of dividing  Microsoft, the likely impact on consumers, and the effect of  divestiture on shareholders.  To take but two examples,  where plaintiffs' economists testified that splitting Microsoft  in two would be socially beneficial, the company offered to  prove that the proposed remedy would "cause substantial  social harm by raising software prices, lowering rates of  innovation and disrupting the evolution of Windows as a  software development platform."  Defendant's Offer of Proof  at 6, reprinted in 4 J.A. at 2747.  And where plaintiffs'  investment banking experts proposed that divestiture might  actually increase shareholder value, Microsoft proffered evidence that structural relief "would inevitably result in a  significant loss of shareholder value," a loss that could reach  "tens--possibly hundreds--of billions of dollars."  Id. at 19,  reprinted in 4 J.A. at 2760.

251
Indeed, the District Court itself appears to have conceded  the existence of acute factual disagreements between Microsoft and plaintiffs.  The court acknowledged that the parties  were "sharply divided" and held "divergent opinions" on the  likely results of its remedies decree.  Final Judgment, at 62. The reason the court declined to conduct an evidentiary  hearing was not because of the absence of disputed facts, but  because it believed that those disputes could be resolved only  through "actual experience," not further proceedings.  Id. But a prediction about future events is not, as a prediction,  any less a factual issue.  Indeed, the Supreme Court has  acknowledged that drafting an antitrust decree by necessity  "involves predictions and assumptions concerning future economic and business events."  Ford Motor Co. v. United  States, 405 U.S. 562, 578 (1972).  Trial courts are not excused  from their obligation to resolve such matters through evidentiary hearings simply because they consider the bedrock  procedures of our justice system to be "of little use."  Final  Judgment, at 62.

252
The presence of factual disputes thus distinguishes this  case from the decisions plaintiffs cite for the proposition that  Microsoft was not entitled to an evidentiary hearing. Indeed,  far from assisting plaintiffs, these cases actually confirm the  proposition that courts must hold evidentiary hearings when  they are confronted with disputed facts.  In Ford Motor Co.,  the Supreme Court affirmed a divestiture order after emphasizing that the District Court had "held nine days of hearings  on the remedy."  405 U.S. at 571.  In Davoll v. Webb, 194  F.3d 1116 (10th Cir. 1999), the defendant both failed to  submit any offers of proof, and waived its right to an evidentiary hearing by expressly agreeing that relief should be  determined based solely on written submissions.  Id. at 114243.  The defendants in American Can Co. v. Mansukhani,  814 F.2d 421 (7th Cir. 1987), were not entitled to a hearing on  remedies because they failed "to explain to the district court  what new proof they would present to show" that the proposed remedy was unwarranted.  Id. at 425.  And in Socialist  Workers Party v. Illinois State Board of Elections, 566 F.2d  586 (7th Cir. 1977), aff'd, 440 U.S. 173 (1979), the Seventh  Circuit held that a remedies-specific hearing was unnecessary  because that case involved a pure question of legal interpretation and hence "[t]here was no factual dispute as to the  ground on which the injunction was ordered."  Id. at 587.

253
Unlike the parties in Davoll, American Can, and Socialist  Workers Party, Microsoft both repeatedly asserted its right  to an evidentiary hearing and submitted two offers of proof. The company's "summary response" to the proposed remedy  argued that it would be "impossible" to address underlying factual issues "on a highly expedited basis," Defendant's  Summary Response at 6-7, reprinted in 4 J.A. at 2587-88, and Microsoft further maintained that the court could not  issue a decree unless it first permitted "substantial discovery,  adequate time for preparation and a full trial on relief." Defendant's Position as to Future Proceedings at 2, reprinted  in 4 J.A. at 2646.  And in 53 pages of submissions, Microsoft  identified the specific evidence it would introduce to challenge  plaintiffs' representations.

254
Plaintiffs further argue--and the District Court held--that  no evidentiary hearing was necessary given that Microsoft  long had been on notice that structural relief was a distinct  possibility.  It is difficult to see why this matters.  Whether  Microsoft had advance notice that dissolution was in the  works is immaterial to whether the District Court violated the  company's procedural rights by ordering it without an evidentiary hearing.  To be sure, "claimed surprise at the district  court's decision to consider permanent injunctive relief does  not, alone, merit reversal."  Socialist Workers, 566 F.2d at  587.  But in this case, Microsoft's professed surprise does not  stand "alone."  There is something more:  the company's  basic procedural right to have disputed facts resolved through  an evidentiary hearing.

255
In sum, the District Court erred when it resolved the  parties' remedies-phase factual disputes by consulting only  the evidence introduced during trial and plaintiffs' remediesphase submissions, without considering the evidence Microsoft sought to introduce.  We therefore vacate the District  Court's final judgment, and remand with instructions to conduct a remedies-specific evidentiary hearing.

256
D. Failure to Provide an Adequate Explanation

257
We vacate the District Court's remedies decree for the  additional reason that the court has failed to provide an  adequate explanation for the relief it ordered.  The Supreme  Court has explained that a remedies decree in an antitrust  case must seek to "unfetter a market from anticompetitive  conduct," Ford Motor Co., 405 U.S. at 577, to "terminate the  illegal monopoly, deny to the defendant the fruits of its statutory violation, and ensure that there remain no practices  likely to result in monopolization in the future," United States  v. United Shoe Mach. Corp., 391 U.S. 244, 250 (1968);  see  also United States v. Grinnell Corp., 384 U.S. 563, 577 (1966).

258
The District Court has not explained how its remedies  decree would accomplish those objectives.  Indeed, the court  devoted a mere four paragraphs of its order to explaining its  reasons for the remedy.  They are:  (1) Microsoft "does not  yet concede that any of its business practices violated the  Sherman Act";  (2) Microsoft "continues to do business as it  has in the past";  (3) Microsoft "has proved untrustworthy in  the past";  and (4) the Government, whose officials "are by  reason of office obliged and expected to consider--and to act  in--the public interest," won the case, "and for that reason  alone have some entitlement to a remedy of their choice." Final Judgment, at 62-63.  Nowhere did the District Court  discuss the objectives the Supreme Court deems relevant.

