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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
IN RE MICROSOFT CORP. ANTITRUST LITIGATION This Document Relates To: Sun Microsystems, Inc. v. Microsoft Corporation, Civil Action No. JFM-02-2739
: : : : : : : : :
MDL Docket No. 1332 Hon. J. Frederick Motz
MICROSOFT’S SUPPLEMENTAL MEMORANDUM IN OPPOSITION TO SUN’S MOTION FOR PRELIMINARY INJUNCTION
David B. Tulchin Steven L. Holley SULLIVAN & CROMWELL 125 Broad Street New York, New York 10004 Telephone: (212) 558-4000
Thomas W. Burt Richard J. Wallis Linda K. Norman MICROSOFT CORPORATION One Microsoft Way Redmond, Washington 98052 Telephone: (425) 936-8080
David T. McDonald Karl J. Quackenbush PRESTON GATES & ELLIS LLP 701 Fifth Avenue, Suite 5000 Seattle, Washington 98104 Telephone: (206) 623-7580
Matthew L. Larrabee HELLER EHRMAN WHITE & MCAULIFFE LLP 333 Bush Street San Francisco, California 94104 Telephone: (415) 772-6000
Darryl Snider HELLER EHRMAN WHITE & MCAULIFFE LLP 601 S. Figueroa Street, 40th Floor Los Angeles, California 90017-5758 Telephone: (213) 689-0200
Michael F. Brockmeyer PIPER RUDNICK LLP 6225 Smith Avenue Baltimore, Maryland 21209 Telephone: (410) 580-3000
Attorneys for Microsoft Corporation
October 25, 2002
Redacted Public Version
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TABLE OF CONTENTS
Page
INTRODUCTION .......................................................................................................................................1
ARGUMENT ...............................................................................................................................................5
I. SUN’S MOTION FOR A “MUST-CARRY” INJUNCTION IS NOT SUPPORTED BY THE FACTS OR THE LAW.............................................................................5
A. Sun Has Not Met Its Burden of Demonstrating Irreparable Injury. .....................................6
1. There Is No Evidence of Any Actual or Imminent “Tipping.” ................................................................................................................7
2. Sun’s Theory of Irreparable Injury Is Based on Feedback Effects and Barriers To Entry That Sun Cannot Establish.....................................11
3. Sun’s Acknowledged Ability To Distribute Its Product Demonstrates That No Irreparable Harm Is Imminent. .........................................17
a. Sun Can Achieve Widespread Distribution Through Numerous Channels at Modest Cost. .........................................................17
b. Recent Deposition Testimony Confirms That Sun Simply Chose Not To Attempt Distribution of Its JRE by OEMs. ...........................................................................................20
c. Sun Does Not Need and Cannot Rely on Microsoft To Assure Software Developers That Java Is a Viable Platform. .........................................................................................22
4. Sun’s Delay in Filing Suit Precludes Emergency Relief. ......................................24
B. Sun’s Proposed Injunction Threatens To Harm the Public Interest and Microsoft. ....................................................................................................................24
1. Sun’s Proposed Injunction Threatens Serious Harm To Microsoft, Its Customers, And the Windows Platform. .........................................24
2. Sun’s Must-Carry Injunction Favors Sun Over Its Competitors And Is Contrary To the Public Interest. ............................................26
C. Sun Is Not Likely To Succeed on the Merits. ....................................................................28
1. Any Distribution Advantage Afforded To Microsoft by Windows Was Lawfully Acquired.........................................................................30
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2. The Court Cannot Act To “Preserve Competition” in an Undefined Market in Which No Anticompetitive Conduct Has Occurred..........................................................................................................31
3. Sun Has Not Suffered “Antitrust Injury.”..............................................................33
4. The More Than Four-Year-Old Conduct of Which Sun Complains Cannot Support Sun’s Proposed Must-Carry Injunction. ..............................................................................................................34
II. SUN’S MOTION FOR A PRELIMINARY INJUNCTION ON ITS COPYRIGHT CLAIM SHOULD BE DENIED............................................................................35
CONCLUSION..........................................................................................................................................38
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TABLE OF AUTHORITIES
CASES
Advanced Resources International, Inc. v. Tri-Star Petroleum Co., 4 F.3d 327 (4th Cir. 1993)..............................................................................................8
Associated General Contractors of Cal., Inc. v. Cal. State Council of
Carpenters, 459 U.S. 519 (1983).....................................................................................................35
Basic Fun, Inc. v. X-Concepts, LLC,
157 F. Supp. 2d 449 (E.D. Pa. 2001) ...........................................................................37
Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263 (2d Cir. 1979)...................................................................................16, 32
Bigelow v. RKO Radio Pictures,
162 F.2d 520 (7th Cir. 1947)........................................................................................32
Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189 (4th Cir. 1977)..........................................................................................8
Bristol Tech., Inc. v. Microsoft Corp.,
42 F. Supp. 2d 153 (D. Conn. 1998) ..............................................................................9
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977).....................................................................................................35
California v. American Stores Co.,
495 U.S. 271 (1990).....................................................................................................33
Caribbean Marine Services Co. v. Baldrige, 844 F.2d 668 (9th Cir. 1988)..........................................................................................8
Daniels Cablevision, Inc. v. San Elijo Ranch, Inc.,
158 F. Supp. 2d 1178 (S.D. Cal. 2001)........................................................................21
Devose v. Herrington, 42 F.3d 470 (8th Cir. 1994)..........................................................................................36
Direx Israel, Ltd. v. Breakthrough Medical Corp.,
952 F.2d 802 (4th Cir. 1992)................................................................................ passim
Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534 (9th Cir. 1983)..................................................................................16, 32
iv
Horcasitas v. Crown Central Petroleum Corp.,
649 F. Supp. 1163 (D. Md. 1986) ..................................................................................4
Illinois ex rel. Burris v. Panhandle Eastern Pipe Line Co., 935 F.2d 1469 (7th Cir. 1991)......................................................................................30
Image Tech. Services, Inc. v. Eastman Kodak Co.,
125 F.3d 1195 (9th Cir. 1997)......................................................................................24
Interstate Commerce Committee v. Baltimore & Annapolis R.R. Co., 64 F.R.D. 337 (D. Md. 1974)...................................................................................7, 25
Jack Kahn Music Co. v. Baldwin Piano & Organ Co.,
604 F.2d 755 (2d Cir. 1979).........................................................................................25
Johnson v. Kegans, 870 F.2d 992 (5th Cir. 1989)........................................................................................24
Manning v. Hunt,
119 F.3d 254 (4th Cir. 1997)....................................................................................8, 30
In re Microsoft Corp. Antitrust Litigation, 127 F. Supp. 2d 702 (D. Md. 2001) .............................................................................24
Natural Res. Def. Council v. United States EPA,
966 F.2d 1292 (9th Cir. 1992)......................................................................................26
Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92 (1st Cir. 1997)..........................................................................................37
Nintendo of America, Inc. v. Lewis Galoob Toys, Inc.,
16 F.3d 1032 (9th Cir. 1994)........................................................................................36
Northeastern Telegraph Co. v. AT&T, 651 F.2d 76 (2d Cir. 1981)...........................................................................................29
Olympia Equipment Leasing Co. v. Western Union Telegraph Co.,
797 F.2d 370 (7th Cir. 1986)........................................................................................30
Omega World Travel, Inc. v. Trans World Airlines, 111 F.3d 14 (4th Cir. 1997)................................................................................7, 31, 39
PepsiCo, Inc v. Coca-Cola Co.,
114 F. Supp. 2d 243 (S.D.N.Y. 2000)..........................................................................34
v
Pfeil v. Rogers, 757 F.2d 850 (7th Cir. 1985)........................................................................................37
Phototron Corp. v. Eastman Kodak Co.,
842 F.2d 95 (5th Cir. 1988)..........................................................................................35
Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132 (9th Cir. 1986)......................................................................................37
Quince Orchard Valley Citizens Association v. Hodel,
872 F.2d 75 (4th Cir. 1989)..........................................................................................25
R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102 (2d Cir. 1989).........................................................................................35
Reuters Ltd. v. United Press International, Inc.,
903 F.2d 904 (2d Cir. 1990).........................................................................................24
Sampson v. Murray, 415 U.S. 61 (1974).......................................................................................................18
Schine Chain Theaters v. United States,
334 U.S. 110 (1948).....................................................................................................33
Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993).....................................................................................................33
Steakhouse, Inc. v. City of Raleigh,
166 F.3d 634 (4th Cir. 1999)........................................................................................23
Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115 (9th Cir. 1999)......................................................................................37
Taylor v. Freeman,
34 F.3d 266 (4th Cir. 1994)........................................................................................3, 7
Triebwasser & Katz v. AT&T, 535 F.2d 1356 (2d Cir. 1976)................................................................................20, 21
United States v. Microsoft Corp.,
253 F.3d 34 (D.C. Cir. 2001) ............................................................................... passim
STATUTES
Fed. R. Civ. P. 65(c)...........................................................................................................29
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
IN RE MICROSOFT CORP. ANTITRUST LITIGATION This Document Relates To: Sun Microsystems, Inc. v. Microsoft Corporation, Civil Action No. JFM-02-2739
: : : : : : : : :
MDL Docket No. 1332 Hon. J. Frederick Motz
MICROSOFT’S SUPPLEMENTAL MEMORANDUM IN OPPOSITION TO SUN’S MOTION FOR PRELIMINARY INJUNCTION
INTRODUCTION
In the last few years alone, Microsoft has invested hundreds of millions of dollars in new
software technologies that benefit its customers worldwide. Microsoft’s .NET Framework is
among the advances produced by this investment, and it already provides new programming
tools that help software developers create Web services – Internet-based programs that promise
valuable new functionality to businesses and consumers. Many competitors, including Sun, offer
many other products and technologies that compete with all or parts of the .NET Framework and
with other elements of Microsoft’s .NET initiative. Sun asks this Court to interfere and favor
them in this natural competitive process, a process that fosters technological innovations and
enhances consumer welfare, by giving Sun a free ride at the expense of Microsoft and to the
detriment of Sun’s other competitors and, ultimately, the public interest. Sun’s extraordinary
request for a mandatory preliminary injunction is unsupported by the law, the facts or common
sense and should be denied.
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In the two briefs filed in support of its motion, Sun identifies not a single antitrust case in
which a court has issued mandatory must-carry relief on a preliminary injunction motion.
Microsoft knows of no such case either. Indeed, “[m]andatory preliminary injunctive relief in
any circumstance is disfavored, and warranted only in the most extraordinary circumstances.”
Taylor v. Freeman, 34 F.3d 266, 270 n.2 (4th Cir. 1994). Far from meeting its burden of
establishing each of the elements necessary to obtain the “extraordinary remedy” of a
preliminary injunction, Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 811-12 (4th
Cir. 1992), Sun has established none.
