STEPHEN D.
SUSMAN RALPH H.
PALUMBO PARKER C. FOLSE
III STEPHEN J. HILL
(A1493) Attorneys for Caldera, Inc.
CALDERA,
INC.,
Plaintiff
MICROSOFT
CORPORATION,
Defendant
CONSOLIDATED
STATEMENT OF FACTS IN
SUPPORT OF ITS RESPONSES TO
MOTIONS FOR SUMMARY
JUDGMENT BY
MICROSOFT CORPORATION
Judge Dee V.
Benson
Case No. 2:96CV
0645B
CHARLES R. ESKRIDGE III
JAMES T. SOUTHWICK
HARRY P. SUSMAN
SUSMAN GODFREY L.L.P.
1000 Louisiana, Suite 5100
Houston, Texas 77002-5096
Telephone: (713) 651-9366
www.SUSMANGODFREY.COM
MATT HARRIS
PHIL McCUNE
LYNN M. ENGEL
SUMMIT LAW GROUP PLLC
WRQ Building, Suite 300
1505 Westlake Avenue N., Suite 300
Seattle, Washington 98109-3050
Telephone: (206) 281-9881
www.SUMMITLAW.COM
SUSMAN GODFREY L.L.P.
1201 Third Avenue, Suite 3090
Seattle, Washington 98101
Telephone: (206) 516-3880
www.SUSMANGODFREY.COM
RYAN E. TIBBITTS (A4423)
SNOW, CHRISTENSEN & MARTINEAU
10 Exchange Place, 11th Floor
P.O. Box 45000
Salt Lake City, Utah 84145
Telephone: (801) 521-9000
www.SCMLAW.COM
DISTRICT OF UTAH, CENTRAL DIVISION
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INTRODUCTION
OVERVIEW OF THE
CASE
SUMMARY JUDGMENT
STANDARDS
CONSOLIDATED
STATEMENT OF FACTS
1974-1981: THE
ERA OF PERSONAL COMPUTERS BEGINS
"World's First Minicomputer Kit to Rival Commercial Models"
Popular Electronics, January 1975
Early Days of Digital Research Inc. and Microsoft Corp.
"Unable to agree to a deal, IBM turned to another small company, Microsoft, for what turned out initially to be a copycat product. Kildall was livid. He said: 'Here we were, in good faith, in negotiations with IBM and they came in with a complete rip-off.'"
Obituary, Gary Kildall, July 20,
1994
"Again, from the programmer's point of view, MS-DOS 1.0 was primarily a clone of CP/M."
Chris Peters, November 6, 1986
Seattle Computer Products, Inc. vs.
Microsoft Corporation
II.
1981-1989: THE STAGNATION OF A
STANDARD
"While DOS continues to be our most important and most profitable product over the last four years we have done very little with it technically."
Bill Gates, November 29, 1989
III.
APRIL 1987-MAY 1990: ADVENT OF DR DOS
"Digital Research Inc., which formerly ruled the operating system world with its CP/M, is planning to take on Microsoft Corp. in the lucrative DOS market with DR DOS, its single-user offering compatible with MS-DOS 3.3."
PC Week, June 14, 1988
"DOS 4 is a mess to discuss -- bugs, too big, strange shell interface, who wrote it? DOS 4 has a terrible reputation."
Bill Gates, October 31, 1988
"Initial consensus from DOS management is that DRI has a product which competes very favorably against MS-DOS."
DOS and Windows Monthly Summary: April
1989
Microsoft
Realizes Its Mistake
"We thought OS/2 would replace MS-DOS. We were wrong. We got distracted and didn't pay enough attention to the DOS standard."
Bill Gates, June 6, 1991
Monopoly
Maintenance: Choosing the Weapons
"DR DOS: I expected to hear we had more of a problem with this. Apparently, we still haven't lost a lot of business. I want us to track this very closely."
Bill Gates, October 31, 1988
Resistance
is Futile -- Prepare to be
Assimilated
"Steve Ballmer had a promising discussion with DRI re: them licensing MS-DOS vs. competing with us. Steveb will follow up with Joachimk."
Russ Werner, December 18, 1988
"You never sent me a response on the question of what things an app would do that would make it run with MSDOS and not run DR-DOS. Is there any version check or api they fail to have? Is ther feature they have that might get in our way? I am not looking for something they cant get around. I am looking for something their current binary fails on."
Bill Gates, September 22, 1988
Warning
Messages and Other Scare Tactics
"Bill Gates ordered to all application business units to include checking routines of operating environments and if it is Microsoft DOS, nothing will happen. But if it is non MS-DOS (such as DR-DOS), application will display messages saying that 'This application has been developed and tested for Microsoft MS-DOS. Since you use different environment, this application may not work correctly . . .' "
B. J. Bahk, August 9, 1989
Propaganda:
Fear, Uncertainty and Doubt
"It only takes a couple of reports about non-compatibility to give the kiss of death to a PC: we've seen that on the hardware side as well as in the operating system area."
Jeremy Butler, September 22, 1989
Exclusionary
Licenses: The Shape of Things to Come
"DOS being fairly cloned has had a dramatic impact on our pricing for DOS. I wonder if we would have it around 30-40% higher if it wasn't cloned. I bet we would!"
Bill Gates, August 6, 1989
"At this time we still offer DOS and Windows on per-system level. If there is any danger we will offer the DOS/Win combo license."
OEM Status Report, November 1989
Dreaming
of The DOS/Windows Merge
"The strategic side is: . . . We put a bullet in the head of our would be competitors on DOS like DRI, Desqview, dos extenders etc."
Nathan Mhyrvold, May 9, 1989
"DOS remains the backbone though of both our software businesses. It is under extreme attack by high quality clones like DR DOS."
Bill Gates, December 1, 1989
DR DOS 5.0, THE REAL
COMPETITION BEGINS
"In order for Leopard to have a bright future, it is necessary to immediately exploit our product superiority and gain name recognition. This is our opportunity and we must take advantage of it."
DR DOS 5.0 Launch Plan, March 14,
1990
Awards,
Praise, and Compatibility
"Verdict: This is the first time I've given any product an all 'excellent' verdict, which speaks for itself."
PC User, July 4, 1990
Monopoly
Maintenance: Building the Perfect
Beast
"On the desktop, we have a strategic win today (monopoly). We must keep the desktop."
Presentation, Microsoft Executive Staff
Retreat, May 10, 1990
"On the PR side, we have begun an 'aggressive leak campaign' for MS-DOS 5.0. The goal is to build anticipation for MS-DOS 5.0, and diffuse potential excitement/momentum from the DR DOS 5.0 announcement."
DR DOS 5.0 Competitive Analysis, May 2,
1990
"I took the opportunity to negotiate in German, sign our offer as is -- this is an agreed upon package deal or if you change any component, we will too. Second option: scratch the DOS clause, pay $35 for Windows instead of $15. . . . In my judgment they will hurt if they do not ship WIN and paying $35 for it is out of the question."
Joachim Kempin, March 26, 1991
"We are engaged in a FUD campaign to let the press know about some of the bugs. We'll provide info a few bugs at a time to stretch it out."
Brad Silverberg, July 22, 1991
Exclusionary
Licenses: Triple-Whammy
"We are forcing them to NOT ship any DRI machines."
Ron Hosogi, September 10, 1990
"Opus agreement has finally been signed by Redmond. Another DRI prospect bites the dust with a per processor DOS agreement."
Microsoft OEM Status Report, October
1990
"The DR threat still lives, especially in the export section which needs a low priced DOS for XTs to be shipped to Eastern Block. We will maintain and utilize HEI's UPB situation to keep out DRI."
Microsoft OEM Status Report, September
1990
"The new contract is for three year term so that we don't have to worry about low end competition. This will be the first OEM in Mexico bundling Windows 3.0 on its system, and we eliminated DRI's chances with Printaform for at least 3 years."
Microsoft OEM Status Report, August
1990
Dreaming
of the DOS/Windows Merge -- Part 2
"In a sense, you lock cloners out of the WIN4 market, but we only benefit from this if you increase the price of WIN4 to be that of WIN3 + DOS. Otherwise, we've destroyed the DOS market under WIN4, revenue-wise, so this is a phyrric victory."