E. Modification of Liability

259
Quite apart from its procedural difficulties, we vacate the  District Court's final judgment in its entirety for the additional, independent reason that we have modified the underlying  bases of liability.  Of the three antitrust violations originally  identified by the District Court, one is no longer viable: attempted monopolization of the browser market in violation  of Sherman Act  2.  One will be remanded for liability  proceedings under a different legal standard:  unlawful tying  in violation of  1.  Only liability for the  2 monopolymaintenance violation has been affirmed--and even that we  have revised.  Ordinarily, of course, we review the grant or  denial of equitable relief under the abuse of discretion standard.  See, e.g., Doran v. Salem Inn, Inc., 422 U.S. 922, 93132 (1975) ("[T]he standard of appellate review is simply  whether the issuance of the injunction, in the light of the  applicable standard, constituted an abuse of discretion."). For obvious reasons, the application of that standard is not  sufficient to sustain the remedy in the case before us. We  cannot determine whether the District Court has abused its  discretion in remedying a wrong where the court did not exercise that discretion in order to remedy the properly  determined wrong. That is, the District Court determined  that the conduct restrictions and the pervasive structural  remedy were together appropriate to remedy the three antitrust violations set forth above.  The court did not exercise  its discretion to determine whether all, or for that matter,  any, of those equitable remedies were required to rectify a   2 monopoly maintenance violation taken alone.  We therefore cannot sustain an exercise of discretion not yet made.

260
By way of comparison, in Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993), the Supreme Court reviewed a  damages award in a Sherman Act case.  In that case, the trial  court entered judgment upon a jury verdict which did not  differentiate among multiple possible theories of liability under  2.  The Supreme Court ultimately determined that the  trial record could not legally support a finding that the  defendant had committed an illegal attempt to monopolize,  and that "the trial instructions allowed the jury to infer  specific intent and dangerous probability of success from the  defendants' predatory conduct, without any proof of the relevant market or of a realistic probability that the defendants  could achieve monopoly power in that market."  Id. at 459. Therefore, the High Court reversed the Ninth Circuit's judgment affirming the District Court and remanded for further  proceedings, expressly because "the jury's verdict did not  negate the possibility that the  2 verdict rested on the  attempt to monopolize grounds alone...."  Id. Similarly,  here, we cannot presume that a District Court would exercise  its discretion to fashion the same remedy where the erroneous grounds of liability were stripped from its consideration.

261
The Eighth Circuit confronted a similar problem in Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir.),  cert. denied, 121 S. Ct. 428 (2000).  In that case, a group of  boat builders brought an action against an engine manufacturer alleging violations of Sherman Act 1 and 2, and  Clayton Act  7.  After a 10-week trial, the jury found  Brunswick liable on all three counts and returned a verdict  for over $44 million.  On appeal, the Eighth Circuit reversed  the Clayton Act claim.  Id. at 1053.  That court held that, as a consequence, it was required to vacate the jury's remedy in  its entirety.  Because the "verdict form did not require the  jury to consider what damages resulted from each type of  violation," the court could not "know what damages it found  to have been caused by the acquisitions upon which the  Section 7 claims were based."  Id. at 1054.  The court  rejected the proposition that "the entire damage award may  be upheld based on Brunswick's Sherman Act liability alone,"  id. at 1053, holding that, because "there is no way to know  what damages the jury assigned to the Section 7 claims," the  defendant "would be entitled at the very least to a new  damages trial on the boat builders' Sherman Act claims," id.  at 1054.

262
Spectrum Sports and Concord Boat are distinguishable  from the case before us in that both involved the award of  money damages rather than equitable relief.  Nonetheless,  their reasoning is instructive.  A court in both contexts must  base its relief on some clear "indication of a significant causal  connection between the conduct enjoined or mandated and  the violation found directed toward the remedial goal intended."  3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust  Law p 653(b), at 91-92 (1996).  In a case such as the one  before us where sweeping equitable relief is employed to  remedy multiple violations, and some--indeed most--of the  findings of remediable violations do not withstand appellate  scrutiny, it is necessary to vacate the remedy decree since the  implicit findings of causal connection no longer exist to warrant our deferential affirmance.

263
In short, we must vacate the remedies decree in its entirety  and remand the case for a new determination.  This court has  drastically altered the District Court's conclusions on liability. On remand, the District Court, after affording the parties a  proper opportunity to be heard, can fashion an appropriate  remedy for Microsoft's antitrust violations.  In particular, the  court should consider which of the decree's conduct restrictions remain viable in light of our modification of the original  liability decision.  While the task of drafting the remedies  decree is for the District Court in the first instance, because of the unusually convoluted nature of the proceedings thus  far, and a desire to advance the ultimate resolution of this  important controversy, we offer some further guidance for  the exercise of that discretion.

F. On Remand

264
As a general matter, a district court is afforded broad  discretion to enter that relief it calculates will best remedy  the conduct it has found to be unlawful.  See, e.g., Woerner v.  United States Small Bus. Admin., 934 F.2d 1277, 1279 (D.C.  Cir. 1991) (recognizing that an appellate court reviews a trial  court's decision whether or not to grant equitable relief only  for an abuse of discretion).  This is no less true in antitrust  cases.  See, e.g., Ford Motor Co., 405 U.S. at 573 ("The  District Court is clothed with 'large discretion' to fit the  decree to the special needs of the individual case.");  Md. &  Va. Milk Producers Ass'n, Inc. v. United States, 362 U.S. 458,  473 (1960) ("The formulation of decrees is largely left to the  discretion of the trial court....").  And divestiture is a  common form of relief in successful antitrust prosecutions:  it  is indeed "the most important of antitrust remedies."  See,  e.g., United States v. E.I. du Pont de Nemours & Co., 366  U.S. 316, 331 (1961).

265
On remand, the District Court must reconsider whether the  use of the structural remedy of divestiture is appropriate with  respect to Microsoft, which argues that it is a unitary company.  By and large, cases upon which plaintiffs rely in arguing  for the split of Microsoft have involved the dissolution of  entities formed by mergers and acquisitions.  On the contrary, the Supreme Court has clarified that divestiture "has  traditionally been the remedy for Sherman Act violations  whose heart is intercorporate combination and control," du  Pont, 366 U.S. at 329 (emphasis added), and that "[c]omplete  divestiture is particularly appropriate where asset or stock  acquisitions violate the antitrust laws," Ford Motor Co., 405  U.S. at 573 (emphasis added).

266
One apparent reason why courts have not ordered the  dissolution of unitary companies is logistical difficulty.  As  the court explained in United States v. ALCOA, 91 F. Supp. 333, 416 (S.D.N.Y. 1950), a "corporation, designed to operate  effectively as a single entity, cannot readily be dismembered  of parts of its various operations without a marked loss of  efficiency."  A corporation that has expanded by acquiring its  competitors often has preexisting internal lines of division  along which it may more easily be split than a corporation  that has expanded from natural growth.  Although time and  corporate modifications and developments may eventually  fade those lines, at least the identifiable entities preexisted to  create a template for such division as the court might later  decree.  With reference to those corporations that are not  acquired by merger and acquisition, Judge Wyzanski accurately opined in United Shoe:

267
United conducts all machine manufacture at one plant in Beverly, with one set of jigs and tools, one foundry, one laboratory for machinery problems, one managerial staff, and one labor force.  It takes no Solomon to see that this organism cannot be cut into three equal and viable parts.