First, Sun bears the burden of making “a clear showing” that it will suffer imminent,
irreparable harm absent the requested injunction. Id. Here, Sun’s theory is that some undefined
and unproven market relating to Web services is in immediate danger of “tipping” to Microsoft’s
.NET Framework unless Microsoft is ordered to integrate and distribute a competing product,
Sun’s Java Runtime Environment (“JRE”), with every copy of Windows. This “tipping” theory
is pure lawyers’ argument. No witness on either side has embraced the view that “tipping” is
imminent. Even Sun’s own economic expert refused to opine that “tipping” was likely to occur,
much less could he say when it might happen. See infra at 10 n.12. The documents, the
witnesses, and independent industry analysts are all in accord: While a variety of software
development environments, including the Java platform and the .NET Framework, are actively
competing, software developers are not abandoning Java in favor of .NET.
If Sun were genuinely concerned about the matter, it could obtain the distribution of its
JRE it says it needs by devoting modest resources to distribution arrangements with PC
manufacturers (“OEMs”) or a wide range of other available distribution channels. Sun’s
documents and testimony demonstrate that Sun formulated a feasible and affordable plan for
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obtaining widespread distribution for its JRE, but elected not to pursue it. Sun easily could have
implemented such a plan, avoiding the potential harm it says it fears, but chose instead not to
invest in distribution. Sun’s decision not to spend a relatively small amount of money is not
irreparable injury and does not justify the extraordinary relief sought.
Second, the mandatory must-carry relief sought by Sun is likely to cause substantial harm
both to Microsoft and to the public. The injunction would force Microsoft to work with its fierce
competitor Sun and accept whatever new technology Sun might choose to include in subsequent
versions of its JRE, with no guarantee that this technology would be compatible with Windows
and with no meaningful protection against quality defects, security flaws or legal challenges
from third parties. Sun fails to explain why this Court should disregard the U.S. Department of
Justice’s rejection of a version of the mandatory must-carry relief Sun seeks as contrary to the
public interest. The requested injunction would provide Sun with a judicially-mandated
advantage over its many competitors. As for the OEMs who will be forced to receive Sun’s JRE
involuntarily, Sun offers the cold comfort that they can remove Sun’s software from Windows at
their own expense. Sun’s requested injunction should be denied on this basis alone.
Third, Sun cannot show a likelihood of success on the merits. An injunction ordinarily
should issue only to enjoin conduct that is wrongful. See, e.g., Horcasitas v. Crown Central
Petroleum Corp., 649 F. Supp. 1163 (D. Md. 1986) (denying injunction because disputed
conduct was reasonable under state and federal law). Here, Sun seeks to enjoin admittedly
lawful conduct. The only alleged wrongful conduct occurred in the period 1995-1998 in a
different market.
Thus, Sun’s claim that Microsoft’s distribution advantage for .NET should be eliminated
by a stroke of this Court’s pen depends on proof that (a) Microsoft’s wrongful conduct in 1995-
4
98 in the market for operating systems for Intel-compatible PCs then enabled Microsoft to
maintain a monopoly in that market; (b) that but-for this wrongful conduct, Microsoft would not
now have this same monopoly; and (c) that Microsoft’s alleged distribution advantage in a
second alleged market has therefore been caused by this wrongful conduct of long ago.
Sun’s theory is thus dependent on a showing that it has not even tried to make. In the
government case, even the trial court refused to find “that Microsoft would have lost its position
in the [operating system] market but for its anticompetitive behavior.” United States v. Microsoft
Corp., 253 F.3d 34, 107 (D.C. Cir. 2001) (“Microsoft III”). On appeal the D.C. Circuit expressly
held both that the record did not contain sufficient evidence to establish a “significant causal
connection” between the acts found to be anticompetitive and Microsoft’s current position and
that, absent this proof, even the government could not secure injunctive relief beyond merely
enjoining any anticompetitive conduct. Id. at 106-07.
Sun has done nothing to fill this evidentiary gap. The only evidence in the record on this
subject comes from Microsoft’s economics expert, whose study demonstrates that the conduct
found anticompetitive by the D.C. Circuit did not have any substantive impact on Microsoft’s
current market position. Unable to prove that Microsoft’s current position is the result of any
wrongful conduct, Sun has no basis whatsoever to justify its proposed injunction on the basis of
a monopoly position or any related distribution advantage Microsoft may enjoy.
Sun’s proposed injunction thus seeks to affect competition in a market that Sun refuses to
define but which it contends is entirely distinct from the one in which any harm to competition
allegedly has occurred. Absent proof of wrongful conduct actually threatening competition, Sun
cannot obtain its requested injunction. And even Sun’s own witnesses confirm that Sun’s ability
to compete is not threatened by Microsoft’s distribution of the runtime associated with its .NET
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Framework. Far from agreeing with Sun that software developers automatically adopt whatever
software development environment is most widely distributed, the three third-party declarants
Sun offered on reply have now testified that in targeting a particular platform, “ubiquity” of
distribution is either not a factor at all (as Terry Stepien of Sybase testified) or is one that may
well be outweighed by others (as Brian Behlendorf of CollabNet testified). Sun thus has yet to
produce a single witness who has embraced the proposition that Java is doomed unless Sun’s
JRE is included in Windows. Indeed, Sun cannot identify a single person in the software
industry who intends to abandon the Java platform in favor of the .NET Framework.
Microsoft’s creation and distribution of .NET technologies is pro-competitive. The
technical superiority of the .NET Framework over the Java platform may persuade some
software developers to switch platforms. While Sun may not like this increased competition, that
is scarcely a substitute for the showing of likely success on the merits that Sun must make to
prevail on this motion.
Finally, Sun’s request for an injunction on its copyright claim is without merit and is
moot in any event. Conduct that has been terminated voluntarily is not a proper subject for a
preliminary injunction.
ARGUMENT
I. SUN’S MOTION FOR A “MUST-CARRY” INJUNCTION IS NOT SUPPORTED BY THE FACTS OR THE LAW.
In this Circuit, any preliminary injunction is “an extraordinary remedy involving the
exercise of very far-reaching power, which is to be applied only in the limited circumstances
which clearly demand it.” Direx Israel, 952 F.2d at 811 (internal quotations omitted). The
6
standard governing the unprecedented mandatory injunction sought by Sun is even more
rigorous. See Taylor, 34 F.3d at 270.1
In order to demonstrate its entitlement to an injunction of any kind, Sun “bears the burden
of establishing that each of the [relevant] factors supports granting the injunction.” Direx Israel,
952 F.2d at 812 (internal quotation omitted). As discussed more fully below, those factors are
(a) “the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied,” (b)
the absence of material harm if the injunction is granted, including “harm to the defendant” and
harm to “the public interest,” and (c) “the likelihood that the plaintiff will succeed on the merits.”
Id. Sun has failed to meet its burden on each factor.
A. Sun Has Not Met Its Burden of Demonstrating Irreparable Injury.
When considering a motion for preliminary injunction, the Court begins “by looking to
the first requirement which must be satisfied if preliminary relief is to be granted: Has the
plaintiff made a ‘clear showing’ that it will suffer an immediate irreparable harm were such relief
not granted it?” Id. at 815.
Microsoft demonstrated in its opposition that Sun’s claim of irreparable injury – a claim
that a new and undefined market would “tip” irreversibly from the Java platform to the .NET
Framework – was entirely speculative. On reply, Sun virtually concedes this point, admitting
that it cannot predict “when and how the market will tip,” but argues that it need only show “the
1 See also Microsoft Corporation’s Opposition to Sun Microsystems, Inc.’s Motion for
Preliminary Injunction (cited herein as “Opp.”) at 11:4-12:11. Sun does not dispute that the relief its seeks is a mandatory injunction that is rarely available in any case, has never been entered in an analogous situation, and is in all cases subject to heightened standards. See Omega World Travel, Inc. v. Trans World Airlines, 111 F.3d 14, 15 n.1 (4th Cir. 1997) (an injunction “ordering the parties to continue in a relationship that would otherwise . . . be terminable at will” is mandatory); Interstate Commerce Comm. v. Baltimore & Annapolis R.R. Co., 64 F.R.D. 337, 342 (D. Md. 1974) (injunction compelling railroad to resume service to customer is mandatory).
7
‘possibility’ of irreparable harm.” Sun Microsystems, Inc.’s Reply Brief Supp. Mot. for Prelim.
Inj. (“Reply”) at 9:12-19. That argument is wrong. As the Fourth Circuit has repeatedly
reaffirmed, a plaintiff must make “a clear showing of irreparable harm as a condition for the
grant of a preliminary injunction.” Direx Israel, 952 F.2d at 812 (emphasis added). Remote or
speculative injury does not satisfy this test: “[W]here the harm is admittedly not present or
immediate but merely problematic, conditioned on possible future events,” the court should
“dismiss[ ] the motion for preliminary relief because the plaintiff failed to establish that the
denial would result in present irreparable harm.” Id. at 816.2
Sun’s claim of irreparable harm is premised entirely upon its speculation about events
that may occur at some unknown point in the future – “something that has not been proven.”
Advanced Resources Int’l, Inc. v. Tri-Star Petroleum Co., 4 F.3d 327, 331 (4th Cir. 1993). A
preliminary injunction should be denied where, as here, the purported harm “is speculative at
best, and may be remedied, should it occur, by an action at law.” Id.
1. There Is No Evidence of Any Actual or Imminent “Tipping.”
After Sun filed its motion last March, it argued that irreparable harm to the Java platform
was increasing with each passing day.3 Eight months have now passed, and Sun and the industry
2 See also Manning v. Hunt, 119 F.3d 254, 263, 265 (4th Cir. 1997) (remote or
speculative injury will not support a preliminary injunction). The cases Sun cites are not to the contrary: Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674, 675-76 (9th Cir. 1988), held that the plaintiff “must demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief” and reversed issuance of a preliminary injunction because the plaintiff’s theories consisted of “subjective apprehensions and unsupported predictions,” and Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189 (4th Cir. 1977), which Sun cites for the proposition that “possible injury” can be sufficient, did not address the quantum of proof necessary, and was in any event subsequently clarified by Direx Israel.
3 See, e.g., Sun’s Opp. to Stay Mot., filed 4/8/02, at 9:19-21 (“[T]he irreparable harm … accrues and escalates every day…”); id. at 11:10-12 (“Sun and third parties suffer irreparable harm every day … and the magnitude of that harm increases every day.”).
8
have been aware of Microsoft’s plans for .NET for nearly two years. Yet despite Sun’s protests
of urgency, Sun offers no proof that any “tipping” from the Java platform to the .NET
Framework – irreversible or otherwise – is underway or imminent. Instead, Sun contends that
the Java platform and the .NET Framework “are battling to be the development platform for the
next generation of software applications and web services.” Sun Microsystems, Inc.’s Mot. for
Prelim. Inj. (“Mot.”) at 20:1-3. Such vigorous competition is, of course, exactly what the
antitrust laws are designed to foster.