Gordon Letwin, March 8, 1991
MS-DOS
5.0: Almost Better Late Than Never
"We're currently hearing from numerous callers (approx 150/day) who are experiencing severe incompatibilities with MS-DOS 5.00, to the point that PSS is unable to get the operating system to work successfully on their machines."
Microsoft PSS Report, June 13,
1991
JULY
1991-OCTOBER 1991: THE DRI/NOVELL
MERGER
"I thought about it all night. Since I came here I said there were two things that concerned me related to Novell: one Novell partnering with IBM and two Novell coming at us at the desktop. Both fears have now come true."
Jim Allchin, July 17, 1991
"'We think [DR DOS 6.0] is excellent technology,' said Joseph Guglielmi, IBM's general manager of marketing and business development for personal systems. 'We're talking with Novell and DRI on a variety of alternatives,' Guglielmi confirmed."
Computer Reseller News, September 23,
1991
"'There was only one stipulation,' says Noorda, 'Gates told me, That DRI thing has to go.'"
Ray Noorda, January 24, 1994
VI. SEPTEMBER 1991-DECEMBER 1993:
DR DOS 6.0, ADVANCING
THE STANDARD
"I think to be successful a DOS update has to . . . match the garbage that DR DOS does."
Bill Gates, March 6, 1992
Awards, Praise, and Compatibility -- Part 2
"Now, only months after the release of MS-DOS 5.0, DRI has again stepped ahead with the release earlier this month of DR DOS 6.0, which once again matches and exceeds the features and capabilities of Microsoft's product."
PC Week, September 30, 1991
Monopoly
Maintenance: Polishing and Improving the
Arsenal
"We need to slaughter Novell before they get stronger."
Jim Allchin, September 9, 1991
"There is an obvious conflict quickly approaching us, and I get the feeling we are not very prepared PR wise. The conflict is Windows 3.1 and DR-DOS. Apparently DRI is quite aware of our plans to not test with DR-DOS, our plan to not let them enter the Win 3.1 beta program, and our plan to detect the presence of MS-DOS and warn the user they are on an un-tested OS if MS-DOS is not detected."
David Cole, November 7, 1991
"fact is, I'm sure they already have win 3.1 anyways. with 10,000 betas, all it takes is one drdos user to send it to them. . . . so I'm sure they have win 3.1 and this is just a pr game."
Brad Silverberg, December 5, 1991
"What the guy is supposed to do is feel uncomfortable, and when he has bugs, suspect that the problem is dr-dos and then go out to buy ms-dos. or decide not to take the risk for all the other machines he has to buy for in the office."
Brad Silverberg, February 10, 1992
Intending Incompatibilities -- Part 2
"heh, heh, heh . . .
my proposal is to have bambi refuse to run on this alien OS. comments?"
Phil Barrett, September 30, 1991
"Objectives: FUD DR DOS with every editorial contact made."
MS-DOS 6 PR Plan, November 1992
"Further to our conversation yesterday, I am writing to confirm that Microsoft is unable to supply you Windows as a single product. Microsoft will only sell you Windows as a combined package with MS-DOS version 5."
Ellen Taylor, January 23, 1992
"look what znix is doing! cut those fuckers off."
Brad Silverberg, May 19, 1992
Exclusionary
Licenses: Critical Mass
"I feel we are much too smug in dealing with Novell. Perhaps they didn't hurt us in DOS yet -- but it's not because of product or their trying. It's because we already had the OEMs wrapped up."
Jim Allchin, March 26, 1992
Choking
on Vaporware -- Part 2
"the design preview has not leaked to the press are you surprised do you wish it would if so when"
Steve Ballmer, June 9, 1992
Implementing the DOS/Windows Merge
"Novell is after the desktop . . . This is perhaps our biggest threat. We must respond in a strong way by making Chicago a complete Windows operating system, from boot-up to shut-down. There will be no place or need on a Chicago machine for DR-DOS (or any DOS)."
Chicago Strategy Document, June 16,
1992
MS-DOS 6.0: Not a Bad Product, Except for the Data Loss Bugs,
Class Action
Lawsuits, and the $120 Million
Verdict
"The current number of US MS-DOS 6 Upgrade customers losing data (full or partial) is about 3/1000. I do not know how to define acceptable but this feels much too high to me."
Brad Chase, May 27, 1993
VII. DECEMBER 1993-SEPTEMBER 1994:
NOVELL DOS 7.0, DEAD ON
ARRIVAL
"Who at Microsoft gets up every morning thinking about how to compete with these guys in the short term -- specifically cut their revenue. Perhaps we need more focus on this. . . . After their behavior in this FTC investigation I am very keen on this."
Bill Gates, July 21, 1993
Awards, Praise, and Compatibility -- Part 3
"if they really release the version with all this junk in it, it will mean that for three ms-dos releases in a row (5, 6 and 7), DR will have had our key features in their product 12-18 months before us."
Richard Freedman, March 26, 1993
Monopoly Maintenance: Pulling the Trigger
"This really isn't that hard. If you're going to kill someone there isn't much reason to get all worked up about it and angry -- you just pull the trigger. Angry discussions before hand are a waste of time. We need to smile at Novell while we pull the trigger."
Jim Allchin, September 18, 1993
Choking
on Vaporware -- Part 3
"WOW -- If you are REALLY still telling the field the RTM is Sept 30 -- and if you are REALLY serious -- we have a ton of work to do VERY fast?!! Is this just propaganda mail???"
Mike Appe, April 7, 1994
"vERY CLEAR TO ME: nO CHICAGO, NO COOPERATION no beta, no alpha code, total war."
Joachim Kempin, May 18, 1993
"At the Exec Retreat in Feb, I suggested that we should lock up the LDS Church (and BYU) as a 100% MS account. . . . Were we to own his account, we would inflict an incredible amount of FUD on the new Novell/WP. The influence of the LDS Church in the Utah economy and culture is difficult to appreciate from a distance."
Mike Murray, April 5, 1994
Exclusionary
Licenses: No Wiggle Room
"Compaq things they can distribute our os sw however they want. Joachim, you'll need to check the contract on this. If they think they can distribute however they want, again, it's a small step to putting other os software on the cd rom."
Brad Silverberg, October 1, 1993
Implementing
the DOS/Windows Merge -- Part 2
"also he asked about chicago pricing. i said that since it's the combination of windows and msdos and more, you should expect a price in the same ballpark as windows + ms-dos."
Brad Silverberg, December 2, 1993
"We plan no new releases of MS-DOS after MS-DOS 6.22!!"
Microsoft Three Year Plan, April
1994
"Novell is considering selling Novell DOS to a third party, sources said. Among those said to be interested in buying the rights to DOS is Novell's former chairman and CEO Ray Noorda, sources said."
PC Week, August 22, 1994
VIII.
JULY 15, 1994: UNITED STATES VS. MICROSOFT
CORP.
"Microsoft's unfair contracting practices have denied other U.S. companies a fair chance to compete, deprived consumers of an effective choice among competing PC operating systems, and slowed innovation."
Janet Reno, July 16, 1994
IX.
AUGUST 1995: DOS IS FINALLY . . . REALLY, REALLY
WELL-HIDDEN
"I would hesitate to say that chicago is a complete redesign, one of the things about chicago is that while it's a big big improvement, it's still an incremental step forward. i would be afraid of scaring people off, thinking, whoa, i better let this settle down before i try it. it's a generation step forward, like a new Honda Accord."
Brad Silverberg, April 26, 1994
"It is our intention to finish the job the Justice Department left unfinished when it settled its antitrust complaint through consent decree."
Steve Susman, July 24, 1996
XI.
MAY 18, 1998: UNITED STATES VS. MICROSOFT CORP. -- PART
2
"The lawsuit we filed today seeks to put an end to Microsoft's unlawful campaign to eliminate competition, deter innovation, and restrict consumer choice."