268
United States v. United Shoe Machine Co., 110 F. Supp. 295,  348 (D. Mass. 1953).

269
Depending upon the evidence, the District Court may find  in a remedies proceeding that it would be no easier to split  Microsoft in two than United Shoe in three.  Microsoft's  Offer of Proof in response to the court's denial of an evidentiary hearing included proffered testimony from its President  and CEO Steve Ballmer that the company "is, and always has  been, a unified company without free-standing business units. Microsoft is not the result of mergers or acquisitions."  Microsoft further offered evidence that it is "not organized along  product lines," but rather is housed in a single corporate  headquarters and that it has

270
only one sales and marketing organization which is responsible for selling all of the company's products, one basic research organization, one product support organization, one operations department, one information technology department, one facilities department, one purchasing department, one human resources department,  one finance department, one legal department and one public relations department.

271
Defendant's Offer of Proof at 23-26, reprinted in 4 J.A. at  2764-67.  If indeed Microsoft is a unitary company, division  might very well require Microsoft to reproduce each of these  departments in each new entity rather than simply allocate  the differing departments among them.

272
In devising an appropriate remedy, the District Court also  should consider whether plaintiffs have established a sufficient causal connection between Microsoft's anticompetitive  conduct and its dominant position in the OS market.  "Mere  existence of an exclusionary act does not itself justify full  feasible relief against the monopolist to create maximum  competition."  3 Areeda & Hovenkamp, Antitrust Law p 650a,  at 67.  Rather, structural relief, which is "designed to eliminate the monopoly altogether ... require[s] a clearer indication of a significant causal connection between the conduct  and creation or maintenance of the market power."  Id.  p 653b, at 91-92 (emphasis added).  Absent such causation,  the antitrust defendant's unlawful behavior should be remedied by "an injunction against continuation of that conduct." Id. p 650a, at 67.

273
As noted above, see supra Section II.C, we have found a  causal connection between Microsoft's exclusionary conduct  and its continuing position in the operating systems market  only through inference.  See 3 Areeda & Hovenkamp, Antitrust Law p 653(b), at 91-92 (suggesting that "more extensive  equitable relief, particularly remedies such as divestiture  designed to eliminate the monopoly altogether, ... require a  clearer indication of significant causal connection between the  conduct and creation or maintenance of the market power"). Indeed, the District Court expressly did not adopt the position that Microsoft would have lost its position in the OS  market but for its anticompetitive behavior.  Findings of  Fact p 411 ("There is insufficient evidence to find that, absent  Microsoft's actions, Navigator and Java already would have  ignited genuine competition in the market for Intelcompatible PC operating systems.").  If the court on remand  is unconvinced of the causal connection between Microsoft's exclusionary conduct and the company's position in the OS  market, it may well conclude that divestiture is not an  appropriate remedy.

274
While we do not undertake to dictate to the District Court  the precise form that relief should take on remand, we note  again that it should be tailored to fit the wrong creating the  occasion for the remedy.

G. Conclusion

275
In sum, we vacate the District Court's remedies decree for  three reasons.  First, the District Court failed to hold an  evidentiary hearing despite the presence of remedies-specific  factual disputes.  Second, the court did not provide adequate  reasons for its decreed remedies.  Finally, we have drastically altered the scope of Microsoft's liability, and it is for the  District Court in the first instance to determine the propriety  of a specific remedy for the limited ground of liability which  we have upheld.

VI. Judicial Misconduct

276
Canon 3A(6) of the Code of Conduct for United States  Judges requires federal judges to "avoid public comment on  the merits of [ ] pending or impending" cases.  Canon 2 tells  judges to "avoid impropriety and the appearance of impropriety in all activities," on the bench and off.  Canon 3A(4)  forbids judges to initiate or consider ex parte communications  on the merits of pending or impending proceedings.  Section  455(a) of the Judicial Code requires judges to recuse themselves when their "impartiality might reasonably be questioned."  28 U.S.C.  455(a).

277
All indications are that the District Judge violated each of  these ethical precepts by talking about the case with reporters.  The violations were deliberate, repeated, egregious, and  flagrant.  The only serious question is what consequences  should follow.  Microsoft urges us to disqualify the District  Judge, vacate the judgment in its entirety and toss out the findings of fact, and remand for a new trial before a different  District Judge.  At the other extreme, plaintiffs ask us to do  nothing.  We agree with neither position.

278
A. The District Judge's Communications with the Press

279
Immediately after the District Judge entered final judgment on June 7, 2000, accounts of interviews with him began  appearing in the press.  Some of the interviews were held  after he entered final judgment.  See Peter Spiegel, Microsoft Judge Defends Post-trial Comments, Fin. Times (London),  Oct. 7, 2000, at 4;  John R. Wilke, For Antitrust Judge, Trust,  or Lack of It, Really Was the Issue--In an Interview,  Jackson Says Microsoft Did the Damage to Its Credibility in  Court, Wall St. J., June 8, 2000, at A1.  The District Judge  also aired his views about the case to larger audiences, giving speeches at a college and at an antitrust seminar.  See James  V. Grimaldi, Microsoft Judge Says Ruling at Risk;  Every  Trial Decision Called 'Vulnerable', Wash. Post, Sept. 29, 2000,  at E1;  Alison Schmauch, Microsoft Judge Shares Experiences, The Dartmouth Online, Oct. 3, 2000.

280
From the published accounts, it is apparent that the Judge  also had been giving secret interviews to select reporters  before entering final judgment--in some instances long before.  The earliest interviews we know of began in September  1999, shortly after the parties finished presenting evidence  but two months before the court issued its Findings of Fact. See Joel Brinkley & Steve Lohr, U.S. vs. Microsoft:  Pursuing a Giant;  Retracing the Missteps in the Microsoft Defense, N.Y. Times, June 9, 2000, at A1.  Interviews with  reporters from the New York Times and Ken Auletta, another reporter who later wrote a book on the Microsoft case,  continued throughout late 1999 and the first half of 2000,  during which time the Judge issued his Findings of Fact,  Conclusions of Law, and Final Judgment.  See id.;  Ken  Auletta, Final Offer, The New Yorker, Jan. 15, 2001, at 40. The Judge "embargoed" these interviews;  that is, he insisted  that the fact and content of the interviews remain secret until  he issued the Final Judgment.

281
Before we recount the statements attributed to the District  Judge, we need to say a few words about the state of the record.  All we have are the published accounts and what the  reporters say the Judge said.  Those accounts were not  admitted in evidence.  They may be hearsay.  See Fed. R.  Evid. 801(c);  Metro. Council of NAACP Branches v. FCC, 46  F.3d 1154, 1165 (D.C. Cir. 1995) ("We seriously question  whether a New York Times article is admissible evidence of  the truthfulness of its contents.").