Far from supporting Sun’s theories, the evidence demonstrates that Sun’s professed fears
of “tipping” are unfounded because the Java platform is alive and well. The number of software
developers targeting the Java platform continues to grow, a trend that, according to Sun’s recent
forecasts (June 2002), will continue for years to come.4 Cf. Bristol Tech., Inc. v. Microsoft
Corp., 42 F. Supp. 2d 153, 171 & n.43 (D. Conn. 1998) (denying preliminary injunction in part
because the “continued vitality” of competing operating systems “raises doubt” about the
likelihood of tipping). Sun has offered no evidence of any migration of Java developers to the
.NET Framework.5 Instead, Sun’s declarants testified at deposition that they had no intention of
abandoning the Java platform and were unaware of any software company that intended to do
4 See Rewinski Decl. ¶ 8, Exs. 4, 8, 46, 101, Ex. 132 at SUN2-15-001758, dated June 5,
2002 (Sun presentation indicating “[v]ery high levels of success for J2SE as measured by Java developer adoption”); Ex. 140 at SUN2-78-000471 (Sun projecting a rise in usage of Java technology through 2005).
5 While the .NET Framework is gaining popularity among software developers, that is hardly surprising in light of the fact that this is a new technology with many desirable features. Most of the software developers writing applications for the .NET Framework, however, are migrating from other Microsoft platforms, not the Java platform. See Rewinski Supp. Decl. ¶ 8, Ex. 196 (article discussing 2002 Evans Data survey, noting migration of software developers from Microsoft’s own Visual Basic 6.0 to Visual Basic.NET).
9
so.6 Sun itself sees the introduction of the .NET Framework as an opportunity to increase the
popularity of the Java platform by enticing existing Microsoft developers to switch to the Java
platform. 7
Sun’s own internal predictions are confirmed by independent survey data that predict
software developers will write applications for the .NET Framework and the Java platform in
roughly equal numbers in the years to come.8 Evans Data Corporation, a prominent industry
analyst, reported in October 2002 that software developers “were virtually split on development
plans for Java architecture, on the one hand, and Microsoft’s .NET.”9 A recent study by another
prominent industry analyst, the Gartner Group, predicts that, over the next five years, there is an
equal 5% probability that either .NET or Java will win, and a 70% probability of a “two standard
6 See Rewinski Decl. ¶ 9; Ex. 150 (Hamel Depo.) at 111:17-112:3; Ex. 151 (Ebert Depo.)
at 79:1-5, 86:10-20; Ex. 155 (Simon Depo.) at 120:3-7, 194:8-195:4; Ex. 152 (Ross Depo.) at 368:3-5; Rewinski Supp. Decl. ¶ 8, Ex. 162 (Limp Depo.) at 11:1-12:1, 23:25-24:5, 94:14-18, 97:5-12, 102:22-103:11, 206:8-25, 208:4-9; Ex. 176 (Behlendorf Depo.) at 39:15-42:1, 157:22-158:6.
7 Rewinski Supp. Decl. ¶ 17, Ex. 164 (Chin Depo.) at 34:3-35:17, 68:3-13; Ex. 166 (Dickman Depo.) at 192:2-21, 195:12-196:5; Ex. 169 (Hamilton Depo.) at 68:2-13; see also Rewinski Decl. ¶ 7, Ex. 78 at SUN2-11-006052.
8 Rewinski Supp. Decl. ¶ 7, Ex. 196 (Evans Data survey reveals that 51% of developers are developing applications for Java today, but 61% will target Java a year from now; 40% of developers surveyed are developing applications for .NET now, but 63% will target .NET a year from now); see also Rewinski Decl. ¶ 7, Ex. 13 at SUN2-21-00080.
9 Rewinski Supp. Decl., Ex. 196; see also Ex. 188 at SUN2-34-001654 (April 2002 Evans Data survey: “Java use has steadily increased over the past four years, from 40% in 1998 to 55% currently”).
10
(Java and Microsoft) world.”10 According to the Gartner study, “neither platform will dominate
these markets through 2006.”11
Even Sun’s expert, Dr. Dennis Carlton, does not agree with Sun’s position. He testified
that he would not be surprised if both the .NET Framework and the Java platform survive, even
if they do not both enjoy what Sun refers to as “ubiquitous” distribution. More importantly, Dr.
Carlton admitted that he could not determine whether “tipping” from Java to .NET was more
probable than not.12
In the face of this evidence, Sun recruited new third-party witnesses to provide written
testimony with its Reply. These declarants quickly retreated from the Sun party line during their
depositions. Brian Behlendorf, for example, testified that neither his company nor anyone he
knew intended to abandon the Java platform, which he expected to coexist with .NET.13
Sun is left to rely on a handful of Microsoft documents that it claims support the
possibility of “tipping.” The full text of the documents, rather than the snippets cited by Sun,
reveals intense competition in which Java enjoys many advantages, including a leading position
10 Rewinski Supp. Decl., Ex. 181 (“.NET vs. Java: Competition or Cooperation? Gartner
Symposium ITXPO 2001,” Oct. 2001), at SUN2-59-000803.
11 Id. (emphasis added); see also Rewinski Decl., ¶ 7 & Ex. 139 at SUN2-01-0013939, dated 6/13/02 (Sun internal document quoting Gartner report concluding that “[t]hru 2005, 75% of new App Development will be in Java or .NET, split ~ 50/50 … Large Enterprises must have both .NET and Java”).
12 Rewinski Decl. ¶ 9, Ex. 157 (Carlton Depo.) at 214:21-215:9, 163:11-14, 165:11-166:25.
13 Rewinski Supp. Decl. ¶ 8, Ex. 176 (Behlendorf Depo.) at 39:15-42:1, 133:15-134:13, 157:22-158:6. Behlendorf also conceded that he did not know what software developers might do in the future – if he “could predict the future, [he] would be in Vegas.” Id. at 147:21-148:2. See also id. Ex. 174 (Stepien Depo.) at 59:10-63:4 (listing factors for selecting a platform without mentioning distribution).
11
in software development environments for both servers and a variety of non-PC devices such as
cellular telephones.14 All of the evidence indicates that competition is not tipping to the .NET
Framework, but instead will continue unabated through the trial of this case and beyond. As Mr.
Behlendorf confirmed, “the world will remain forever heterogeneous.”15
2. Sun’s Theory of Irreparable Injury Is Based on Feedback Effects and Barriers To Entry That Sun Cannot Establish.
Sun’s “tipping” theory is premised on its assertion that widespread distribution of the
.NET Framework will create “feedback effects” leading to “barriers to entry” that exclude
“competing platforms” like the Java platform. 16 Yet Sun disavows any need to define a market
in which such “feedback effects” supposedly operate, other than to insist that the competitors are
“primarily” the Java platform and the .NET Framework. Reply at 4 & n. 13.17 Having failed to
define a market or identify the various products and firms that compete in such a market, Sun
cannot meet its burden of proving that such a purported “market” is in danger of “tipping” in
14 See, e.g., Lin Decl., Ex. 2 at MSSunII 4310 (“Some analysts predict that J2EE will
overtake Microsoft in software developer market share. Others predict an even split.”), 4312 (“J2EE is gaining momentum”); Ex. 33 at MSSunII 5004638 (“The enterprise software arena has never been a Microsoft stronghold . . . This is compounded by J2EE”), 5004638 (“obstacles to success in the academic market are clear: decreasing Microsoft product usage and a poor image of Microsoft”); Ex. 64 at MSSunII 103036-39 (describing competitive situation); Ex. 54 at MSSunII 19511 (“The web application server is the most competitive area in the development space, and LAMP and J2EE have incredible momentum.”).
15 Rewinski Supp. Decl. Ex. 176 (Behlendorf Depo.) at 133:15-134:13.
16 Reply at 5:3-9; Mot. 20:17-21:8. See also Carlton Reply Decl. ¶ 22; Behlendorf Reply Decl. ¶¶ 26-27, 33, 40; Green Reply Decl. ¶¶ 60, 64, 66.
17 Reply at 4 & n.13. Sun’s documents confirm the existence of other competitors. See Rewinski Decl. ¶ 30, Ex. 86 at SUN2-09-001873 (competitors to Sun’s JRE include “Microsoft .NET and VB, HTML, JavaScript, and Macromedia Flash . . . and [o]ther Java implementations from competitors such as IBM, HP and Compaq”); Ex. 2, at SUN2-09-002035 (“It is not Microsoft versus Sun. It is Microsoft versus the rest of the industry”).
12
favor of .NET. As the D.C. Circuit explained in rejecting the attempted monopolization claim
relating to Web browsing software, “[w]hether 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.” Microsoft III, 253 F.3d at 82.18 Sun’s failure to define a market, much less
to demonstrate harm to competition in such a market, is in itself sufficient basis for this Court to
deny Sun’s motion.
Sun not only fails to provide the Court with evidence of a market in which to assess
Sun’s theory of “tipping,” it also fails to support its assertions about “feedback effects” and
“barriers to entry” even in the abstract. Lacking empirical evidence of feedback effects relating
to runtime environments, Sun continues to rely on those found in the government case with
respect to Intel-compatible PC operating systems.19 That analogy fails, however, because
consumers do not choose a single runtime environment that is capable of running the greatest
number of applications; instead, they acquire and use multiple runtime environments at very low
or no cost.20 Cf. Microsoft III, 253 F.3d at 83 (plaintiffs failed to show barriers to entry in
alleged market for Web browsing software where users switch Web browsers with no more
reluctance than “switching brands of cereal.”) Thus, a key element of the “feedback loop” said
18 Cf. Microsoft III, 253 F.3d at 84 (“Simply invoking the phrase ‘network effects’
without pointing to more evidence does not suffice to carry plaintiffs’ burden” to show entry barriers); Rewinski Supp. Decl., Ex. 176 (Behlendorf Depo.) at 32:18-19 (stating that even if platforms are inherently subject to network effects, “[w]hether such feedback effect locks out others is an open question”).
19 Sun also states that Microsoft’s distribution and marketing expert agreed at his deposition that network effects exist in this case. Reply at 5:6-8. In fact, Professor Frazier agreed only that the existence of network effects was a factor that Sun should consider as relevant. Frazier Depo. at 65:22-66:17; 67:7-20.
20 Murphy Decl. ¶¶ 44, 111, 137-139.
13
to exist with respect to Intel-compatible PC operating systems is absent in the segment of the
software industry relevant here.