Joel I. Klein, May 18, 1998
Appendix A Table: Relevant Product Releases
* Source: Exhibit 5
Ivie Report, at 36-37
Appendix B Chart: DR DOS vs. MS-DOS: A Side-by-Side Comparison
* Source: Leitzinger
Report, Exhibit 7
Appendix C Chart: OEMs That Microsoft Realized Were Considering DR DOS
* Source: Leitzinger
Report, Exhibit 5
Appendix D Summary: Results of NSTL Compatibility Testing of DR DOS 5.0,
* Source: Leitzinger Rebuttal
Report, Exhibit 3
Appendix E Summary: Results of XXCAL Compatibility Testing of DR DOS 6.0,
* Source: Leitzinger Rebuttal
Report, Exhibit 4
Appendix F Summary: Results of Evan Ivie Compatibility Testing of
DR DOS 5.0 and DR DOS 6.0
* Source: Leitzinger Rebuttal
Report, Exhibit 5
COMES NOW Caldera, Inc. complaining of Microsoft Corporation, and offers this Consolidated Statement of Facts in support of its forthcoming Responses to various Motions for Partial Summary Judgment now pending, and would show the Court as follows:
In 1916, Judge Learned Hand resolved the antitrust dispute pending in United States v. Corn Products Refining Company, 234 F. 964 (S.D.N.Y. 1916). The government charged that a starch producer had engaged in illegal monopolization. In evidence were typewritten memoranda from company executives, who had a custom of communicating with each other in this fashion. Judge Hand wrote: "The documents were never intended to meet the eyes of anyone but the officers themselves, and were, as it were, cinematographic photographs of their purposes at the time they were written." Id. at 978. A witness's attempts to contradict the validity of these memos, Judge Hand wrote, "served only to affect the general credibility of his testimony." Id.
Like the executives in Corn Products, Bill Gates and the senior executives at Microsoft never expected that their e-mail and other internal reports and communications would be produced and reviewed as a record of their anti-competitive conduct.(1) They were wrong. Those internal communications tell the story of Microsoft's predatory actions, contradicting in every material respect the "legitimate business justifications" put forth in Microsoft's various summary judgment motions. Judge Hand's conclusions over 80 years ago apply perforce today to a new industry dominated from its inception by Microsoft:
In the face of these memoranda, which for some strange reason were preserved, there can be no question in my mind of the continuous and deliberate purpose of the Corn Products Refining Company, by every device which their ingenuity could discover, to maintain as completely as possible their original domination of the industry.
234 F. 978
In this Consolidated Factual Statement, Caldera will highlight the glaring discrepancies between Microsoft's current proffer of justification for its anti-competitive conduct, in contrast to the documents and dialogue flying about between its highest executives at the time.
The evidence in this case -- including Microsoft's internal documents and deposition testimony of Microsoft employees, former DRI and Novell employees, and disinterested witnesses -- proves that Microsoft has maintained its monopoly in the desktop operating systems business through predatory conduct that excluded competitors from the DOS market, a market in which Microsoft had monopoly power.(2) Caldera's case covers a long period of time, but the basic thrust is straightforward.
In 1987, Microsoft announced its intention to discontinue the development of MS-DOS in favor of a new operating system product, dubbed OS/2. A company called Digital Research Inc. (DRI), which had helped develop the original DOS, immediately recognized Microsoft's blunder. Consumers still wanted DOS. Within a year of Microsoft's announcement, DRI released its own version of DOS called DR DOS. Microsoft initially reacted by trying to buy DR DOS from DRI. When DRI rejected the offer, Microsoft implemented a series of anti-competitive tricks that it perfected in years to come, such as spreading false stories about problems with DR DOS in order to create fear, uncertainty, and doubt (FUD) among consumers; falsely announcing the imminent release of non-existent products in order to freeze consumer demand (vaporware); and retaliating against computer manufacturers -- original equipment manufacturers (OEMs) -- who dared to license DR DOS. Still, DR DOS established its niche and enjoyed modest growth.
In June 1990, DRI raised the stakes by releasing DR DOS 5.0, a revolutionary DOS product. Microsoft launched a vicious campaign to destroy DR DOS 5.0 before its sales could take off.
Vaporware. First came the wave of vaporware. Within a week of DRI's announcement of DR DOS 5.0, Microsoft announced plans to ship within four months a comparable product: MS-DOS 5.0. Microsoft executives literally circled the globe, spreading word of MS-DOS 5.0 and thus deterring customers from purchasing DR DOS 5.0. This announcement was demonstrably false, as proven by Microsoft's own records. Finally, in June 1991 -- over one year after Microsoft's announcements -- MS-DOS 5.0 was released. Any momentum DRI should have gained from DR DOS 5.0 was dead.
FUD. Microsoft kept up the attack by launching a barrage of FUD against DR DOS 5.0. Microsoft's FUD strategy was to portray DR DOS 5.0 as full of technical glitches ("bugs") and incompatible with Windows 3.0 -- the then-current version of Microsoft's graphical user interface (GUI), which translates the word commands needed to run DOS into pictures on the screen. Neither charge was remotely truthful, as Microsoft well knew. Indeed, Microsoft's own documents reveal the predatory intent behind these spurious charges: convince customers that DR DOS was simply too risky a venture to justify crossing swords with a vindictive monopolist like Microsoft.
Tying. Simultaneously, Microsoft began bringing to bear its power in the Windows market, where Microsoft faced no competition. Increasingly, DOS users -- whether MS-DOS or DR DOS -- wanted to take advantage of Windows, which ran on top of DOS. To prevent consumers from using DR DOS with Windows, Microsoft began tying license for Windows to commensurate license of MS-DOS by either charging prohibitively high prices to any OEM that wanted to buy Windows alone, or prohibiting sale of Windows on its own altogether.
Exclusionary Licenses. During this 1990-1991 period, Microsoft also began deploying what would become its most effective weapon against DRI: exclusive licenses with OEMs. Although these licenses did not contain express exclusivity clauses, they utilized a collection of devices to create the same exclusive effect as an express contractual clause. Under these licenses, an OEM would have to pay Microsoft a royalty on every machine the OEM shipped regardless of whether the machine contained MS-DOS. This "per processor" term meant that an OEM could only ship a competing operating system if it was willing to pay twice: The OEM had to pay the maker of the competing system, such as DRI, and it had to pay Microsoft. Microsoft's licenses also required the OEM to make large minimum commitments with up-front payments for these commitments. Because Microsoft's pricing structure rewarded OEMs that made overly-optimistic minimum commitments, OEMs regularly had large pre-paid balances when their licenses expired. OEMs would forfeit these balances unless they renewed their license with Microsoft. Further tightening its stranglehold on OEMs , Microsoft dramatically increased the duration of these licenses to two, three, or even four years -- far in excess of the product life of MS-DOS versions. Microsoft's own documents show that these restrictive terms were introduced to ensure that no OEM could switch to DR DOS. In fact, almost no OEM that adopted one of Microsoft's restrictive licenses ever patronized DR DOS.
DR DOS expanded its market share slightly through 1991. In the Summer of 1991, DRI got a major boost in its effort to tackle Microsoft: DRI merged with Novell. This was a major competitive threat, and so Microsoft immediately tried to buy Novell. Novell ultimately refused. Microsoft responded with a vengeance, aiming its fury at the forthcoming version of DR DOS.
In the Fall of 1991, DRI/Novell released DR DOS 6.0, leapfrogging the features in MS-DOS 5.0 which Microsoft had released barely three months before. Microsoft pulled three special tricks out of its nasty bag to destroy DR DOS 6.0. 1. Beta Blacklist. Microsoft blacklisted DRI, and then Novell -- and ultimately anyone doing business with DR DOS -- from receiving test versions (or "betas") of Windows 3.1, which was being tested during the second half of 1991. Traditionally, software makers provide such test versions to makers of complimentary software so they can make appropriate changes to existing software and thus avoid huge compatibility problems every time a new piece of software is released. For example, DRI had used previous betas of Windows to assure consumers that DR DOS was compatible with Windows. But after cutting DRI and Novell off from the Windows 3.1 beta program, Microsoft made sure the world knew about it, and further sowed the seeds of concern about incompatibility between DR DOS and Windows by falsely stating it did not test DR DOS and thus could not ensure compatibility with Microsoft products like Windows. 2. AARD Code. In December 1991, Microsoft also inserted secret, encrypted code into the final Windows 3.1 beta -- a preview, marketing release -- that triggered a false error message whenever a computer was running DR DOS with Windows. 3. Intentional Incompatibility. Microsoft went further still, and designed both beta and released versions of Windows 3.1 to be incompatible with DR DOS simply to harm DRI.