282
We are of course concerned about granting a request to  disqualify a federal judge when the material supporting it has  not been admitted in evidence.  Disqualification is never  taken lightly.  In the wrong hands, a disqualification motion  is a procedural weapon to harass opponents and delay proceedings.  If supported only by rumor, speculation, or innuendo, it is also a means to tarnish the reputation of a federal  judge.

283
But the circumstances of this case are most unusual.  By  placing an embargo on the interviews, the District Judge  ensured that the full extent of his actions would not be  revealed until this case was on appeal.  Plaintiffs, in defending the judgment, do not dispute the statements attributed to  him in the press;  they do not request an evidentiary hearing; and they do not argue that Microsoft should have filed a  motion in the District Court before raising the matter on  appeal.  At oral argument, plaintiffs all but conceded that the  Judge violated ethical restrictions by discussing the case in  public:  "On behalf of the governments, I have no brief to  defend the District Judge's decision to discuss this case  publicly while it was pending on appeal, and I have no brief to  defend the judge's decision to discuss the case with reporters  while the trial was proceeding, even given the embargo on  any reporting concerning those conversations until after the  trial."  02/27/01 Ct. Appeals Tr. at 326.

284
We must consider too that the federal disqualification  provisions reflect a strong federal policy to preserve the  actual and apparent impartiality of the federal judiciary. Judicial misconduct may implicate that policy regardless of  the means by which it is disclosed to the public.  Cf. The  Washington Post v. Robinson, 935 F.2d 282, 291 (D.C. Cir. 1991) (taking judicial notice of newspaper articles to ascertain  whether a fact was within public knowledge).  Also, in our  analysis of the arguments presented by the parties, the  specifics of particular conversations are less important than  their cumulative effect.

285
For these reasons we have decided to adjudicate Microsoft's disqualification request notwithstanding the state of the  record.  The same reasons also warrant a departure from our  usual practice of declining to address issues raised for the  first time on appeal:  the "matter of what questions may be  taken up and resolved for the first time on appeal is one left  primarily to the discretion of the courts of appeals, to be  exercised on the facts of individual cases."  Singleton v.  Wulff, 428 U.S. 106, 121 (1976);  accord Hormel v. Helvering,  312 U.S. 552, 556-57 (1941);  Nat'l Ass'n of Mfrs. v. Dep't of  Labor, 159 F.3d 597, 605-06 (D.C. Cir. 1998).  We will assume  the truth of the press accounts and not send the case back for  an evidentiary hearing on this subject.  We reach no judgment on whether the details of the interviews were accurately  recounted.

286
The published accounts indicate that the District Judge  discussed numerous topics relating to the case.  Among them  was his distaste for the defense of technological integration-one of the central issues in the lawsuit.  In September 1999,  two months before his Findings of Fact and six months  before his Conclusions of Law, and in remarks that were kept  secret until after the Final Judgment, the Judge told reporters from the New York Times that he questioned Microsoft's  integration of a web browser into Windows.  Stating that he  was "not a fan of integration," he drew an analogy to a 35millimeter camera with an integrated light meter that in his  view should also be offered separately:  "You like the convenience of having a light meter built in, integrated, so all you  have to do is press a button to get a reading.  But do you  think camera makers should also serve photographers who  want to use a separate light meter, so they can hold it up,  move it around?"  Joel Brinkley & Steve Lohr, U.S. v.  Microsoft 263 (2001).  In other remarks, the Judge commented on the integration at the heart of the case:  "[I]t was quite clear to me that the motive of Microsoft in bundling the  Internet browser was not one of consumer convenience.  The  evidence that this was done for the consumer was not credible....  The evidence was so compelling that there was an  ulterior motive."  Wilke, Wall St. J.  As for tying law in  general, he criticized this court's ruling in the consent decree  case, saying it "was wrongheaded on several counts" and  would exempt the software industry from the antitrust laws. Brinkley & Lohr, U.S. v. Microsoft 78, 295;  Brinkley &  Lohr, N.Y. Times.

287
Reports of the interviews have the District Judge describing Microsoft's conduct, with particular emphasis on what he  regarded as the company's prevarication, hubris, and impenitence.  In some of his secret meetings with reporters, the  Judge offered his contemporaneous impressions of testimony. He permitted at least one reporter to see an entry concerning  Bill Gates in his "oversized green notebook."  Ken Auletta,  World War 3.0, at 112 (2001).  He also provided numerous  after-the-fact credibility assessments.  He told reporters that  Bill Gates' "testimony is inherently without credibility" and  "[i]f you can't believe this guy, who else can you believe?" Brinkley & Lohr, U.S. v. Microsoft 278;  Brinkley & Lohr,  N.Y. Times;  see also Auletta, The New Yorker, at 40.  As for  the company's other witnesses, the Judge is reported as  saying that there "were times when I became impatient with  Microsoft witnesses who were giving speeches."  "[T]hey  were telling me things I just flatly could not credit."  Brinkley & Lohr, N.Y. Times.  In an interview given the day he  entered the break-up order, he summed things up:  "Falsus in  uno, falsus in omnibus":  "Untrue in one thing, untrue in  everything."  "I don't subscribe to that as absolutely true. But it does lead one to suspicion.  It's a universal human  experience.  If someone lies to you once, how much else can  you credit as the truth?"  Wilke, Wall St. J.

288
According to reporter Auletta, the District Judge told him  in private that, "I thought they [Microsoft and its executives]  didn't think they were regarded as adult members of the  community.  I thought they would learn."  Auletta, World  War 3.0, at 14.  The Judge told a college audience that "Bill Gates is an ingenious engineer, but I don't think he is that  adept at business ethics.  He has not yet come to realise  things he did (when Microsoft was smaller) he should not  have done when he became a monopoly."  Spiegel, Fin. Times. Characterizing Gates' and his company's "crime" as hubris,  the Judge stated that "[i]f I were able to propose a remedy of  my devising, I'd require Mr. Gates to write a book report" on  Napoleon Bonaparte, "[b]ecause I think [Gates] has a Napoleonic concept of himself and his company, an arrogance that  derives from power and unalloyed success, with no leavening  hard experience, no reverses."  Auletta, The New Yorker, at  41;  see also Auletta, World War 3.0, at 397.  The Judge  apparently became, in Auletta's words, "increasingly troubled  by what he learned about Bill Gates and couldn't get out of  his mind the group picture he had seen of Bill Gates and Paul  Allen and their shaggy-haired first employees at Microsoft." The reporter wrote that the Judge said he saw in the picture  "a smart-mouthed young kid who has extraordinary ability  and needs a little discipline.  I've often said to colleagues that  Gates would be better off if he had finished Harvard." Auletta, World War 3.0, at 168-69;  see also Auletta, The  New Yorker, at 46 (reporting the District Judge's statement  that "they [Microsoft and its executives] don't act like grownups!"  "[T]o this day they continue to deny they did anything  wrong.").