Acknowledging this distinction, Sun shifts the debate and claims that software
developers, not consumers, are the “first and most important platform customers” and that
Microsoft “can initiate and drive this feedback cycle in its favor by offering developers the
largest potential market for their applications.” Reply at 5:12-16. Contrary to Sun’s assumption,
inclusion with Windows is not necessary to make the Java platform attractive to software
developers.21 Indeed, Terry Stepien, a software developer whose testimony Sun offered on
reply, does not even consider a platform’s breadth of distribution in choosing which platform to
target.22 His company, Sybase, ships a Java runtime environment to customers integrated into its
database.23 His testimony is consistent with that of other witnesses, both Sun’s and Microsoft’s,
who agree that software developers do not target platforms based solely or even primarily on the
relative distribution of the associated runtime environments.24
Moreover, as a practical matter, market potential alone cannot determine what platforms
software developers target – otherwise no applications would exist for any platform other than
21 Preinstallation of runtimes on PCs is a relevant consideration for only a small segment
of software developers. Allchin Depo. at 125:12-126:25. Moreover, Sun ignores the central role that enterprises, many of which have invested substantially in Java applications, play in the selection of software development environments. Murphy Decl. ¶¶ 103-107.
22 Stepien Reply Decl. ¶ 13; Rewinski Supp. Decl., Ex. 174 (Stepien Depo.) at 59:10-63:4.
23 Rewinski Supp. Decl., Ex. 174 (Stepien Depo.) at 54:11-56:25.
24 Parthasarathy 30(b)(6) Depo. at 26:12-15; Goren Decl. ¶¶ 7-8; Button Depo. at 47:12-48:3, 59:1-61:4.
14
the market leader.25 In fact, numerous platforms, including the Java platform, Sun’s Solaris
operating system, Apple’s Macintosh operating system, and others have enticed software
developers to write applications without what Sun refers to as “ubiquitous” distribution.26 Here,
of course, Sun has a far broader potential market for its JRE than Microsoft has for the .NET
Framework because the JRE is available on multiple operating systems, while the .NET
Framework is currently available only for certain recent versions of Windows. Thus, even if one
were to accept Sun’s contention that software developers “will naturally prefer the larger market
opportunity” (Reply at 11:13), that preference should benefit Java, not .NET.27
Because software developers can easily distribute, and consumers can easily obtain the
necessary runtime environment for any given type of application, the Java platform offers at least
as large a potential market as the .NET Framework.28 Developers thus are able to decide what
platform to target based on the one that offers the best functionality and performance given the
customer need they are attempting to satisfy.29 Indeed, today the Java platform is more widely
25 Rewinski Supp. Decl., Ex. 176 (Behlendorf Depo.) at 42:10-43:3.
26 For example, the Solaris operating system is one of many variants of the Unix operating system. According to Sun, variants are offered by “some of the largest, most successful companies in the world,” including “International Business Machines Corporation (IBM), Hewlett-Packard Company (HP) which now owns Compaq Computer Corporation, EMC Corporation (EMC)[,] Fujitsu and the Fujitsu-Siemens joint venture.” Rewinski Supp. Decl., Ex. 199 at 14. Despite this vigorous competition among Unix-based operating systems, Sun has convinced software developers to create “more than 12,000 applications” for Solaris. Id. at 9.
27 Murphy Decl. ¶¶ 152-156.
28 Murphy Decl. ¶ 138; Allchin Depo. at 126:5-25.
29 Parthasarathy 30(b)(6) Depo. at 26:12-15; Goren Decl. ¶¶ 7-8; Button Depo. at 47:12-48:3, 59:1-61:4.
15
distributed on PCs, servers, and non-PC devices than the .NET Framework. 30 In fact, Java
runtime environments are installed on 97% of all PCs.31 If feedback effects exist in the so-called
“market” relating to software for Web services, they are just as likely – if not more likely – to
favor Sun.32
Sun is also wrong when it claims that the interoperability afforded by Web services does
not diminish the potential barriers to entry that can result from feedback effects. See Reply at
8:3-15. While it is true that software developers still must choose the platform on which their
applications will run, certain factors deemed relevant to the feedback effects identified with
respect to Intel-compatible PC operating systems (such as the number of accessible end-users
and porting costs) are less important in the context of Web services. Regardless of what
platform a developer uses to build a Web service application, that application can share both data
and functionality with any other application, written to any platform, located anywhere in the
world.33
Sun finally makes the peculiar argument that Microsoft is seeking to “advantage the
.NET platform by ensuring its products will work ‘better together.’” Reply at 8:19-20. Of
course, Microsoft’s desire to ensure that its products work well together is pro-competitive. See,
e.g., Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 544-45 (9th Cir. 1983);
Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 285-88 (2d Cir. 1979). In any event,
having Microsoft products work well together does not diminish the importance of
30 Murphy Decl. ¶¶ 152-153.
31 Rewinski Decl. ¶ 12, Ex 116 at SUN2-27-000915.
32 Murphy Decl. ¶¶ 152-156.
33 Allchin Decl. ¶¶ 8, 18, 38; Opp. at 8 n.32; Murphy Decl. ¶¶ 131, 145-148.
16
interoperability, as Sun asserts. Indeed, given the prevalence of heterogeneous computing
networks, it would be contrary to Microsoft’s interests to do so. The competition between Java
and .NET encompasses not only PCs but also mainframes and various other non-PC devices and
is arguably most intense on servers, where enterprise applications increasingly run. 34 According
to Sun, the Java platform has been tremendously successful and has secured widespread
distribution on non-Microsoft platforms. Mot. at 20:5-6. Overall, the Java platform has by far
the larger base of applications, the broader distribution of runtime environments, and the greater
number of experienced programmers.35 Promoting interoperability through Web services
standards is one way that Microsoft plans to compete with Sun and others in this heterogeneous
environment.36 As one of Sun’s own witnesses recognized, there will be a continuing need to
interoperate with a variety of new and existing technologies.37
34 See, e.g., Green Supp. Decl. ¶ 38.
35 Murphy Decl. ¶¶ 152-154.
36 Sun in fact characterizes it as such: “Microsoft’s strategy is designed to leverage its control over PCs to overcome the considerable success of the Java platform on servers and handhelds.” Reply at 7:9-10 (emphasis added). Many of the Microsoft documents cited by Sun reflect the same dynamic. See, e.g., Lin Decl., Ex. 64 at MSSUNII103026 (noting Microsoft “win[s]” by ensuring “[i]nteroperability based on industry standards”), Ex. 66 at MSSUNII102811 (stating “GXA business goal” to “[a]ssure customers that .NET will interoperate in their heterogeneous environments”). Given the current relative positions of the parties, not only is “tipping” from Java to the .NET Framework unlikely, but according to the assumptions built into Sun’s own motion, a mandatory must-carry injunction will serve to protect Sun’s dominant position in the server and non-PC device segments. Cf. Murphy Decl. ¶¶ 152-156 (network effects favor Java).
37 Rewinski Supp. Decl., Ex. 176 (Behlendorf Depo.) at 135:9-136:24.
17
3. Sun’s Acknowledged Ability To Distribute Its Product Demonstrates That No Irreparable Harm Is Imminent.
Courts consistently hold that a plaintiff who can avoid irreparable injury by spending
money has an obligation to do so. “Mere injuries, however substantial, in terms of money, time
and energy necessarily expended in the absence of a stay, are not enough” to establish irreparable
harm. Sampson v. Murray, 415 U.S. 61, 90 (1974). Ignoring the law, Sun asks this Court to
believe that it “vigorously pursued distribution deals through a variety of potential channels,”
including OEMs, and that its efforts prove that such deals would be “prohibitively expensive and
ultimately futile.”38 Sun provides no evidence, however, about its purported efforts or any
details of its actual or anticipated costs. Recent discovery confirms what Microsoft had already
demonstrated: Sun has the means and the opportunity to obtain widespread distribution of its
JRE.39 That it may lack the motivation to follow through on these opportunities is no basis for
an injunction.
a. Sun Can Achieve Widespread Distribution Through Numerous Channels at Modest Cost.
Sun admits that it could achieve distribution of “perhaps millions” of JREs, but insists
that its “distribution objective must be to achieve parity with .NET’s distribution.” Reply at
11:4-5. The law does not guarantee “parity”; moreover, whatever its objectives might be, Sun
cannot prevail on its motion if it can achieve widespread distribution of its JRE on its own. 40
Sun’s documents confirm that it can obtain such distribution. As its own witness testified, “with
38 Green Reply Decl. ¶ 61, Green Supp. Decl. ¶ 106.
39 See Opp. at 8:7-11:2; Murphy Decl. ¶¶ 97, 122; Frazier Decl. ¶¶ 15-16.
40 See Rewinski Decl., Ex. 157 (Carlton Depo.) at 154:17-155:13.
18
enough marketing muscle anything can become widespread.”41 Here the evidence shows that
only a little “muscle” would be needed.
As set forth in Microsoft’s Opposition, Sun has access to multiple channels of
distribution that Microsoft does not control and that have been used effectively by many software
companies to gain widespread distribution of their products. Sun can – and in some cases does –
distribute its JRE through OEMs, software developers and resellers, enterprise customers,
Internet access providers and online service providers, as well as directly to consumers via
Internet downloading.42 Sun analyzed these channels in May 2002 in its “Java Plug-In
Distribution Plan” which contains detailed plans for quickly achieving widespread distribution of
Sun’s JRE. The plan indicates that Sun could achieve its distribution goals – 70% of new PC
users on top of an installed base that Sun predicts will include JREs on 97% of all PCs by the end
of 2002 – for $3.65 million per year, occupying the time of fewer than two full-time
employees.43 Whatever the cost of distribution, Sun, a company with billions in revenue, can
well afford to pay it.44
41 Rewinski Supp. Decl., Ex. 176 (Behlendorf Depo.) at 147:21-148:2.
42 See Opp. at 8:7-11:2. Sun also has pursued distribution of its JRE through other channels, including through Linux and open source vendors, book and magazine publishers, systems and software vendors, and direct distribution to end users. See Rewinski Decl. ¶¶ 24-27.
43 Rewinski Decl., Ex. 116 at SUN2-27-000915-946. See also Rewinski Decl., Ex. 81 at SUN2-27-000891 (“Sun’s Java Strategy,” defining “success” as shipping on “60% of OEM units by end 2002 (combined market share of all leading brands)”). In this analysis, the total cost of distributing through OEMs was estimated at $500,000 per OEM. Id. at SUN2-27-000885.
44 According to its most recent annual report, Sun has nearly 40,000 employees, and nearly $3 billion in cash and marketable securities. Rewinski Supp. Decl., Ex. 199 (Sun 2002 Form 10-K) at 14, 52. During the past four years, Sun has nearly $60 billion in revenues and more than $3.2 billion in net profits in the aggregate. Id. at 21.