Exclusionary Licenses and Tying. DRI's efforts to market DR DOS 6.0, also, collided head-on with the wall erected around OEMs by Microsoft's exclusionary licenses and tying of Windows and MS-DOS. While DRI and Novell tried to vigorously market DR DOS to OEMs during 1991 and 1992, OEMs simply could not afford to license DR DOS 6.0 even though it was a superior product. DR DOS 6.0 was cut off from the single most important customer base for operating systems.
FUD. On the off chance DR DOS 6.0 had any hope of survival, Microsoft unleashed another barrage of FUD against DR DOS 6.0 during 1991 and 1992. Microsoft put engineers to work searching for potential problems with DR DOS 6.0. After those engineers reported back a few problems -- none of which were more serious than problems in MS-DOS -- Microsoft made ominous (but false) statements that DR DOS suffered from a wide range of serious problems.
Vaporware. And once again, Microsoft reacted to the release of DR DOS 6.0 by immediately announcing the pending release of a competing product, MS-DOS 6.0, that was not even then on the drawing board. Microsoft outdid itself, describing a product that would not be released until four years later -- and only then as the DOS component of what is now known as Windows 95.
DR DOS sales plummeted in the first quarter of 1992, never to recover. Not realizing DR DOS was mortally wounded, Novell persisted, and in December 1993 released an updated version dubbed Novell DOS 7.0.
DOS/Windows Merge. In addition to the same anti-competitive conduct outlined above (exclusionary licenses, FUD, vaporware), Novell confronted Microsoft's final blow, which had been in the works at Microsoft for years. Since 1989, Microsoft executives realized that the ultimate solution to competition in the DOS market was to eliminate the DOS market in favor of Windows. Microsoft could accomplish this feat by simply incorporating DOS into Windows; in other words, Microsoft could use its uncontested monopoly in the Windows market to swallow the DOS market in one gulp. In 1993, Microsoft began preannouncing the development of a new product -- code-named "Chicago" -- that was supposedly an "integrated" Windows operating system, and which would eliminate the need for DOS. In the face of this announcement, and finding itself locked out of OEM business, Novell withdrew DR DOS from the marketplace in the Fall of 1994. Windows 95 was released in August 1995.
But Caldera has discovered Microsoft's little secret: What Microsoft continues to describe as an "integrated" operating system is what antitrust enforcers call an illegal tie. Windows 95 is nothing more than a bolting together of two easily separable products: updated versions of Windows and MS-DOS. But for Windows 95, DR DOS could have survived as a viable option for consumers. And with choice, the lower prices and innovations that had greeted the advent of DR DOS would continue to this day.
The Tenth Circuit admonishes that, in an antitrust dispute,
"[p]laintiff's evidence should be viewed as a whole" -- not
artificially segregated as in Microsoft's numerous motions for
partial summary judgment. Aspen Highlands Skiing Corp. v. Aspen
Skiing Co., 738 F.2d 1509, 1522 n.18 (10th Cir. 1984),
aff'd, 472 U.S. 585, 604 (1985). As the Supreme Court notes,
an antitrust plaintiff "should be given the full benefit of
[its] proof without tightly compartmentalizing the various
factual components and wiping the slate clean after the scrutiny of
each." Continental Ore Co. v. Union Carbide & Carbon
Co., 370 U.S. 690, 699 (1962). The fact that a monopolist such
as Microsoft has engaged in a course of questionable conduct is
powerful evidence of bad intent and also illuminates the true
potential of a single act to cause harm -- a relatively minor blow to
an already beaten body does more harm than a single uppercut does to
a fresh fighter. See Photovest Corp. v. Fotomat
Corp., 606 F.2d 704, 719 (7th Cir. 1979) ("Otherwise lawful
practices may become unlawful if they are part of an illegal
scheme"); City of Mishawaka, Indiana v. American Electric Power
Co., 616 F.2d 976, 986 (7th Cir. 1980) ("It is the mix of the
various ingredients of [defendant's] behavior in a monopoly
broth that produces the unsavory flavor").
Microsoft is only entitled to summary judgment if it shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The Supreme Court has stated that a "genuine issue" exists simply "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 282, 248, 106 S. Ct. 2505, 2510 (1986). Three important points control this consideration of Microsoft's motions for summary judgment:
Id. at 250, 254-55, 106 S. Ct. at 2511, 2513.
Even brief discourse makes plain how inappropriate summary judgment is here: the case is factually complex; it is of undeniable and far-reaching public importance; numerous material facts are in dispute; and Microsoft's explanations of its conduct are starkly at odds with its own internal, contemporaneous documents. Indeed, Microsoft presents this Court with little more than a mass of baldly self-serving testimony from its own employees. But doubts as to the credibility of the movant's witnesses may alone lead this Court to conclude that a genuine issue exists. See C. Wright, A. Miller & M. Kane, 10A Federal Practice and Procedure: Civil 2d 2726 at 113 (1983). Where, as here, "the knowledge of the events or occurrences on which the action is based lies exclusively within the control of the party moving for summary judgment," courts are understandably reluctant to deprive the nonmoving party of the opportunity of testing the movants' or their witnesses' credibility in open court. Id. at 120. See Anderson, 477 U.S. at 255, 106 S. Ct. at 2513 ("Credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge"); United States v. Perry, 431 F.2d 1020, 1022 (9th Cir. 1970) (summary judgment inappropriate "where a trial, with its opportunity for cross-examination and testing the credibility of witnesses, might disclose a picture substantially different from that given by the affidavits").
The Supreme Court has counseled that summary judgment in antitrust cases be used sparingly. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491 (1962). The Tenth Circuit has long adhered to this position. See, e.g., City of Chanute v. Williams Natural Gas Co., 955 F.2d 641, 646 (10th Cir.), cert denied, 506 U.S. 831 (1992) ("We recognize the prevailing sentiment that summary judgment should be used sparingly in antitrust cases. . . . We remain mindful that summary judgment in antitrust case is disfavored"), overruled on other grounds, Systemcare, Inc. v. Wang Lab Corp., 117 F.3d 1137 (10th Cir. 1997) (en banc); Sports Racing Serv. v. Sports Car Club of Amer., 131 F.3d 874, 882 (10th Cir. 1997) ("We note that in a broad sense, summary judgment in antitrust caes should be used sparingly"). The Supreme Court has again stated recently that mere economic theory alone, in the absence of factual proof, will not support summary judgment. See Eastman Kodak Co. v. Image Technical Svcs, 504 U.S. 451, 471-478, 112 S.Ct. 2072, 2084-88 (1992). Especially here -- where Microsoft suggests pro-competitive reasons for its conduct -- the Court should allow these issues to be explored at trial.(3) "The question of whether a restraint promotes or suppresses competition is not one that can typically be resolved through summary proceedings. Rather, resolution must await a full-developed trial record. This is also particularly applicable in cases of novel antitrust claims." Ratino v. Medical Service, 718 F.2d 1260, 1268 n. 23 (4th Cir. 1983).
Caldera's evidence, and all reasonable inferences to be drawn therefrom, places sharply at issue the credibility of Microsoft employees who would explain away all difficulties in contradiction to, or in the absence of, contemporaneous documentation. As explained below, "the record reveals the existence of many unresolved questions of motive, intent, credibility, demeanor or issues of material fact that justify proceeding to trial." C. Wright, A. Miller & M. Kane, supra, 2732 at 312.