289
The District Judge likened Microsoft's writing of incriminating documents to drug traffickers who "never figure out that  they shouldn't be saying certain things on the phone." Brinkley & Lohr, U.S. v. Microsoft 6;  Brinkley & Lohr,  N.Y. Times.  He invoked the drug trafficker analogy again to  denounce Microsoft's protestations of innocence, this time  with a reference to the notorious Newton Street Crew that  terrorized parts of Washington, D.C.  Reporter Auletta wrote  in The New Yorker that the Judge

290
went as far as to compare the company's declaration of innocence to the protestations of gangland killers.  He was referring to five gang members in a racketeering, drug-dealing, and murder trial that he had presided over  four years earlier.  In that case, the three victims had had their heads bound with duct tape before they were riddled with bullets from semi-automatic weapons.  "On the day of the sentencing, the gang members maintained that they had done nothing wrong, saying that the whole case was a conspiracy by the white power structure to destroy them," Jackson recalled.  "I am now under no illusions that miscreants will realize that other parts of society will view them that way."

291
Auletta, The New Yorker, at 40-41;  Auletta, World War 3.0,  at 369-70 (same);  see also Auletta, The New Yorker, at 46.

292
The District Judge also secretly divulged to reporters his  views on the remedy for Microsoft's antitrust violations.  On  the question whether Microsoft was entitled to any process at  the remedy stage, the Judge told reporters in May 2000 that  he was "not aware of any case authority that says I have to  give them any due process at all.  The case is over.  They  lost."  Brinkley & Lohr, N.Y. Times.  Another reporter has  the Judge asking "[w]ere the Japanese allowed to propose  terms of their surrender?"  Spiegel, Fin. Times.  The District  Judge also told reporters the month before he issued his  break-up order that "[a]ssuming, as I think they are, [ ] the  Justice Department and the states are genuinely concerned  about the public interest," "I know they have carefully studied all the possible options.  This isn't a bunch of amateurs. They have consulted with some of the best minds in America  over a long period of time."  "I am not in a position to  duplicate that and re-engineer their work.  There's no way I  can equip myself to do a better job than they have done." Brinkley & Lohr, N.Y. Times;  cf. Final Judgment, at 62-63.

293
In February 2000, four months before his final order  splitting the company in two, the District Judge reportedly  told New York Times reporters that he was "not at all  comfortable with restructuring the company," because he was  unsure whether he was "competent to do that."  Brinkley &  Lohr, N.Y. Times;  see also Brinkley & Lohr, U.S. v. Microsoft 277-78 (same);  cf. Auletta, World War 3.0, at 370  (comment by the Judge in April 2000 that he was inclining toward behavioral rather than structural remedies).  A few  months later, he had a change of heart.  He told the same  reporters that "with what looks like Microsoft intransigence,  a breakup is inevitable." Brinkley & Lohr, N.Y. Times;  see  also Brinkley & Lohr, U.S. v. Microsoft 315.  The Judge  recited a "North Carolina mule trainer" story to explain his  change in thinking from "[i]f it ain't broken, don't try to fix it"  and "I just don't think that [restructuring the company] is  something I want to try to do on my own" to ordering  Microsoft broken in two:

294
He had a trained mule who could do all kinds of wonderful tricks.  One day somebody asked him:  "How do you do it?  How do you train the mule to do all these amazing things?"  "Well," he answered, "I'll show you." He took a 2-by-4 and whopped him upside the head. The mule was reeling and fell to his knees, and the trainer said:  "You just have to get his attention."

295
Brinkley & Lohr, U.S. v. Microsoft 278.  The Judge added: "I hope I've got Microsoft's attention."  Id.;  see also Grimaldi, Wash. Post (comments by the Judge blaming the break-up  on Microsoft's intransigence and on what he perceived to be  Microsoft's responsibility for the failure of settlement talks); Spiegel, Fin. Times (the Judge blaming break-up on Microsoft's intransigence).

296
B. Violations of the Code of Conduct for United States Judges

297
The Code of Conduct for United States Judges was  adopted by the Judicial Conference of the United States in  1973.  It prescribes ethical norms for federal judges as a  means to preserve the actual and apparent integrity of the  federal judiciary.  Every federal judge receives a copy of the  Code, the Commentary to the Code, the Advisory Opinions of  the Judicial Conference's Committee on Codes of Conduct,  and digests of the Committee's informal, unpublished opinions.  See II Guide to Judiciary Policies and Procedures  (1973).  The material is periodically updated.  Judges who  have questions about whether their conduct would be consistent with the Code may write to the Codes of Conduct  Committee for a written, confidential opinion.  See Introduction, Code of Conduct.  The Committee traditionally responds promptly.  A judge may also seek informal advice  from the Committee's circuit representative.

298
While some of the Code's Canons frequently generate  questions about their application, others are straightforward  and easily understood.  Canon 3A(6) is an example of the  latter.  In forbidding federal judges to comment publicly "on  the merits of a pending or impending action," Canon 3A(6)  applies to cases pending before any court, state or federal,  trial or appellate.  See Jeffrey M. Shaman et al., Judicial  Conduct and Ethics  10.34, at 353 (3d ed. 2000).  As "impending" indicates, the prohibition begins even before a case  enters the court system, when there is reason to believe a  case may be filed.  Cf. E. Wayne Thode, Reporter's Notes to  Code of Judicial Conduct 54 (1973).  An action remains  "pending" until "completion of the appellate process."  Code  of Conduct Canon 3A(6) cmt.;  Comm. on Codes of Conduct,  Adv. Op. No. 55 (1998).

299
The Microsoft case was "pending" during every one of the  District Judge's meetings with reporters;  the case is "pending" now;  and even after our decision issues, it will remain  pending for some time.  The District Judge breached his  ethical duty under Canon 3A(6) each time he spoke to a  reporter about the merits of the case.  Although the reporters interviewed him in private, his comments were public. Court was not in session and his discussion of the case took  place outside the presence of the parties.  He provided his  views not to court personnel assisting him in the case, but to  members of the public.  And these were not just any members of the public.  Because he was talking to reporters, the  Judge knew his comments would eventually receive widespread dissemination.

300
It is clear that the District Judge was not discussing purely  procedural matters, which are a permissible subject of public  comment under one of the Canon's three narrowly drawn  exceptions.  He disclosed his views on the factual and legal matters at the heart of the case.  His opinions about the  credibility of witnesses, the validity of legal theories, the  culpability of the defendant, the choice of remedy, and so  forth all dealt with the merits of the action.  It is no excuse  that the Judge may have intended to "educate" the public  about the case or to rebut "public misperceptions" purportedly caused by the parties.  See Grimaldi, Wash. Post;  Microsoft Judge Says He May Step down from Case on Appeal,  Wall St. J., Oct. 30, 2000.  If those were his intentions, he  could have addressed the factual and legal issues as he saw  them--and thought the public should see them--in his Findings of Fact, Conclusions of Law, Final Judgment, or in a  written opinion.  Or he could have held his tongue until all  appeals were concluded.