19
Attempting to sweep its own marketing plans under the rug, Sun contends – relying only
on the declaration of Steven Banfield, which purportedly attests to the experience of
RealNetworks in distributing its streaming media software – that it might cost “hundreds of
millions of dollars spent over many years” to obtain the same distribution available through
Windows. Reply at 11:7-9 & n.57. At his deposition, Banfield testified otherwise. According to
Banfield, the “hundreds of millions of dollars” referred to in his declaration includes “all the
costs of the company,” including product development, customer relations, sales and marketing
efforts, and acquisitions.45 Banfield himself did not participate in negotiating any distribution
deals and does not know what out-of-pocket distribution costs, if any, RealNetworks incurred.46
RealNetworks’ experience confirms the views expressed by Microsoft’s experts and
Sun’s own Java Plug-in Distribution Plan: Sun can use multiple distribution channels to obtain
ubiquitous distribution of the JRE at reasonable cost without Microsoft’s help. RealNetworks
successfully used this approach to compete against Microsoft, growing from a start-up company
into a global market leader in just seven years.47
In the face of such evidence, any claim of irreparable injury is utterly unsustainable.
Sun’s preference for free distribution by Microsoft instead of distribution through its own efforts
and expense is no justification for the injunction it seeks. See Triebwasser & Katz v. AT&T, 535
45 Rewinski Supp. Decl., Ex. 173 (Banfield Depo.) at 43:1-25, 80:10-23; 84:18-23.
46 Rewinski Supp. Decl., Ex. 173 (Banfield Depo.) at 39:24-40:15, 43:1-25.
47 Banfield Reply Decl. ¶¶ 8-20. RealNetworks has more than 285 million unique users of its streaming media software and that software is installed on 90% of U.S. home PCs – which RealNetworks accomplished even though Microsoft’s competing Windows Media Player has been included in Windows since 1998. Rewinski Supp. Decl., Ex. 173 (Banfield Depo.) at 50:9-51:3, 139:9-141:1.
20
F.2d 1356, 1360 (2d Cir. 1976) (vacating preliminary injunction forcing defendant to carry
plaintiffs’ ad in Yellow Pages because plaintiffs could advertise through other media).48
b. Recent Deposition Testimony Confirms That Sun Simply Chose Not To Attempt Distribution of Its JRE by OEMs.
Although Sun claims that the OEM distribution channel is critical to its ability to
compete, it turns out that Sun never pursued distribution deals with OEMs, “vigorously” or
otherwise. Almost immediately after Microsoft announced in August 2001 that OEMs could
choose whether to preinstall Microsoft’s implementation of a Java runtime environment, the
Microsoft Java Virtual Machine (“MSJVM”), as part of Windows XP, Sun asked a few
employees to implement Sun’s response, but did not tell them to seek distribution of Sun’s
JRE.49 Instead, one Sun employee contacted major OEMs to find out if they intended to
preinstall the MSJVM on their PCs.50 When most major OEMs confirmed that they intended to
do so, the group of Sun employees stopped working.51 Apart from filing this lawsuit, Sun then
ignored the OEM channel for eight months.
48 Even if the cost to Sun of distributing its JRE were as high as Sun now claims (which it
is not), the cost of obtaining the distribution Sun says it needs is not irreparable harm justifying mandatory “must-carry” relief. See, e.g., Triebwasser & Katz, 535 F.2d at 1360 (reversing injunction even though available alternatives entailed allegedly “prohibitive costs”); Daniels Cablevision, Inc. v. San Elijo Ranch, Inc., 158 F. Supp. 2d 1178, 1189-90 (S.D. Cal. 2001) (denying mandatory injunction where threatened irreparable harm could be avoided by paying defendant “onerous” fee).
49 Rewinski Supp. Decl. ¶ 12 & Ex. 164 (Chin Depo.) at 25:8-29:8; 40:2-43:4; 52:8-24.
50 See Rewinski Decl. Ex. 21 at SUN2-07-07-00084, Ex. 35 at SUN2-32-000256, Rewinski Supp. Decl., Ex. 164 (Chin Depo.) at 25:18-28:14.
51 Rewinski Supp. Decl., Ex. 164 (Chin Depo.) at 40:2-43:4; 52:8-24; 54:7-22. In the fall of 2001, Sun also broke off negotiations relating to the distribution of its JRE through other channels. See Rewinski Supp. Decl., Ex. 175 (Abrahams Depo. Vol. 2) at 159:20-161:20 (Sun broke off discussions with RealNetworks in fall 2001 after it proposed that Sun pay a certain
(Footnote continued)
21
Although Sun’s Java Plug-In Distribution Plan recognized in May of this year that Sun
could reach 70% of new PC users merely by reaching agreements with the seven largest OEMs,52
Sun rejected the plan. Instead, Sun again contacted major OEMs simply to determine whether
they were distributing the MSJVM, and not to ask that they distribute Sun’s JRE.53 Seeking to
obtain OEM distribution of Sun’s product “just wasn’t part of the assignment.”54 The leader of
Sun’s worldwide software sales force similarly confirmed that his group made no effort to obtain
distribution of Sun’s JRE through OEMs or any other channel.55 Because Sun’s sales force is
evaluated based on revenue targets and is paid on commission, while Sun’s JRE is licensed for
free, marketing the JRE was “not in their DNA.”56 Apparently, Sun consciously rejected the
amount each year for distribution); 157:18-158:17 (Sun broke off discussions with Yahoo! in fall or early winter of 2001).
52 Rewinski Decl., Ex. 116 at SUN2-27-000924; see Green Supp. Decl. ¶ 106. Sun wrongly suggests that, by including the .NET Framework with Windows XP, Microsoft will achieve distribution on “100% of PCs.” Reply at 11:12-13. The .NET Framework is an optionally installable component of Windows XP, and will be included on new PCs only to the extent that Microsoft can convince OEMs that it is in their interests to do so. In fact, Dell Computer Corporation, one of the largest OEMs, has indicated that it does not intend to include the .NET Framework on its PCs. Montgomery Depo. at 155:12-156:3. Sun has the same opportunity to persuade OEMs to ship its JRE.
53 Rewinski Supp. Decl., Ex. 164 (Chin Depo.) at 55:18-58:6; 60:1-63:12; 82:7-84:1. Microsoft’s Opposition stated that Sun had contacted each of the top seven OEMs because the Java Plug-in Distribution Plan urged that such contacts be made. As described herein, Microsoft learned during subsequent depositions that Sun never even attempted to make those contacts.
54 Rewinski Supp. Decl., Ex. 164 (Chin Depo.) at 62:15-18.
55 Rewinski Supp. Decl., Ex. 172 (Civjan Depo.) at 21:20-22:2; 30:4-32:4; 44:5-16.
56 Rewinski Supp. Decl., Ex. 172 (Civjan Depo.) at 34:11-35:1.
22
strategies in Sun’s Java Plug-in Distribution Plan because one Sun executive decided that the
benefit was not worth the incremental cost.57
Sun’s “casual pursuit” of distribution “gives its cries of irreparable injury a tinny pitch.”
Steakhouse, Inc. v. City of Raleigh, 166 F.3d 634, 637 (4th Cir. 1999) (affirming denial of
motion for preliminary injunction compelling city to grant use permit where plaintiff did not
diligently pursue permitting process). The decision not to invest the modest amounts that Sun
itself thought were necessary to obtain widespread distribution of its JRE certainly does not
entitle Sun to free distribution from Microsoft.
c. Sun Does Not Need and Cannot Rely on Microsoft To Assure Software Developers That Java Is a Viable Platform.
Sun offers, but fail to support, a variety of excuses for its failure to pursue the distribution
it claims is essential to the continued success of Java. Sun first speculates that OEMs might
refuse to distribute Sun’s JRE because they fear retaliation by Microsoft,58 but the evidence
shows that Sun can enter into agreements with OEMs when it decides to follow through.59 As
this Court recognized in another context, “whatever incentives OEMs . . . may have to cooperate
57 See Green Reply Decl. ¶ 61; see also Rewinski Supp. Decl., Ex. 175 (Abrahams Depo.
Vol. 2) at 168:7-170:22. The person designated as most knowledgeable about distribution testified that he has no idea why Sun did not follow the advice of its distribution task force to work through OEMs or why an OEM shipping Microsoft’s MSJVM might not also ship Sun’s JRE. Rewinski Decl., Ex. 159 (Abrahams Depo. Vol. 1) at 53:16-54:5; 56:10-16.
58 Green Reply Decl. ¶ 61; Banfield Reply Decl. ¶ 29. Mr. Banfield subsequently testified at his deposition that he had never been involved in any discussion with an OEM representative who expressed fear about angering Microsoft. Rewinski Supp. Decl., Ex. 173 (Banfield Depo.) at 113:16-114:17.
59 Rewinski Supp. Decl., Ex. 191 (Sun’s Second Supplemental Response to Microsoft’s First Set of Fact Interrogatories) at 5:5-9 (describing successful distribution arrangement with Gateway). Sun’s Rule 30(b)(6) witness on this topic testified that he knew of no OEM that refused to consider installing Sun’s JRE. Rewinski Decl., Ex. 159 (Abrahams Depo. Vol. 1) at 54:6-55:10.
23
with Microsoft . . . they clearly are separate and independent entities capable of making their
own decisions.” In re Microsoft Corp. Antitrust Litig., 127 F. Supp. 2d 702, 713 (D. Md. 2001).
Indeed, OEMs have recently confirmed their independence by preinstalling Corel software rather
than competing Microsoft applications on new PCs.60
Sun also speculates that whatever distribution it is able to obtain “may be insufficient” to
provide the same “expectation among developers of long-term, ubiquitous distribution” that
Windows provides. Reply at 11:17-20 & n.60. In other words, Sun now argues that it is entitled
to a court order promising the industry that Sun’s JRE will receive a long-term free ride on
Windows. There is no basis for such an order. To the contrary, the antitrust laws condemn free
riding. See Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1224-26 (9th Cir.
1997) (reversing injunction to extent it promoted “free riding” by competitors).61
In any event, Sun’s proposed injunction would not deceive software developers into
believing Microsoft would include Sun’s JRE in Windows one moment longer than it was
required to do so. Microsoft and Sun are well-known adversaries; no preliminary injunction can
change that fact. Sun’s motion is thus seriously misguided, since it will signal to developers that
Sun cannot assure distribution of its JRE without Microsoft’s court-ordered support. Cf. Johnson
v. Kegans, 870 F.2d 992, 999 (5th Cir. 1989) (denying injunctive relief because, inter alia,
plaintiff “seeks meaningless relief” that would not prevent alleged harm).
60 On October 16, 2002, Gateway became the latest OEM to announce that it would offer
Corel’s WordPerfect Suite instead of Microsoft Office on its PCs. Dell, Hewlett-Packard and Sony also announced this year that they would preinstall Corel’s software on their PCs. Rewinski Supp. Decl., Ex. 198.