1974-1981:
THE ERA OF PERSONAL COMPUTERS BEGINS
1. By the early 1970s, such companies as IBM, DEC and Xerox had developed single-user computers. None, however, were marketed to the general public, and each cost more than a luxury car. S. Manes & P. Andrews, Gates at 65. That changed in January 1975, when Popular Electronics announced the "World's First Minicomputer Kit to Rival Commercial Models." Id. at 63. The Altair 8800 -- a build-your-own kit available for $500 from MITS, Inc., of Albuquerque, New Mexico -- was a hit. Orders flooded in from enthusiasts and hobbyists. Id. at 63-67. See generally Exhibit 4 at 7-8 (History of the Microcomputer Revolution).
2. When the first "killer application" shipped in 1979 -- VisiCalc, an accounting spreadsheet -- corporations and small businesses began purchasing personal computers in large quantities. IBM took notice. By 1980, it was planning to enter this new market -- desktop personal computers -- with a model of its own offering more power, features and functionality. A new industry had begun. See Exhibit 4 at 14-15 (History of the Microcomputer Revolution).
Early
Days of Digital Research Inc. and Microsoft Corp.
3. Digital Research, Inc. was founded in 1976 to pioneer the development of operating systems suitable for use on microprocessors (the central processing unit, or CPU) of what are today known as personal computers. DRI's founder and chairman, Gary Kildall, held a Ph.D. in Computer Science. In 1973 he developed a program called CP/M (Control Program for Microprocessors), which was one of the first operating system programs for personal computers. Williams Decl. at 3; see generally Exhibit 4 at 11-12 (History of the Microcomputer Revolution); Exhibit 5 (Chronology of Events in the History of Microcomputers).
4. CP/M quickly became the dominant operating system in the market for 8-bit personal computers in the late 1970s and early 1980s. See D. Ichbiah, The Making of Microsoft at 50-52. During this time DRI enhanced CP/M to optimize its capabilities for 8-bit microprocessors and created a family of CP/M based operating systems. Driven by the strength of CP/M products, DRI's revenues grew to over $54 million in 1984. Williams Decl. at 3; see Exhibit 13 (DRI Business Plan, August 1987).
5. Bill Gates and Paul Allen were intrigued by the Popular Electronics issue announcing the Altair 8800. They wrote MITS that they had a version of BASIC (a programing language) written and ready to run. No such code existed, but when MITS expressed interest, Gates borrowed from and quickly adapted DEC's RSTS-11 BASIC-PLUS. Gates at 70-71. MITS bought it. In short order, Gates dropped out of Harvard; he and Allen moved to Albuquerque; and by mid-1975, they formed Microsoft as a partnership. Id. at 82-84; Exhibit 5 (Chronology of Events in the History of Microcomputers).
6. Microsoft's initial focus was on programming languages, which required an underlying, compatible operating system. Microsoft chose the emerging standard, CP/M. The Making of Microsoft at 52. Gates visited Kildall in November 1977, and obtained a license for $50,000 cash. Gates at 120, 138.
7. In July 1980, IBM contacted Microsoft about IBM's undisclosed plans for a personal computer, and asked Microsoft to design compatible 16-bit versions of its most popular products: BASIC, COBOL, FORTRAN, Pascal and the BASIC compiler. Gates at 151-154. But IBM still needed an operating system. DRI was already planning a 16-bit version of CP/M, called CP/M-86. Microsoft had obtained a preliminary version, but had no right to sub-license. Id. at 154. Gates told IBM to contact Kildall. Exhibit 4 at 15 (History of the Microcomputer Revolution). IBM and DRI were unable to agree on terms for a CP/M license. Exhibit 330 (Kildall 11/13/92 letter).
8. Microsoft moved quickly to "design" an operating system for IBM. Tim Paterson, an engineer at a small Seattle-based OEM named Seattle Computer Products, had already designed in April 1980 his own 16-bit CP/M "clone," i.e., it mirrored CP/M's function calls. He dubbed it QDOS -- Quick and Dirty Operating System. Gates at 157. On January 6, 1981, Microsoft licensed QDOS (subsequently dubbed "86-DOS") for $25,000 -- while obtaining a right to sub-license, and without disclosure of IBM's interest. Exhibit 6 (License Agreement). Just prior to launch of the IBM PC in August 1981, Microsoft decided to buy the product outright. On July 27, 1981, Microsoft paid an additional $50,000 to Seattle Computer. Exhibit 7. Microsoft had its DOS, without any original work of its own, for a total price of $75,000.
9. Microsoft gave IBM a royalty-free license, but retained ownership rights to this DOS, which it planned to license to the clone OEM vendors sure to follow the IBM standard. See Exhibit 29. When the IBM PC launched in August 1981, two identical operating systems emerged: IBM offered PC-DOS 1.0 to its customers; Microsoft offered MS-DOS 1.0 to all other OEMs and their customers. Exhibit 12 at MSC00566789, -873) (Paterson interview transcripts); Exhibit 8 (Softalk for the IBM Personal Computer, March 1983, "Tim Paterson: The Roots of DOS").
10. Years later, Kildall's obituary summed up these events succinctly:
Unable to agree to a deal, IBM turned to
another small company, Microsoft, for what turned out initially to be
a copycat product. Kildall was livid. He said: "Here we were, in good
faith, in negotiations with IBM and they came in with a complete
rip-off."
Exhibit 428 (The
Guardian, July 20, 1994)
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Contents
11. The links from CP/M to QDOS to MS-DOS 1.0 are well-recognized. See Ivie Report at 34-36. Kildall noted that DOS "mirrored the 'de-facto industry standard' CP/M interface." Exhibit 330 (Kildall letter). The technical treatise Undocumented DOS provides a brief overview, and points to other works mapping the extensive similarities between CP/M and MS-DOS:
There is no question about MS-DOS's large-scale borrowing from CP/M. As Tim Paterson would write somewhat later in "An Inside Look at MS-DOS" (Byte, June 1983), "The primary design requirement of MS-DOS was CP/M-80 translation compatibility."
. . .
So MS-DOS began life as an enhanced clone of
CP/M.
Exhibit 401 at 181-182 (A.
Schulman, et al., Undocumented DOS) (citing Dr. Dobb's
Journal, "CP/M vs. MS-DOS: A Technical Comparison").
See also Ivie Report
at 34-36.
12. Microsoft's own programmers have readily acknowledged what was done. Only two people at Microsoft worked on MS-DOS 1.0. Reynolds Depo. at 8. One of them, Chris Peters, later testified when Seattle Computer Products sued Microsoft concerning the purchase of QDOS:
Again, from the programmer's point of view,
MS-DOS 1.0 was primarily a clone of CP/M.
Peters Depo. at 12 (emphasis
added)
Pascal Martin, product manager for MS-DOS 3.0, also freely admitted in a presentation on DOS history:
When it was first introduced, along with the
IBM PC in 1981, MS-DOS Version 1 was basically a 16 bit adaptation of
the CP/M operating system.
Exhibit 9 at WS209067
13. Microsoft's clone was up and running, and Microsoft was off and running towards industry domination.
II.
1981-1989: THE STAGNATION OF A STANDARD
14. Because operating systems facilitate program and data compatibility across systems, they are said to exhibit "network effects," a phenomenon where a product's value increases as more consumers use it. These effects lead to the market "tipping" to a preferred standard, making that standard difficult to unseat. Leitzinger Report at 5-6. Due to IBM's imprimatur, PC operating systems "tipped" towards DOS. Microsoft's own economic expert agrees that by 1985, MS-DOS was the standard operating system for personal computers. Schmalensee Depo. at 218-219. No non-Microsoft operating system has since come close to challenging Microsoft's dominant position. Id. at 219-220; see Exhibit 447.
15. At least by 1988, Microsoft's MS-DOS had secured a monopoly in the DOS market. See Kearl Report at 11; supra, at 2 fn. 2. With monopoly came complacency and stagnation. In November 1989, Gates told his top DOS developers:
While DOS continues to be our most important
and most profitable product over the last four years we
have done very little with it technically.
Exhibit 38 (emphasis
added)
16. Microsoft abandoned product innovation, and put little effort into improving MS-DOS. By late 1987, industry criticism of the DOS platform noted the neglect:
Though still the dominant operating system for
personal computers, MS-DOS is a dinosaur. By not adapting to the
changing needs of program developers and users, DOS has become a dead
end on the evolutionary path and is headed for extinction. It's
played out, unfixable, and hopelessly inadequate for supporting the
applications of the 1990s.