301
Far from mitigating his conduct, the District Judge's insistence on secrecy--his embargo--made matters worse.  Concealment of the interviews suggests knowledge of their impropriety.  Concealment also prevented the parties from nipping  his improprieties in the bud.  Without any knowledge of the  interviews, neither the plaintiffs nor the defendant had a  chance to object or to seek the Judge's removal before he  issued his Final Judgment.

302
Other federal judges have been disqualified for making  limited public comments about cases pending before them. See In re Boston's Children First, 244 F.3d 164 (1st Cir.  2001);  In re IBM Corp., 45 F.3d 641 (2d Cir. 1995);  United  States v. Cooley, 1 F.3d 985 (10th Cir. 1993).  Given the extent of the Judge's transgressions in this case, we have  little doubt that if the parties had discovered his secret  liaisons with the press, he would have been disqualified,  voluntarily or by court order.  Cf. In re Barry, 946 F.2d 913  (D.C. Cir. 1991) (per curiam);  id. at 915 (Edwards, J., dissenting).

303
In addition to violating the rule prohibiting public comment, the District Judge's reported conduct raises serious  questions under Canon 3A(4).  That Canon states that a  "judge should accord to every person who is legally interested  in a proceeding, or the person's lawyer, full right to be heard

304
according to law, and, except as authorized by law, neither  initiate nor consider ex parte communications on the merits,  or procedures affecting the merits, of a pending or impending  proceeding."  Code of Conduct Canon 3A(4).

305
What did the reporters convey to the District Judge during  their secret sessions?  By one account, the Judge spent a  total of ten hours giving taped interviews to one reporter. Auletta, World War 3.0, at 14 n.*.  We do not know whether  he spent even more time in untaped conversations with the  same reporter, nor do we know how much time he spent with  others.  But we think it safe to assume that these interviews  were not monologues.  Interviews often become conversations.  When reporters pose questions or make assertions,  they may be furnishing information, information that may  reflect their personal views of the case.  The published  accounts indicate this happened on at least one occasion. Ken Auletta reported, for example, that he told the Judge  "that Microsoft employees professed shock that he thought  they had violated the law and behaved unethically," at which  time the Judge became "agitated" by "Microsoft's 'obstinacy'."  Id. at 369.  It is clear that Auletta had views of the  case.  As he wrote in a Washington Post editorial, "[a]nyone  who sat in [the District Judge's] courtroom during the trial  had seen ample evidence of Microsoft's sometimes thuggish  tactics."  Ken Auletta, Maligning the Microsoft Judge, Wash.  Post, Mar. 7, 2001, at A23.

306
The District Judge's repeated violations of Canons 3A(6)  and 3A(4) also violated Canon 2, which provides that "a judge  should avoid impropriety and the appearance of impropriety  in all activities."  Code of Conduct Canon 2;  see also In re  Charge of Judicial Misconduct, 47 F.3d 399, 400 (10th Cir.  Jud. Council 1995) ("The allegations of extra-judicial comments cause the Council substantial concern under both  Canon 3A(6) and Canon 2 of the Judicial Code of Conduct."). Canon 2A requires federal judges to "respect and comply  with the law" and to "act at all times in a manner that  promotes public confidence in the integrity and impartiality of  the judiciary."  Code of Conduct Canon 2A.  The Code of  Conduct is the law with respect to the ethical obligations of federal judges, and it is clear the District Judge violated it on  multiple occasions in this case.  The rampant disregard for  the judiciary's ethical obligations that the public witnessed in  this case undoubtedly jeopardizes "public confidence in the  integrity" of the District Court proceedings.

307
Another point needs to be stressed.  Rulings in this case  have potentially huge financial consequences for one of the  nation's largest publicly-traded companies and its investors. The District Judge's secret interviews during the trial provided a select few with inside information about the case,  information that enabled them and anyone they shared it with  to anticipate rulings before the Judge announced them to the  world.  Although he "embargoed" his comments, the Judge  had no way of policing the reporters.  For all he knew there  may have been trading on the basis of the information he  secretly conveyed.  The public cannot be expected to maintain confidence in the integrity and impartiality of the federal  judiciary in the face of such conduct.

C. Appearance of Partiality

308
The Code of Conduct contains no enforcement mechanism. See Thode, Reporter's Notes to Code of Judicial Conduct 43. The Canons, including the one that requires a judge to  disqualify himself in certain circumstances, see Code of Conduct Canon 3C, are self-enforcing.  There are, however,  remedies extrinsic to the Code.  One is an internal disciplinary proceeding, begun with the filing of a complaint with the  clerk of the court of appeals pursuant to 28 U.S.C.  372(c). Another is disqualification of the offending judge under either  28 U.S.C.  144, which requires the filing of an affidavit while  the case is in the District Court, or 28 U.S.C.  455, which  does not.  Microsoft urges the District Judge's disqualification under  455(a):  a judge "shall disqualify himself in any  proceeding in which his impartiality might reasonably be  questioned."  28 U.S.C.  455(a).  The standard for disqualification under  455(a) is an objective one.  The question is  whether a reasonable and informed observer would question  the judge's impartiality.  See In re Barry, 946 F.2d at 914; see also In re Aguinda, 241 F.3d 194, 201 (2d Cir. 2001); Richard E. Flamm, Judicial Disqualification  24.2.1 (1996).

309
"The very purpose of  455(a) is to promote confidence in  the judiciary by avoiding even the appearance of impropriety  whenever possible."  Liljeberg v. Health Servs. Acquisition  Corp., 486 U.S. 847, 865 (1988).  As such, violations of the  Code of Conduct may give rise to a violation of  455(a) if  doubt is cast on the integrity of the judicial process.  It has  been argued that any "public comment by a judge concerning  the facts, applicable law, or merits of a case that is sub judice  in his court or any comment concerning the parties or their  attorneys would raise grave doubts about the judge's objectivity and his willingness to reserve judgment until the close of  the proceeding."  William G. Ross, Extrajudicial Speech: Charting the Boundaries of Propriety, 2 Geo. J. Legal Ethics  589, 598 (1989).  Some courts of appeals have taken a hard  line on public comments, finding violations of  455(a) for  judicial commentary on pending cases that seems mild in  comparison to what we are confronting in this case.  See  Boston's Children First, 244 F.3d 164 (granting writ of  mandamus ordering district judge to recuse herself under   455(a) because of public comments on class certification and  standing in a pending case);  In re IBM Corp., 45 F.3d 641  (granting writ of mandamus ordering district judge to recuse  himself based in part on the appearance of partiality caused  by his giving newspaper interviews);  Cooley, 1 F.3d 985  (vacating convictions and disqualifying district judge for appearance of partiality because he appeared on television  program Nightline and stated that abortion protestors in a  case before him were breaking the law and that his injunction  would be obeyed).