61 Reuters Ltd. v. United Press Int’l, Inc., 903 F.2d 904, 907-09 (2d Cir. 1990), is not to the contrary. There, the defendant breached a contract to provide Reuters with photos of each day’s world events. Sun, however, asserts no contractual right to use Windows as its distribution vehicle.
24
4. Sun’s Delay in Filing Suit Precludes Preliminary Injunctive Relief.
Sun wrongly claims that it was justified in waiting to bring this motion for more than four
years after the conduct challenged in its complaint, and more than a year after signing the Sun I
Settlement Agreement, because the .NET Framework was not commercially released until
February 2002. Reply at 12:20-13:2. Sun misses the point. Sun knew all it needed to know
about Microsoft’s plans with respect to .NET and the MSJVM when it signed the Settlement
Agreement in January 2001, and it has known for many years of the Microsoft conduct that
allegedly interfered with Sun’s Java distribution. 62 Sun’s delay in seeking injunctive relief
conclusively demonstrates a lack of urgency to remedy any alleged harm. See Quince Orchard
Valley Citizens Ass’n v. Hodel, 872 F.2d 75, 79-80 (4th Cir. 1989) (holding plaintiff that waited
nine months to seek injunction had not shown irreparable harm); Interstate Commerce Comm.,
64 F.R.D. at 343 (“perhaps the most disturbing aspect of this case [is that] there has been a delay
of nineteen months,” which “substantially undermines the equitable position of the ICC”). See
Opp. at 16:12-17::9.
B. Sun’s Proposed Injunction Threatens To Harm Both Microsoft and the Public Interest.
1. Sun’s Proposed Injunction Threatens Serious Harm to Microsoft, Its Customers, and the Windows Platform.
Sun’s proposal that Microsoft be locked into a long-term relationship with a company
with which it has a history of acrimonious disputes is in itself a great hardship. See Jack Kahn
Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 764 (2d Cir. 1979). Sun responds to
Microsoft’s showing that the proposed injunction would require Microsoft to accept a JRE that
Sun intends to develop into a competing operating system – what Sun has described as a “Trojan
62 See Rewinski Decl. ¶ 37, Ex. 2 at SUN2-09-002030; Rewinski Supp. Decl. ¶ 18.
25
horse” that could “kill Microsoft” – by candidly acknowledging that Microsoft would have to
“approach the court and complain” about any problems with the JRE.63 Sun’s requested
injunction would inevitably result in protracted judicial proceedings to resolve disputes arising
from the parties’ forced dealings. This alone is good reason to deny Sun’s motion. See Natural
Res. Def. Council v. United States EPA, 966 F.2d 1292, 1300 (9th Cir. 1992) (declining to grant
injunction despite recognition of important interests involved due to need for active judicial
supervision).
Sun also dismisses as speculative Microsoft’s showing that Sun’s JRE may impair
software programs designed for use with Windows or subject them to viruses or other malicious
software code. However, Sun’s own Web site reports numerous compatibility issues, bugs, and
security problems with Sun’s JRE.64 A recent press article confirms these concerns by observing
that “unexpected interactions between otherwise secure applications can weaken the security of a
system.”65 Sun similarly dismisses Microsoft’s profound concern that customers will blame
Microsoft for problems caused by Sun’s JRE. Reply at 14:1-4. In fact, customers already blame
Microsoft for problems relating to Sun’s JRE and have rejected Microsoft’s attempts to refer
them to Sun for assistance.66 As one customer explained: “I have no reason to contact SUN and
63 Hamilton Reply Decl. ¶ 35. See Rewinski Decl., Ex. 127 at SUN 06 023275 (referring
to JRE as “trojan horse”). Sun also claims that “the proposed order sets clear limits on what Microsoft would be required to redistribute from Sun.” Reply at 13:20-21. In fact, the proposed order states without limitation that Microsoft must distribute “the most current, unmodified binary implementation of the Java Runtime Environment . . . provided by Sun to Microsoft.”
64 See Wallent Supp. Decl. ¶ 12.
65 Wallent Supp. Decl. ¶ 11.
66 See Wallent Supp. Decl. ¶¶ 13-14. See also Wallent Depo. at 119:18-120:5; see also id. at 123:1-124:13; 215:18-216:7.
26
it is completely unacceptable to tell . . . customers that they must do so . . . .”67 Far from being
speculative, the evidence of harm to Microsoft is clear and compelling.
Sun asserts that Microsoft will suffer no harm from the requested injunction because
Microsoft currently includes the MSJVM in Windows XP and it “offered to distribute Sun’s
more recent implementation” as part of settlement negotiations. Reply at 14:5-14. But the
MSJVM was developed by Microsoft and thoroughly tested to ensure that it would run properly
with Windows. Microsoft offered to distribute Sun’s JRE as part of court-ordered settlement
negotiations in Sun I and that offer was conditioned upon obtaining the sort of essential
protections for Microsoft and its customers that Microsoft demands in all distribution
agreements, rather than the one-sided arrangement proposed by Sun.
2. Sun’s Must-Carry Injunction Favors Sun Over Its Competitors and Is Contrary to the Public Interest.
Sun fails to come to grip with the criticisms leveled by the U.S. Department of Justice
and its economics expert, Professor Sibley, against the non-settling States’ proposed must-carry
injunction, a remedy nearly identical to that proposed here by Sun, in the proceedings still
pending in the District of Columbia. Requiring Microsoft to distribute a so-called compatible
JRE would be “disproportionate and will improperly preordain market outcomes.”68 It would
“bless one competitor over others” and “lead to a decrease in innovation . . . .”69 The must-carry
67 Wallent Supp. Decl. ¶ 14. Sun’s proposed injunction also inhibits Microsoft’s ability
to assist such customers by recommending that they remove Sun’s JRE and/or install the MSJVM. See Opp. at 18:20-19:2 & n.89; see also Wallent Depo. at 31:23-34:17; 128:15-129:8; 130:1-131:9; 134:5-14; 135:4-12.
68 Rewinski Supp. Decl., Ex. 184 (Sibley Decl.) ¶ 80; see also Murphy Decl. ¶¶ 221-226.
69 Rewinski Decl., Ex. 141 (Response of the United States to Public Comments on the Revised Proposed Final Judgment) ¶ 431.
27
injunction therefore is the “antithesis” of the goal of “promotion of competition and not specific
competitors.”70
Specifically, to the extent distribution in Windows has significance, the favored position
granted to Sun’s JRE would distort competition by (a) giving Sun an advantage over firms like
IBM that have their own proprietary Java runtime environments71 and (b) giving the Java
platform an advantage over other application development environments.72
Sun’s mandatory must-carry relief also would impose unjustifiable costs on OEMs. Sun
downplays the impact of its requested injunction on OEMs by asserting that they would be able
to remove Sun’s JRE after being forced to preinstall it as part of Windows. Reply at 19:10-14.
Sun does not explain, however, why OEMs, who are now free to distribute Sun’s JRE if they
perceive value in doing so, should be forced to incur the cost of removing the product if they do
not want it on their new PCs.73 Such an outcome would not promote consumer welfare or serve
the public interest.
70 Id.
71 Rewinski Decl., Ex. 86 at SUN2-09-001873; see also id. Ex. 8 at SUN2-05-00352; Ex. 38 at SUN2-11-006224-25; Ex. 79 at 11-17. Silence from members of this group of Java licensees during these injunction proceedings is neither surprising nor indicative of support for Sun given the influence Sun enjoys over the development of all Java technologies (including veto power over decisions made through the Java Community Process). See Wallent Supp. Decl. ¶ 17.
72 Allchin Decl. ¶¶ 48-51; Rewinski Decl. ¶ 30, Ex. 86 at SUN2-09-001873 (identifying “Alternative technologies to Java such as Microsoft .NET and VB, HTML, JavaScript and Macromedia Flash”); Murphy Decl. ¶¶ 221-226. That the .NET Framework and Java platform may share unique characteristics does not mean they are the only relevant competitors. See Parthasarathy 30(b)(6) Depo. at 85:15-86:23; 91:1-93:9 (identifying .NET competitors other than Java); Rewinski Supp. Decl., Ex. 176 (Behlendorf Depo.) at 116:8-117:3.
73 See Murphy Decl. ¶¶ 219, 220, 222, 224. Moreover, Sun’s JRE alters the Windows Registry such that even after the JRE is removed, remnants of the installation process cause
(Footnote continued)
28
Sun contends that its proposed injunction “is in the public interest because it would
preserve potential competition between the .NET and Java platform pending final adjudication of
Sun’s claims.” Reply at 19:1-2. Of course, the antitrust laws encourage competitive battles,
even where one of the combatants is a monopolist. Northeastern Tel. Co. v. AT&T, 651 F.2d 76,
93 (2d Cir. 1981) (“[w]hile it is a fundamental tenet of antitrust law that customers will benefit
from the salubrious effects of competition, a monopolist’s right to compete is not limited to
actions undertaken with an altruistic purpose”). Far from preserving such vigorous competition,
Sun seeks to place a thumb on the scales by forcing Microsoft to distribute Sun’s product for
free. Consumer welfare is best served if Sun, like its competitors, is forced to decide whether the
benefits of obtaining broader distribution are worth the costs. When faced with incurring those
costs, Sun opted not to make the investment. Only when potentially relieved of paying those
costs does Sun argue that they should be incurred – by Microsoft.74
C. Sun Is Not Likely To Succeed on the Merits.
Sun’s motion should be denied because it cannot establish “the likelihood of irreparable
harm” required by the Fourth Circuit. See Direx Israel, 952 F.2d at 812. If the Court
nonetheless does proceed to address “the likelihood the plaintiff will succeed on the merits,” id.,
it will find Sun’s showing equally deficient. “[I]n a case such as this where the hardship balance
problems and interfere with the ability of PC users to view certain web pages on the Internet. See Wallent Supp. Decl. ¶¶ 3-9.
74 Fed. R. Civ. P. 65(c) mandates that “[n]o restraining order or preliminary injunction shall issue except upon the giving of security by the applicant.” This requirement is especially important where – as here – a party seeks an extraordinary mandatory injunction which, if improvidently granted, would threaten Microsoft’s flagship product, which is sold to hundreds of millions of users and generates billions of dollars in revenue annually. Preliminary injunctive relief should in no event be granted in this case without taking account of the significant bond that would be required.
29
does not tip ‘decidedly’ in plaintiff’s favor,” Sun must make “a strong showing of likelihood of
success . . . by ‘clear and convincing evidence.’” Id. at 818 (quoting Mycalex Corp. v. Pemco
Corp., 159 F.2d 907, 912 (4th Cir. 1947)) (other citations omitted). Under this standard, “if there
is doubt as to the probability of plaintiff’s ultimate success on the merits, the preliminary
injunction must be denied.” Id. at 813 (quoting 2 McCarthy on Trademarks and Unfair
Competition § 30.16, at 485-86 (2d ed. 1980)).