Exhibit 14 (PC
Magazine, September 29, 1987)
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III.
APRIL 1987-MAY 1990: ADVENT OF DR DOS
17. A dynamic new leader, Dick Williams, took the helm DRI on January 5, 1987. Prior to Williams' arrival, DRI had been approached by several OEMs who, unhappy with MS-DOS and Microsoft's control of the operating system market, had urged DRI to develop a competing product. Within 30 days of taking control of the company, Williams had begun the development of DR DOS. Williams Depo. at 23-26.
18. John Constant, a DRI engineer in Hungerford, England, began development of DR DOS using an existing DRI product, Concurrent DOS.(4) Constant did no "reverse engineering" of MS-DOS. Rather, he built upon the DOS compatibility DRI had already developed in Concurrent DOS. Constant Depo. at 8-10, 22-23.
19. DR DOS 3.31 launched in May 1988. The industry greeted the arrival of DR DOS with great expectations. On June 14, 1988, PC Week gave the first report on DR DOS:
Digital Research Inc. (DRI), which formerly ruled the operating system world with its CP/M, is planning to take on Microsoft Corp. in the lucrative DOS market with DR DOS, its single-user offering compatible with MS-DOS 3.3.
. . .
Analysts and potential customers said an
alternative to Microsoft's DOS could result in cheaper PCs as
manufacturers pass on savings and operating-system costs.
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Exhibit 15 (PC Week,
June 14, 1988)
20. Microsoft, in its continuing neglect of the DOS standard, had already made a serious mistake. In April 1987, at Spring COMDEX -- the industry's preeminent convention and expo -- Microsoft and IBM jointly announced OS/2, the supposed successor to the DOS standard, which would be available by year's end on IBM's new PS/2 systems. See Exhibit 11 (internal Microsoft newsletter gathering media reports of announcement). This came to be known as the "DOS is dead" announcement.
21. Microsoft and IBM agreed to develop OS/2 under a "Joint Development Agreement," under which Microsoft also abandoned artistic control of the DOS standard.(5) Chestnut Depo. at 11 ("IBM was solely responsible for the development of DOS"); Werner Depo. at 35. Microsoft had approximately 200 developers actively involved in OS/2. Maritz Depo. at 44.
22. The last "pure" Microsoft version of MS-DOS was version 3.21, released at the end of 1985. Chestnut Depo. at 16-17. IBM took the laboring oar with version 3.3(6) and developed version 4.0 "[t]otally on their own . . . ." Id. at 11-12, 16. To clean up some of the bugs in PC-DOS 4.0 and develop MS-DOS 4.01, Microsoft had perhaps two, and at most six, developers working on code. Chestnut Depo. at 12-13; Lennon Depo. at 16.
23. Incredibly, DOS had become so unimportant to both IBM and Microsoft that no external beta testing was even worked into the development of PC-DOS 4.0 or MS-DOS 4.01.(7) Chestnut Depo. at 112-113.
24. Not surprisingly, DOS 4.x was widely perceived by the marketplace to be of poor quality.(8) Bill Gates conceded the point in a memorandum to his executive staff in October 1988:
DOS 4 is a mess to discuss -- bugs, too big,
strange shell interface, who wrote it? DOS 4 has a terrible
reputation.
Exhibit 18 at X177305
25. Gates reiterated these problems to his top DOS developers in November 1989:
Meanwhile the widespread belief that DOS 4
offers no real benefits, might have bugs, takes more memory and
breaks things like redirectors has increased the piracy of DOS and
made it more difficult to sell. People selling DOS add-ons have been
doing excellent business. DR DOS is "as good as" our DOS so we get
into purely price oriented negotiations.
Exhibit 38
26. The industry understood that, while Microsoft got behind OS/2, MS-DOS "was a -- sort of a dying product." Chestnut Depo. at 66.
27. Within one year of entry into the market, trade press concluded that DR DOS was better, faster and cheaper than MS-DOS, and was fully compatible with applications that ran on MS-DOS. PC Week reported on May 8, 1989:
DR DOS is 100 percent compatible with
IBM's PC-DOS and Microsoft Corp's MS-DOS versions 3.x and later, but
includes several features not present in those systems and costs OEMs
two-thirds less, analysts say. . . .
"DRI is making big inroads with DR-DOS," said
Fred Thorlin, an analyst with Data Quest.
"DR-DOS is important -- it is the first
successful DOS clone and its success shows DOS is becoming a
commodity," he said.
"Digital Research produced DOS the way it
should have been done in the first place," said Paul Colvin, a
computer consultant with PC Technologies Inc. in Los Angeles and a
DR-DOS user. "It's a much cleaner, faster system than MS- and
PC-DOS, and its cheaper."
Exhibit 25 (PC Week,
May 8, 1989) (emphasis added)
28. Microsoft's internal evaluations confirmed that DR DOS was a strong competitor to MS-DOS. An April 1989 internal report titled "DOS and Windows Monthly Summary" reported:
Initial consensus from DOS program management
is that DRI has a product which competes very favorably against
MS-DOS.
Exhibit 26 at X568281
29. Mark Chestnut reported in November 1989 to Microsoft executive staff:
DRI offers "DR DOS," a DOS 3.3-level clone
which offers some nice utilities and enhancements over and above
standard DOS 3.3. DRI currently markets an OEM version of the product
and competes mainly on the basis of price.
Exhibit 37 at X517297
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Microsoft
Realizes Its Mistake
30. Even Bill Gates viewed DR DOS as a serious competitive threat. He wrote to his executive staff on November 29, 1989, that "DR DOS is 'as good as' our DOS . . ." Exhibit 38. More importantly, Gates and Microsoft realized the need to wrest back control of future DOS development from IBM. See Chestnut Depo. at 13-15. On December 1, 1989, in a letter to Jim Canavino of IBM, Gates made the case to take back control of the languishing DOS development:
I think we have a great opportunity to kick off
our move to single site development with DOS. We currently have
versions 3.3 and 4.0 in the market. 4.0 was developed at IBM and was
received poorly in the market. It was buggy and much larger than 3.3
(17K).
Working together to put together a DOS plan has
been particularly frustrating for our team, and probably yours, since
DOS gets little joint management attention. DOS remains the
backbone though of both of our software businesses. It is under
extreme attack by high quality clones like DR DOS. I think we
can ease the frustration, cut resources, and most importantly improve
DOS by moving now to single site planning and development here
in Redmond.
Exhibit 39 (emphasis
added)
31. By this time, Microsoft realized it had made a serious mistake -- PC users preferred DOS. At the launch of MS-DOS 5.0 on June 6, 1991, the outline for Bill Gates' MS-DOS 5 presentation contained the following slide and speaking points:
Customers won't easily abandon a standard
* Don't force them to make changes
* Don't ignore the importance of the
standard
We thought OS/2 would replace MS-DOS. We were wrong.
We got distracted and didn't pay enough attention to the DOS standard.
The marketplace told us that it likes DOS, likes the benefits of the open DOS standard and told us that we should invest in moving the standard forward.
(This is the humble billg part.)
Exhibit 134 at MS5008500
32. Steve Ballmer had made a similar concession during a prior presentation at an OEM briefing on October 2, 1990:
When we introduced OS/2 back in 1987, we were
on a replacement strategy. OS/2 would replace DOS. We gave speeches
in which the only question was, "would OS/2 outsell DOS in 1990 or in
1991?" . . . We recognize that OS/2 will not replace DOS, not in the
foreseeable future. Rather, OS/2 needs to be part of a family of
operating systems that is upwardly compatible from DOS.
Exhibit 84 at X174606-607
33. What forced Microsoft to recognize its error in writing a premature obituary for DOS is simple: entry of DR DOS into the DOS market, and particularly, the innovations of DR DOS 5.0 in June 1990.
Monopoly
Maintenance: Choosing the Weapons
34. Although Gates had abandoned MS-DOS in 1987 in favor of OS/2, he was soon aware of DR DOS and the revenue threat it posed to Microsoft. In October 1988, he wrote his executive staff:
DR-DOS: I expected to hear we had more
of a problem with this. Apparently, we still haven't lost a lot of
business. I want us to track this very closely.