310
While  455(a) is concerned with actual and apparent impropriety, the statute requires disqualification only when a  judge's "impartiality might reasonably be questioned."  28  U.S.C.  455(a).  Although this court has condemned public  judicial comments on pending cases, we have not gone so far  as to hold that every violation of Canon 3A(6) or every  impropriety under the Code of Conduct inevitably destroys  the appearance of impartiality and thus violates  455(a).  See In re Barry, 946 F.2d at 914;  see also Boston's Children  First, 244 F.3d at 168;  United States v. Fortier, 242 F.3d  1224, 1229 (10th Cir. 2001).

311
In this case, however, we believe the line has been crossed. The public comments were not only improper, but also would  lead a reasonable, informed observer to question the District  Judge's impartiality.  Public confidence in the integrity and  impartiality of the judiciary is seriously jeopardized when  judges secretly share their thoughts about the merits of  pending cases with the press.  Judges who covet publicity, or  convey the appearance that they do, lead any objective observer to wonder whether their judgments are being influenced by the prospect of favorable coverage in the media. Discreet and limited public comments may not compromise a  judge's apparent impartiality, but we have little doubt that  the District Judge's conduct had that effect.  Appearance  may be all there is, but that is enough to invoke the Canons  and  455(a).

312
Judge Learned Hand spoke of "this America of ours where  the passion for publicity is a disease, and where swarms of  foolish, tawdry moths dash with rapture into its consuming  fire...."  Learned Hand, The Spirit of Liberty 132-33 (2d  ed. 1953).  Judges are obligated to resist this passion.  Indulging it compromises what Edmund Burke justly regarded  as the "cold neutrality of an impartial judge."  Cold or not,  federal judges must maintain the appearance of impartiality. What was true two centuries ago is true today:  "Deference to  the judgments and rulings of courts depends upon public  confidence in the integrity and independence of judges." Code of Conduct Canon 1 cmt.  Public confidence in judicial  impartiality cannot survive if judges, in disregard of their  ethical obligations, pander to the press.

313
We recognize that it would be extraordinary to disqualify a  judge for bias or appearance of partiality when his remarks  arguably reflected what he learned, or what he thought he  learned, during the proceedings.  See Liteky v. United States,  510 U.S. 540, 554-55 (1994);  United States v. Barry, 961 F.2d  260, 263 (D.C. Cir. 1992).  But this "extrajudicial source" rule has no bearing on the case before us.  The problem here is  not just what the District Judge said, but to whom he said it  and when.  His crude characterizations of Microsoft, his  frequent denigrations of Bill Gates, his mule trainer analogy  as a reason for his remedy--all of these remarks and others  might not have given rise to a violation of the Canons or of   455(a) had he uttered them from the bench.  See Liteky,  510 U.S. at 555-56;  Code of Conduct Canon 3A(6) (exception  to prohibition on public comments for "statements made in  the course of the judge's official duties").  But then Microsoft  would have had an opportunity to object, perhaps even to  persuade, and the Judge would have made a record for review  on appeal.  It is an altogether different matter when the  statements are made outside the courtroom, in private meetings unknown to the parties, in anticipation that ultimately  the Judge's remarks would be reported.  Rather than manifesting neutrality and impartiality, the reports of the interviews with the District Judge convey the impression of a  judge posturing for posterity, trying to please the reporters  with colorful analogies and observations bound to wind up in  the stories they write.  Members of the public may reasonably question whether the District Judge's desire for press  coverage influenced his judgments, indeed whether a  publicity-seeking judge might consciously or subconsciously  seek the publicity-maximizing outcome.  We believe, therefore, that the District Judge's interviews with reporters created an appearance that he was not acting impartially, as the  Code of Conduct and  455(a) require.

314
D. Remedies for Judicial Misconduct and Appearance of Partiality

1. Disqualification

315
Disqualification is mandatory for conduct that calls a  judge's impartiality into question.  See 28 U.S.C.  455(a);  In  re School Asbestos Litig., 977 F.2d 764, 783 (3d Cir. 1992). Section 455 does not prescribe the scope of disqualification. Rather, Congress "delegated to the judiciary the task of  fashioning the remedies that will best serve the purpose" of  the disqualification statute.  Liljeberg, 486 U.S. at 862.

316
At a minimum,  455(a) requires prospective disqualification of the offending judge, that is, disqualification from the  judge's hearing any further proceedings in the case.  See  United States v. Microsoft Corp., 56 F.3d 1448, 1463-65 (D.C.  Cir. 1995) (per curiam) ("Microsoft I").  Microsoft urges  retroactive disqualification of the District Judge, which would  entail disqualification antedated to an earlier part of the  proceedings and vacatur of all subsequent acts.  Cf. In re  School Asbestos Litig., 977 F.2d at 786 (discussing remedy  options).

317
"There need not be a draconian remedy for every violation  of  455(a)."  Liljeberg, 486 U.S. at 862.  Liljeberg held that  a district judge could be disqualified under  455(a) after  entering final judgment in a case, even though the judge was  not (but should have been) aware of the grounds for disqualification before final judgment. The Court identified three  factors relevant to the question whether vacatur is appropriate:  "in determining whether a judgment should be vacated  for a violation of  455(a), it is appropriate to consider the  risk of injustice to the parties in the particular case, the risk  that the denial of relief will produce injustice in other cases,  and the risk of undermining the public's confidence in the  judicial process."  Id. at 864.  Although the Court was discussing  455(a) in a slightly different context (the judgment  there had become final after appeal and the movant sought to  have it vacated under Rule 60(b)), we believe the test it  propounded applies as well to cases such as this in which the  full extent of the disqualifying circumstances came to light  only while the appeal was pending.  See In re School Asbestos  Litig., 977 F.2d at 785.

318
Our application of Liljeberg leads us to conclude that the  appropriate remedy for the violations of  455(a) is disqualification of the District Judge retroactive only to the date he  entered the order breaking up Microsoft.  We therefore will  vacate that order in its entirety and remand this case to a  different District Judge, but will not set aside the existing  Findings of Fact or Conclusions of Law (except insofar as  specific findings are clearly erroneous or legal conclusions are  incorrect).

319
This partially retroactive disqualification minimizes the risk  of injustice to the parties and the damage to public confidence  in the judicial process.  Although the violations of the Code of  Conduct and  455(a) were serious, full retroactive disqualification is unnecessary.  It would unduly penalize plaintiffs,  who were innocent and unaware of the misconduct, and would  have only slight marginal deterrent effect.