Sun fails to maintain a consistent legal position in arguing that it is likely to succeed on
the merits. Sun no longer contends – and certainly cannot show – that Microsoft’s position in
Intel-compatible PC operating systems would be substantially different but for the conduct found
to be anticompetitive in Microsoft III. Similarly, Sun originally relied on a purported antitrust
“duty to cooperate with business rivals,” only to relinquish expressly on reply any notion that
Microsoft has any duty under the antitrust laws to distribute Sun’s JRE. Reply at 17:5-13.75
Thus, Sun is now seeking preliminary injunctive relief to assist it in competing with Microsoft in
an alleged (but, as of yet, undefined) market for “the development platform for the next
generation of software applications and web services” (Mot. at 20:2-3) because of Microsoft’s
lawful leading position in a different market. There is no basis in American jurisprudence for
such a result. See Manning, 119 F.3d at 265 (rejecting injunction because there was no “link”
75 In its moving papers, Sun asserted: “When a firm possesses monopoly power, courts
may enforce a duty to cooperate with business rivals if the purpose behind a refusal to cooperate is to create or maintain a monopoly.” Mot. at 17:22-24; see generally id. at 17:20-19:17. Faced with Microsoft’s demonstration that it has no antitrust duty to carry Sun’s JRE (Opp. at 27:4 -30:8), Sun now expressly admits that its motion is not based on any unlawful refusal to deal with Sun. Reply at 17:5-9. Sun “ha[s] no right under antitrust law to take a free ride on its competitor’s sales force.” Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797 F.2d 370, 377-78 (7th Cir. 1986); see also Illinois ex rel. Burris v. Panhandle Eastern Pipe Line Co., 935 F.2d 1469, 1484 (7th Cir. 1991).
30
between the conduct and the claimed irreparable injuries); Omega World Travel, 111 F.3d at 16
(irreparable harm must be “caused by the alleged wrongful conduct”).
1. Any Distribution Advantage Afforded To Microsoft by Windows Was Lawfully Acquired.
Sun states repeatedly that the breadth of distribution Windows affords to the .NET
Framework is an unlawful benefit of Microsoft’s monopoly in Intel-compatible PC operating
systems. See Mot. at 1:13-16.76 That is wrong. The D.C. Circuit did not find that Microsoft had
illegally acquired its leading position in Intel-compatible PC operating systems. Nor did the
court find that Microsoft’s leading position in Intel-compatible PC operating systems would have
been any different but for the conduct found anticompetitive. The D.C. Circuit, like the district
court, “expressly did not adopt the position that Microsoft would have lost its position in [that]
market but for its anticompetitive behavior.” Microsoft III, 253 F.3d at 107. Accordingly, it
found no evidence that Microsoft’s position in Intel-compatible PC operating systems is a
byproduct of unlawful conduct, and Sun makes no showing that it is.77 Indeed, the record
demonstrates that the acts found anticompetitive by the D.C. Circuit had, at most, negligible
effects on Microsoft’s market position.78
Unable to contest the point on reply, Sun abandons the argument that Microsoft’s present
market position is the result of anticompetitive conduct. Reply at 15:16-16:7. The omission is
76 This charge was also offered as the rationale for must-carry relief by Sun’s economics
expert. See Carlton Decl. ¶¶ 39-40.
77 Although the D.C. Circuit gave the U.S. Department of Justice a “second chance” on the causation issue, the government admitted that it had “tried hard the first time around” and concluded that litigating the issue again “would have been an uphill battle that likely would have been resolved against us.” Rewinski Supp. Decl., Ex. 202 (March 6, 2002 Tunney Act Proceedings) at 27:22-28:24.
78 Murphy Decl. ¶¶ 157-213; Opp. at 23:8-25:8.
31
fatal. As the Court of Appeals held “[a]bsent such causation, the antitrust defendant’s unlawful
behavior should be remedied by an injunction against continuation of that conduct.” Microsoft
III, 253 F.3d at 106 (internal quotation omitted). In addition, whatever competitive advantages
Microsoft derives from its lawful position in Intel-compatible operating systems, those
advantages are also lawful:
[A] large firm does not violate § 2 simply by reaping the competitive rewards attributable to its efficient size, nor does an integrated business offend the Sherman Act whenever one of its departments benefits from association with a division possessing a monopoly in its own market. So long as we allow a firm to compete in several fields, we must expect it to seek the competitive advantages of its broad-based activity [-] more efficient production, greater ability to develop complimentary products, reduced transaction costs, and so forth.
Berkey Photo, 603 F.2d at 276 (emphasis added). “That the dominant firm in any market may
. . . create demand for new products is perfectly consistent with the competitive forces that the
Sherman Act was intended to foster.” Foremost Pro Color, 703 F.2d at 546.
2. The Court Cannot Act To “Preserve Competition” in an Undefined Market in Which No Anticompetitive Conduct Has Occurred.
The mandatory injunction sought by Sun is even less defensible than the injunction
overturned by the D.C. Circuit. That court found insufficient evidence of “an actual loss to
competition” arising from Microsoft’s monopoly in Intel-compatible PC operating systems to
justify a remedy restoring competition in that same market. Microsoft III, 253 F.3d at 80.
Although Sun’s opening papers have cryptically pitched must-carry relief as a way to “restore
competition in the market,”79 the market where Sun alleges harm to be threatened is a different
79 Mot. at 3:3-5 (emphasis added). As Microsoft observed, “by attempting to place the
Java platform back in the position it would have been ‘but for’ Microsoft’s illegal conduct” (id.), Sun is attempting to “restore Sun,” not “competition,” an improper goal for injunctive relief, e.g., Bigelow v. RKO Radio Pictures, 162 F.2d 520, 524 (7th Cir. 1947) (reversing grant of preliminary injunction because damages “should take care of the past injury”). Opp. at 25:11-26:4.
32
market, allegedly one in which the .NET Framework and the Java platform compete. Reply at
18:2-5. Sun, however, expressly declines to define that market – arguing instead that “it is
unnecessary for Sun to define and prove the relevant antitrust market in which the .NET and Java
platforms compete” – or prove anticompetitive conduct in that market. Reply at 4 n.13. This is
untenable.80
Absent proof of the new alleged market, there is no way to assess whether the market in
which the .NET Framework and the Java platform compete is subject to imminent, irreversible
“tipping” in favor of a single competitor.81 This is one of the lessons of Microsoft III. Without
proving the Web browser market at issue, plaintiffs alleged that Microsoft’s conduct, together
with feedback effects, threatened to create an applications entry barrier sufficient to “tip” the
alleged market and confer monopoly power on Microsoft. See Microsoft III, 253 F.3d at 80-84.
The D.C. Circuit rejected plaintiffs’ use of alleged feedback effects as proof of threatened
monopolization outside the context of a properly defined relevant market. It held that the lack of
80 Sun cites no case in which a court intervened in one market based on conduct that
occurred in a different market. Indeed, one of the cases it does cite faulted the lower court for “restoring competition” in geographic markets without determining whether there was unlawful conduct that harmed competition. Schine Chain Theaters v. United States, 334 U.S. 110, 127-29 (1948). Sun also attempts to draw on the recognition that courts have “discretion and flexibility,” but the case it cites merely held that a private party could challenge an allegedly unlawful merger, thus allowing it to avoid threatened harm in the market in which the allegedly anticompetitive conduct actually would occur. California v. American Stores Co., 495 U.S. 271, 284 (1990).
81 Sun has now alleged a claim that Microsoft has attempted to monopolize the market in which the .NET Framework and the Java platform compete. Amended Complaint ¶¶ 292-97. To succeed on such a claim Sun must establish that there is “a dangerous probability” Microsoft will soon monopolize that market. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993). To do so, it must first prove the existence of substantial barriers to entry, which requires Sun to define that market. Id. at 456; Microsoft III, 253 F.3d at 81. Sun refuses on its motion to define this market and does not even argue that such barriers actually exist. Reply at 4 n.13. For good reason, Sun has chosen not to base its motion for must-carry relief on this allegation.
33
sufficient market evidence alone was dispositive of the claim. See id. at 82.82 Here, not only
does Sun decline to offer proof, it concedes that it gerrymandered its market allegation to
exclude all platforms but the Java platform and the .NET framework. See Reply at 4:11-13 &
n.13. Such an approach is plainly invalid.83 Simply put, there is nothing remotely unlawful
about Microsoft’s competition with the Java platform in the purported “market” at issue and
therefore no legal basis for restraining that competition. Indeed, on this record, restraining
Microsoft’s efforts to compete with Java would itself be anticompetitive.
3. Sun Has Not Suffered “Antitrust Injury.”
Sun does not have standing to seek redress under the monopoly maintenance claim
affirmed in Microsoft III because it has not suffered “antitrust injury” in the market for Intel-
compatible PC operating systems.84 Under the market definition adopted by the D.C. Circuit,
Microsoft III, 253 F.3d at 53-54, as well as Sun’s own market definition here (Amended
Complaint ¶ 27), the Java platform does not compete in the market for Intel-compatible PC
82 The court also found no evidence that “network effects were a necessary or even
probable, rather than merely possible, consequence of high market share in the browser market . . . or [were] ‘significant’ enough to confer monopoly power.” Microsoft III, 253 F.3d at 83. The presence of feedback effects did not automatically indicate a threat of monopolization or, as Sun calls it, “tipping.”
83 Sun’s allegation of a “general purpose, Internet-enabled, distributed applications” platform market seeks improperly to exclude various platforms, components of platforms and other technology that vie to build and support Web services including Visual Basic, JavaScript and Macromedia Flash. See PepsiCo, Inc v. Coca-Cola Co., 114 F. Supp. 2d 243, 249 (S.D.N.Y. 2000) (“PepsiCo has chosen to define the elements of the relevant market to suit its desire for high Coca-Cola market share, rather than letting the market define itself.… Accordingly, I reject its latest definition insofar as it creates a ‘strange red-haired, bearded, one-eyed man-with-a-limp classification.’”) (internal citations omitted).
84 Sun’s lack of standing is explained more fully in Microsoft’s Memorandum in Support of Its Motion To Dismiss Claims 1-3, 5-7, 9-10 & 12-14 of Sun’s Amended Complaint and To Strike Certain Damages Demands (“Microsoft’s Motion to Dismiss Sun’s FAC”) at Part I. B. 1.