Exhibit 18 at X177309
As outlined hereafter, Microsoft undertook a series of anti-competitive tactics designed to remove competition to the MS-DOS monopoly.
Resistance
is Futile -- Prepare to be Assimilated
35. Initially, rather than deal with the threat of competition, Microsoft attempted to pay off DRI to exit the market.(9) In December 1988, Steve Ballmer and Dick Williams both attended a conference in England. Ballmer spoke privately with Williams, and stated Microsoft was "concerned about the MS-DOS 'standard.'" Williams Decl., 69. Ballmer proposed that DRI sell MS-DOS instead of DR DOS, and that each company license rights in the other's product. Id. Ballmer confirmed this meeting and proposal in his deposition. Ballmer Depo. at 43-51. An entry in Russ Werner's monthly report for December 1988 stated:
Steve Ballmer had a promising discussion with
DRI re: them licensing MS-DOS vs. competing with us. Steveb will
follow-up with Joachimk.
Exhibit 19 at X149435
36. Joachim Kempin, Microsoft's worldwide director of OEM sales, testified as to his follow-up meeting in January 1989 with Williams:
We basically offered DRI a certain amount of
money for the use of [DR DOS] technology, and we proposed to
them that instead of taking money that we would license the MS-DOS so
that they could resell MS-DOS.
Kempin Depo. at 122
In essence, Microsoft was "trying to buy technology" it did not have. Id. at 125.
37. DRI was not interested in a long-term relationship with Microsoft, and so offered the DR DOS technology to Microsoft for $30 to $40 million. Kempin Depo. at 123-124. Microsoft refused to consider paying so much cash, and DRI walked away. See also Williams Decl., 71-73.
38. Within six months of the release of the initial version of DR DOS, Gates was directing his development staff to identify ways Microsoft applications could break DR DOS. On September 22, 1988, he had the following exchange:
You never sent me a response on the question of
what things an app would do that would make it run with MSDOS and
not run with DR-DOS. Is there any version check or api that they
fail to have? Is ther feature they have that might get in our way? I
am not looking for something they cant get around. I am looking
for something that their current binary fails on.
This is a fairly urgent question for me and I
have received nothing.
Exhibit 16 at X565988
(emphasis added)
39. Gates received a reply that day from Phil Barrett -- a top DOS and Windows developer -- that DR DOS approached perfect compatibility:
Here follow the three "differences" (between DR
and MS DOS) that Aaron has been able to find so far. Except for
these differences, the two OSs behave similarly, including
undocumented calls.
The bottom line is that, given Aaron's current
findings, an application can identify DR DOS. However, most apps
usually have no business making the calls that will let them decide
which DOS (MS or DR) they are running on.
Exhibit 17 (emphasis
added)
40. Microsoft has been unable to produce copies of the Korean versions of their application software from this time period. Even so, evidence in the record suggests that -- consistent with Gates' directive -- Microsoft coded "software locks" into several of its Hangeul (Korean) applications, including Word, Works, and Excel. Dixon Depo. at 40-41. Caldera continues to seek copies of this software from third party sources. What is clear, however, is that Phil Barrett continued to think about Bill Gates' directive to find ways to "break" DR DOS. Barrett would have his chance with Windows 3.1. See infra, 245 and 251.
Warning
Messages and Other Scare Tactics
41. DR DOS did not infringe MS-DOS, and Microsoft never made such a legal claim. Nonetheless, in Korea -- a country where OEMs early on considered DR DOS favorably -- Microsoft told OEMs in "open forum seminars" that "DR DOS was a copy of MS-DOS, and anybody that used that product would be sued by Microsoft." Dixon Depo. at 349-350. Microsoft confirmed this explicit verbal threat with veiled threats from its attorneys. Id.; see also Exhibit 40.
42. Apart from pure intimidation, Gates early on decided that Microsoft products should test whether DR DOS was running. If so, he wanted the user warned about using DR DOS instead of MS-DOS. He wrote on February 8, 1989, in a memo to his executive staff:
11. DR DOS
I want to make sure we get the message
implemented in all our product. Languages are important. Windows is
important. Applications are important. How can we spread the message
about getting this done including the localized versions? (I guess we
have to localize this message!) Russ--please let me know your action
plan for this.
Exhibit 22 at X155957
See Gates Depo. at 95 (the "message" under consideration was "whether to indicate that somebody was running an untested configuration and whether to just notify them of that fact").
43. Within three months, Microsoft products were shipping with the "DOS clone check" warning message dictated by Gates. In May 1989, Mark Chestnut -- Microsoft's MS-DOS product manager -- reported:
DRI Competitive Response
The first MS product with the non-tested DOS
warning code, Quick Pascal, was released. Tom Reeve and Cindy Kasin
have committed to implementing it in all new MS application and
language releases from this point forward, including
international.
Exhibit 28 at MSC00474987
See generally Werner Depo. at 161-163.
44. By August 1989, the "DOS clone check" was being implemented on foreign versions of Windows, as evidenced by this message from the Microsoft Korean subsidiary:
Bill Gates ordered to all application
business units to include checking routines of operating
environments and if it is Microsoft DOS, nothing will happen.
But if it is non MS-DOS (such as DR-DOS), application will display
messages saying that "This application has been developed and tested
for MICROSOFT MS-DOS. Since you use different environment, this
application may not work correctly. . . ."
The question from MSCH is "How to check the DOS
is MS-DOS or clone". MSCH wants to include such routine in Hangeul
Windows so that Hangeul windows can run only Hangeul MS-DOS. Could
you tell me to whom I can ask to resolve this problem?
Exhibit 30 (emphasis
added)
45. When confronted with this document, Gates testified that no such check or message ever occurred. Gates Depo. at 136 ("We did not put that code into Windows"). Gates' testimony was not true. At least one Korean Windows version from this era contains this warning:
Hangeul Windows 3.0 should be executed on Hangeul MS-DOS.
For correct execution, please run on Hangeul MS-DOS.
Press any key to continue.
Harris Decl., 2-4
46. A similar DR DOS detection and warning was implemented in QuickPascal, Microsoft's implementation of the Pascal programming language. The QuickPascal message stated:
WARNING: Microsoft QuickPascal has been tested
for use only with the MS-DOS and PC-DOS operating systems. Your use
of this product with another operating system may void valuable
warranty protection by Microsoft on QuickPascal.
Exhibit 20 at X0594692 (source
code)
Other language products such as Microsoft QuickC, Programmers Workbench, and C 6.0 Setup had a similar message. Exhibit 401 (A. Schulman et al., Undocumented DOS). Russ Werner -- MS-DOS product manager at the time -- admitted to developing the message with assistance of Microsoft legal counsel. Werner Depo. at 168-169.
47. Regardless how widespread the ultimate implementation, Microsoft gained valuable experience in tactics designed to give the perception of shortcomings in DR DOS where none, in fact, existed. When working the AARD code into Windows 3.1 beta in November 1991, Microsoft elaborated on these lessons to create a false perception of DR DOS incompatibility. See infra 223-242.
Propaganda:
Fear, Uncertainty and Doubt
48. Imperfect information and expectations play an important role in market perceptions of software products. Because compatibility is an essential requirement of competitive operating system offerings, market perceptions about that compatibility are vital to the product's market acceptance. Public statements that serve to raise "fear, uncertainty and doubt" (FUD) serve to alter all-important perceptions of compatibility. See generally Leitzinger Report at 19-20. As Microsoft' own personnel concede, the purpose of a FUD campaign is to raise an artificial barrier to entry by a competitor, by introducing and maintaining inertia in the decision-making process. Freedman Depo. at 64-65.
49. Microsoft was well aware of the potency of a FUD campaign. When closing a license with Acer in September 1989, Jeremy Butler played the FUD card to great effect against DRI, when explicitly pandering to the fears of an OEM:
It only takes a couple of reports about
non-compatibility to give the kiss of death to a PC: we've seen that
on the hardware side as well in as the operating system area.