320
Most important, full retroactive disqualification is unnecessary to protect Microsoft's right to an impartial adjudication. The District Judge's conduct destroyed the appearance of  impartiality.  Microsoft neither alleged nor demonstrated  that it rose to the level of actual bias or prejudice.  There is  no reason to presume that everything the District Judge did  is suspect.

321
See In re Allied-Signal Inc., 891 F.2d 974, 975-76  (1st Cir. 1989);  cf. Liberty Lobby, Inc. v. Dow Jones & Co.,  838 F.2d 1287, 1301-02 (D.C. Cir. 1988).  Although Microsoft  challenged very few of the findings as clearly erroneous, we  have carefully reviewed the entire record and discern no basis  to suppose that actual bias infected his factual findings.

322
The most serious judicial misconduct occurred near or  during the remedial stage.  It is therefore commensurate that  our remedy focus on that stage of the case.  The District  Judge's impatience with what he viewed as intransigence on  the part of the company;  his refusal to allow an evidentiary  hearing;  his analogizing Microsoft to Japan at the end of  World War II;  his story about the mule--all of these out-ofcourt remarks and others, plus the Judge's evident efforts to  please the press, would give a reasonable, informed observer  cause to question his impartiality in ordering the company  split in two.

323
To repeat, we disqualify the District Judge retroactive only  to the imposition of the remedy, and thus vacate the remedy  order for the reasons given in Section V and because of the  appearance of partiality created by the District Judge's misconduct.

324
2. Review of Findings of Fact and Conclusions of  Law

325
Given the limited scope of our disqualification of the District Judge, we have let stand for review his Findings of Fact  and Conclusions of Law.  The severity of the District Judge's  misconduct and the appearance of partiality it created have  led us to consider whether we can and should subject his  factfindings to greater scrutiny.  For a number of reasons we  have rejected any such approach.

326
The Federal Rules require that district court findings of  fact not be set aside unless they are clearly erroneous. See  Fed. R. Civ. P. 52(a).  Ordinarily, there is no basis for  doubting that the District Court's factual findings are entitled  to the substantial deference the clearly erroneous standard  entails.  But of course this is no ordinary case.  Deference to  a district court's factfindings presumes impartiality on the  lower court's part.  When impartiality is called into question,  how much deference is due?

327
The question implies that there is some middle ground, but  we believe there is none.  As the rules are written, district  court factfindings receive either full deference under the  clearly erroneous standard or they must be vacated.  There is  no de novo appellate review of factfindings and no intermediate level between de novo and clear error, not even for  findings the court of appeals may consider sub-par.  See  Amadeo v. Zant, 486 U.S. 214, 228 (1988) ("The District  Court's lack of precision, however, is no excuse for the Court  of Appeals to ignore the dictates of Rule 52(a) and engage in  impermissible appellate factfinding.");  Anderson v. City of  Bessemer City, 470 U.S. 564, 571-75 (1985) (criticizing district  court practice of adopting a party's proposed factfindings but  overturning court of appeals' application of "close scrutiny" to  such findings).

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Rule 52(a) mandates clearly erroneous review of all district  court factfindings:  "Findings of fact, whether based on oral  or documentary evidence, shall not be set aside unless clearly  erroneous, and due regard shall be given to the opportunity  of the trial court to judge of the credibility of the witnesses." Fed. R. Civ. P. 52(a).  The rule "does not make exceptions or  purport to exclude certain categories of factual findings from the obligation of a court of appeals to accept a district court's  findings unless clearly erroneous."  Pullman-Standard v.  Swint, 456 U.S. 273, 287 (1982);  see also Anderson, 470 U.S.  at 574-75;  Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S.  844, 855-58 (1982).  The Supreme Court has emphasized on  multiple occasions that "[i]n applying the clearly erroneous  standard to the findings of a district court sitting without a  jury, appellate courts must constantly have in mind that their  function is not to decide factual issues de novo."  Zenith  Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123  (1969);  Anderson, 470 U.S. at 573 (quoting Zenith).

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The mandatory nature of Rule 52(a) does not compel us to  accept factfindings that result from the District Court's misapplication of governing law or that otherwise do not permit  meaningful appellate review.  See Pullman-Standard, 456  U.S. at 292;  Inwood Labs., 456 U.S. at 855 n.15.  Nor must  we accept findings that are utterly deficient in other ways. In such a case, we vacate and remand for further factfinding. See 9 Moore's Federal Practice  52.12[1] (Matthew Bender  3d ed. 2000);  9A Charles A. Wright & Arthur R. Miller,  Federal Practice and Procedure  2577, at 514-22 (2d ed.  1995);  cf. Icicle Seafoods, Inc. v. Worthington, 475 U.S. 709,  714 (1986);  Pullman-Standard, 456 U.S. at 291-92.

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When there is fair room for argument that the District  Court's factfindings should be vacated in toto, the court of  appeals should be especially careful in determining that the  findings are worthy of the deference Rule 52(a) prescribes. See, e.g., Thermo Electron Corp. v. Schiavone Constr. Co., 915  F.2d 770, 773 (1st Cir. 1990);  cf. Bose Corp. v. Consumers  Union of United States, Inc., 466 U.S. 485, 499 (1984).  Thus,  although Microsoft alleged only appearance of bias, not actual  bias, we have reviewed the record with painstaking care and  have discerned no evidence of actual bias.  See S. Pac.  Communications Co. v. AT & T, 740 F.2d 980, 984 (D.C. Cir.  1984);  Cooley, 1 F.3d at 996 (disqualifying district judge for appearance of partiality but noting that "the record of the  proceedings below ... discloses no bias").

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In light of this conclusion, the District Judge's factual  findings both warrant deference under the clear error standard of review and, though exceedingly sparing in citations to  the record, permit meaningful appellate review.  In reaching  these conclusions, we have not ignored the District Judge's  reported intention to craft his factfindings and Conclusions of  Law to minimize the breadth of our review.  The Judge  reportedly told Ken Auletta that "[w]hat I want to do is  confront the Court of Appeals with an established factual  record which is a fait accompli."  Auletta, World War 3.0, at  230.  He explained:  "part of the inspiration for doing that is  that I take mild offense at their reversal of my preliminary  injunction in the consent-decree case, where they went ahead  and made up about ninety percent of the facts on their own." Id.  Whether the District Judge takes offense, mild or severe,  is beside the point.  Appellate decisions command compliance,  not agreement.  We do not view the District Judge's remarks  as anything other than his expression of disagreement with  this court's decision, and his desire to provide extensive  factual findings in this case, which he did.

VII. Conclusion

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The judgment of the District Court is affirmed in part,  reversed in part, and remanded in part.  We vacate in full the  Final Judgment embodying the remedial order, and remand  the case to the District Court for reassignment to a different  trial judge for further proceedings consistent with this opinion.