34
operating systems. Thus, any harm to the Java platform resulting from anticompetitive conduct
engaged in by Microsoft is not antitrust injury. Sun’s failure to offer any evidence on this point
is fatal to its motion. “Given the onerous effects of granting a preliminary injunction . . . more
than mere pleading is necessary to establish standing” under the antitrust laws.85
Sun ignores well-settled law by asserting that its standing can be premised on statements
in Microsoft III that Sun suggests indicate “Microsoft’s conduct was anticompetitive and caused
direct harm to Sun.” Reply at 15:9-15. Of course, the antitrust laws “were enacted for the
protection of competition, not competitors.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429
U.S. 477, 488 (1977). The antitrust laws do not provide a remedy for every injury that can be
attributed to an antitrust violation. Associated Gen. Contractors of Cal., Inc. v. Cal. State
Council of Carpenters, 459 U.S. 519, 534-35 (1983).
4. The More Than Four-Year-Old Conduct of Which Sun Complains Cannot Support Sun’s Proposed Must-Carry Injunction.
Sun argues that Microsoft has unlawfully deprived Sun of the ability to “assure
developers that the Java platform will have comparable distribution” to that for Windows. Reply
at 6:5-7. Sun has tried different approaches to establish this allegation. Sun originally argued
that it is entitled to “ubiquitous” distribution on Windows by virtue of its original contracts with
Microsoft and Netscape. See, e.g., Mot. at 3:3-5; 16:14-17. On reply, Sun appears to abandon
that argument in light of both the contrary evidence (see Opp. at 27 n.117; Rewinski Decl. ¶ 34)
and its admission that Microsoft has no duty to cooperate (Reply at 17:7-8). Sun now suggests
that absent the conduct held to be anticompetitive in Microsoft III, it would today possess JRE
85 Phototron Corp. v. Eastman Kodak Co., 842 F.2d 95, 98 (5th Cir. 1988) (remanding
for determination whether there was “substantial likelihood” that plaintiff could prove allegations of antitrust injury); R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 109 (2d Cir. 1989) (requiring a demonstrated probability of antitrust injury for preliminary injunction).
35
distribution at a level comparable to the current distribution of Windows. Reply at 6:5-7; 6:13-
14; 15:12-15; & n.85.
Sun’s claim is pure speculation. Sun offers no evidence that Netscape Navigator would
have maintained its claimed 85 percent usage share in the face of Microsoft’s entirely legitimate
efforts to improve the quality of Internet Explorer. The only evidence on this issue remains the
analysis of Microsoft’s expert, Dr. Kevin Murphy, who concluded that the effect on the
distribution of Navigator (and on distribution of Sun’s JRE) was not substantive.86
II. SUN’S MOTION FOR A PRELIMINARY INJUNCTION ON ITS COPYRIGHT CLAIM SHOULD BE DENIED.
Sun’s copyright claim is moot and is in any event with merit. The claim is moot because
Microsoft has ceased the optional installation of the MSJVM in Windows via Internet
downloading about which Sun complained. That issue is now moot, and the conduct complained
of is not the proper basis of preliminary injunctive relief since it cannot threaten Sun with any
“actual and imminent” harm. Direx Israel, 952 F.2d at 812; see also Nintendo of America, Inc.
v. Lewis Galoob Toys, Inc., 16 F.3d 1032, 1037 (9th Cir. 1994) (“[p]ublic policy does not
advocate the liberal issuance of preliminary injunctions in copyright infringement actions”)
(emphasis in original, distinguishing competing rule in cases involving permanent injunctions).
Because that is the only conduct by Microsoft that is alleged as a basis for copyright
infringement in Sun’s Amended Complaint, Sun’s injunction motion should be denied. See
Devose v. Herrington, 42 F.3d 470, 471 (8th Cir. 1994) (“a party moving for a preliminary
86 Murphy Decl. ¶¶ 164-186. Indeed, in light of the government’s failure to prove that
high market share in the browser market could lead to an applications barrier to entry, Microsoft III, 253 F.3d at 83, there is no basis for concluding that Navigator’s current market share is the result of anything other than its competitive merits.
36
injunction must necessarily establish a relationship between the injury claimed in the party’s
motion and the conduct asserted in the complaint”).87
Sun cannot dispute that it “must definitively establish” that its interpretation of the
Settlement Agreement is correct before asserting that Microsoft has infringed Sun’s copyright.
See Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1122 (9th Cir. 1999). Sun has
failed to do so. Instead, Sun argues for the first time in a declaration submitted in connection
with its Reply that the manner in which Microsoft incorporates the MSJVM in Windows XP also
infringes Sun’s copyrights. However, Sun’s Amended Complaint asserts no such claim, and
challenges only the optional installation of the MSJVM via Internet downloading. Of course,
arguments made in a declaration provide no basis to grant Sun any injunctive relief.
In any event, Sun’s new copyright infringement arguments are similarly without merit.
The interpretation of the Settlement Agreement offered by Richard Green, a Sun executive, is
both inadmissible88 and incorrect. The Settlement Agreement entitles Microsoft to “incorporate”
the MSJVM “in successor versions” of certain of its products, and there is no dispute that
87 Sun claims that injunctive relief is appropriate “despite Microsoft’s claim it will cease
distribution via Internet downloads.” Reply at 20:10-11. As support, Sun cites Basic Fun, Inc. v. X-Concepts, LLC, 157 F. Supp. 2d 449 (E.D. Pa. 2001), which in turn relied upon Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132 (9th Cir. 1986) (which Sun also cites). See Reply at 20:11-13. Yet as Sun plainly knows, the Ninth Circuit in Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115 (9th Cir. 1999), specifically declined to follow Polo Fashions because Sun’s unfair competition claim in Sun – like its copyright claim here – “is not brought under federal trademark law.” Sun, 188 F.3d at 1123. Even if Sun’s cases were on point (which they are not), Sun has offered no reason to depart from the Sun court’s sensible ruling that injunctive relief should be granted only if a plaintiff can show “that the conduct [at issue] will probably recur.” Id.
88 As Sun itself states (Reply at 19:23-20:1), “parol evidence should not be allowed to vary the unambiguous terms of the agreement.” See also Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92, 99 (1st Cir. 1997) (noting that at least seven circuit courts, including the Fourth Circuit, refuse to permit testimony on matters of law); Pfeil v. Rogers, 757 F.2d 850, 862 (7th Cir. 1985) (legal argument in affidavit improper and “may be disregarded”).
37
Windows XP is among those products.89 It does not limit the manner in which Microsoft elects
to “incorporate” the MSJVM and, as Sun is well aware, Microsoft has long “incorporated”
technologies into its operating system through Internet downloading and the release of so called
“Service Packs,” which aggregate periodic updates and bug fixes.90
With regard to irreparable harm, Sun’s only argument is that it “is entitled to control how
its copyrighted material is copied and distributed.” Reply at 20:8-9. However, Sun ignores the
binding admission of its own Rule 30(b)(6) witness Richard Green that incorporating the
MSJVM in Windows XP via Internet downloading does not harm Sun, an admission that defeats
any claim of irreparable harm. Opp. at 34 n.141. Sun offers no response to this testimony,
which is fatal to its request for injunctive relief on its copyright claim. See Opp. at 34:1-35:1
(establishing that any presumption of harm “is rebutted where the plaintiff has not been harmed,
[or] where harm is de minimis,” and, in addition, that both Microsoft and end-users would be
89 Green Reply Decl. ¶ 38; Rewinski Supp. Decl. ¶ 16, Ex. 164 (Patch 30(b)(6) Depo.) at
11:7-13.
90 See Miller Decl. ¶ 52; Parthasarathy Decl. ¶¶ 27-28; Allchin Decl. ¶ 57. As Mr. Parthasarathy explains in detail in his supplemental declaration, nothing in the Settlement Agreement precludes Microsoft from incorporating the MSJVM in Windows XP after initial distribution of the operating system or permitting OEMs to decide whether to incorporate it in Windows when installing the operating system. Parthasarathy Supp. Decl. ¶¶ 15-17. Indeed, when asked about this issue, Sun’s own Rule 30(b)(6) witness could not identify anything in the Settlement Agreement that would preclude Microsoft from distributing in any manner a repaired MSJVM to a user who had an existing copy of Windows that included the MSJVM. Rewinski Supp. Decl. ¶ 16, Ex. 168 (Patch 30(b)(6) Depo.) at 40:11-41:17. And finally, the record is equally clear that the MSJVM for Windows XP, once downloaded from the Internet (or otherwise installed), is integrated with Windows XP in the same manner as it was with Windows 2000. See Miller Decl. ¶ 52.
38
harmed if the Court were to prohibit Microsoft from incorporating the MSJVM in Windows XP
via Internet download).91
CONCLUSION
Sun can cite no antitrust case that has ever granted a mandatory injunction before trial on
a preliminary injunction motion. There is no basis for the sweeping relief Sun now seeks, which
would drastically change the competitive landscape in an undefined market where Microsoft’s
conduct has admittedly been pro-competitive.
Sun faces no irreparable injury, and certainly no injury that is imminent. Its own expert
disavows any such notion. Sun cannot even establish that Microsoft’s supposed distribution
advantage comes about by reason mosof the alleged unlawful conduct of 4-7 years ago in a
different market. Indeed, and in any event, Sun can obtain all the distribution it needs through
reasonable efforts of its own.
In contrast to Sun’s lack of proof that it faces any imminent or irreparable injury in the
absence of a mandatory, must-carry injunction, Microsoft faces serious harm, as does the public
interest, if the Court were to grant Sun’s unprecedented motion. It should be denied.
Dated: October 25, 2002 Respectfully submitted,
By:_____________________________________ Matthew L. Larrabee HELLER EHRMAN WHITE & McAULIFFE LLP 333 Bush Street San Francisco, California 94104 Telephone: (415) 772-6000 Attorneys for Defendant MICROSOFT CORPORATION
91 Sun cannot, as it now attempts to do, claim that any reduction in the distribution of the
MSJVM was anticompetitive while at the same time seek to enjoin Microsoft from distributing the MSJVM. Omega World Travel, 111 F.3d at 16.
39
Additional Counsel for Microsoft Corporation:
David B. Tulchin Steven L. Holley SULLIVAN & CROMWELL 125 Broad Street New York, New York 10004 Telephone: (212) 558-4000
Darryl Snider HELLER EHRMAN WHITE & MCAULIFFE LLP 601 S. Figueroa Street, 40th Floor Los Angeles, California 90017-5758 Telephone: (213) 689-0200
Thomas W. Burt Richard J. Wallis Linda K. Norman MICROSOFT CORPORATION One Microsoft Way Redmond, Washington 98052 Telephone: (425) 936-8080
David T. McDonald Karl J. Quackenbush PRESTON GATES & ELLIS LLP 701 Fifth Avenue, Suite 5000 Seattle, Washington 98104 Telephone: (206) 623-7580
Michael F. Brockmeyer PIPER RUDNICK LLP 6225 Smith Avenue Baltimore, Maryland 21209 Telephone: (410) 580-3000