Exhibit 34
50. Microsoft began pulling together "bug sheets," detailing supposed problems with DR DOS, to distribute to OEM account managers. On April 12, 1990, Bob O'Rear distributed to the domestic and international OEM sales force "a current list of known compatibility problems with DR DOS." Exhibit 45. The expectation was that OEM sales representatives "would use that information as they saw fit in competitive situations." Chestnut Depo. at 33. The bug sheet gives the appearance of instances of 100% incompatibility, as opposed to any qualification for possible work-arounds or whether system configuration contributed to the supposed problem. See generally Ivie Report at 19-21. Microsoft's many subsequent "bug sheets" would suffer this same, misleading defect. See infra 121, 125, 274, 385.
51. These FUD techniques would be refined and dramatically expanded following the launch of DR DOS 5.0. See infra 119-129, 265-280, 383-386. Indeed, in the era prior to DR DOS 5.0, Mark Chestnut -- product manager for MS-DOS 5.0 until November 1990 -- disagreed with tactics of "taking what you perceived to be a minor bug and trying to make a big deal, a big story out of it." Chestnut Depo. at 26; see also id. at 34-35. He also specifically killed a PR initiative to do "some kind of a systematic editorial calldown" because "[w]e didn't think that was appropriate." Id. at 38-39. Chestnut's successor in November 1990 -- Brad Chase -- was not so similarly restrained.
Exclusionary
Licenses: The Shape of Things to Come
52. DRI made inroads almost immediately into several substantial, heretofore unchallenged Microsoft accounts. See, e.g., Exhibit 23 (Intel). This provoked Microsoft to consider ways to leverage its dominance in the OEM channel(10) to exclude DRI through its licensing agreements. See Appendix C.
53. The DR DOS threat drew the personal attention of Bill Gates at this stage of the game. He was personally involved in negotiations to keep DR DOS out of Microsoft accounts, and was intimately aware of the price erosion caused by DR DOS. For instance, when moving to close a license with Acer in September 1989, Gates talked with Acer's president, Stan Shih, and sent this directive to Microsoft's account managers:
Stan said if we did a special price
for this it would not affect the diskette price so please do our
best. I said all we are asking for is a chance to quote to thes
people and avoid acer becoming the first real company
to license DRDOS. He said fine he would make sure that
happened.
Exhibit 33 (emphasis
added)
54. Gates began thinking about how to protect Microsoft's DOS monopoly, with particular emphasis on the emerging power of its Windows graphical user interface. On May 18, 1989, Gates sent a memo to his executive staff specifically addressing "Operating Systems Strategy," and specifically noted his concern about falling revenue:
The DOS gold mine is shrinking and our
costs are soaring -- primarily due to low prices, IBM share and
DR-DOS. Making Windows a strong product benefits our gold mine
and protects it in the following ways:
DR DOS. I doubt they will be able to
clone Windows. It is very difficult to do technically, we have made
it a moving target and we have some visual copyright and patent
protection. I believe people underestimate the impact DR-DOS has
had on us in terms of pricing.
Exhibit 27 at MS0048937
(emphasis added)
55. By August 1989, Gates began to think about a way to increase profits for every machine shipped by any OEM -- a definite precursor to per processor licenses. On August 6, 1989, in an e-mail directed only to his top lieutenant, Steve Ballmer, Gates wrote:
Basicly last year (I may get the numbers wrong)
it was around $180M worldwide PROFIT. Assuming 12m machines thats
$15 PROFIT per machine or giving IBM 1/3 of the market (a little
high) $22.5 per non IBM machine. We have to drive that number up
to around $45. . . . This means the price we can charge for
windows will drive a lot of our future. Now how can we get this
doubling per system thing to take place.
First, we have to make sure windows isnt easy
to clone for both technical and legal reasons. Who is smart that
thinks about this -- patents and such. I can do it at some point and
I think we will be able to achieve it. DOS being fairly cloned
has had a dramatic impact on our pricing for DOS. I wonder if we
would have it around 30-40 % higher if it wasnt cloned. I bet we
would!
Exhibit 29 (emphasis
added)
56. In his memo of May 18, 1989, Gates had also challenged his senior managers to leverage Microsoft's use of the OEM channel to license MS-DOS:
5. OEM channel. Per system money from the OEM channel is the only proven way to make lots of money. It avoids worrying about copying, COGS [cost of goods sold] and end user marketing. We are good at it.
. . .
Of course, even a 20% increase would bring down
over $30M to fund our increasing systems development costs.
Exhibit 27 at MS0048940-941
(emphasis added)
57. Joachim Kempin, worldwide director of OEM sales, was uniquely well-situated to know that despite its lack of innovation, Microsoft's DOS monopoly had permitted it to maintain a steady price -- notwithstanding a rapid decline in price for all other components of the personal computer. See Kempin Depo. at 41-42. Thus, in addition to searching for a way simply to exclude DR DOS and the erosion on price that competition there entailed, Microsoft was searching for a way to maintain higher prices even in the absence of innovation. On February 9, 1990, Kempin summarized current thinking on the issue:
OEM Pricing
The Manufacturer's View
OEM manufacturers are increasingly sensitive to
added costs. The PC being a commodity and most OEMs not creating
enough differentiation. PC pricing has become a dominant factor to
gain market share. OEMs are pressuring us more and more to accept the
fact that operating system software needs to follow their economy for
scale model. Expressed in % of SRP per, today we are asking for
2-3 times as much money for MS DOS as we did 5 years ago.
The Microsoft View
Prices for MS DOS have been kept fairly
unchanged over the last 4 years, not counting the undoing of some
flat fee contracts. . . . If we cannot improve DOS significantly, the
price eventually has to come down and follow the OEM pricing
model.
Exhibit 42 at X581007
(emphasis added)
More significantly, Kempin also identified the possibility that Microsoft might use licensing tactics to require OEMs to pay a fee to Microsoft for every computer sold -- with or without MS-DOS:
If we could keep DOS prices constant and
make all manufacturers pay for DOS, even for OS/2 systems, our upside
would be approx. 100M$, yielding us $35.8 per system sold. A
dream, no a challenge for OEM Sales and System Product Marketing to
manage OS/2 and DOS pricing!
Id. (emphasis
added)
58. Microsoft suggests that the per processor license -- a licensing scheme under which OEMs paid Microsoft a DOS royalty for every computer shipped regardless of whether the machine contained MS-DOS -- was originally dreamed up "in the late 1980s at the request of OEMs who wanted to simplify the administration of their per system licenses." Licensing Memo at 3. Microsoft cannot get its story straight, however. Bill Gates testified per processor licenses were first suggested by a Taiwanese OEM (Acer), who brought it up in his presence at a meeting in Taiwan. Gates Depo. at 43-44. Joachim Kempin testified it was Tandy in 1989. Kempin Depo. at 143-144. Microsoft's general counsel, Bill Neukom, in answering questions posed by the Korean Fair Trade Commission in 1992, contended the practice began in February 1990 at the request of two U.S. OEMs. Exhibit 276.
59. Fortunately, "when" and "where" the per processor license was first instigated is ultimately irrelevant. The Court will be well aware later in this brief that -- even if an OEM originally thought of the per processor license -- Microsoft implemented it as a primary method to exclude DR DOS. See infra 130-143, 299-306, 387-390.
60. Before attaining monopoly power in the GUI market(11) with Windows, Microsoft simply coaxed OEMs into accepting licenses excluding DR DOS by offering an attractive bundled price for MS-DOS and Windows together. For instance, DR DOS was identified early on as a threat in the Vobis account, which was a large German OEM. The Microsoft OEM status report for November 1989 states:
Also, they [Vobis] are interested in
having Windows 3 on their computer systems as soon as the product is
released. At this time we still offer DOS and Windows on per system
level. If there is any danger we will offer the DOS/WIN combo
license.
Exhibit 35 at X0596447
(emphasis added)
61. Alternatively, Microsoft would negotiate more favorable minimum commitment packages(12) for DOS and Windows combined, as opposed to Windows in the absence of MS-DOS. For instance, when closing a license with Acer in November 1989, where DR DOS was a threat, Jeff Lum proposed crediting some prepaid moneys on MS-DOS (also known as unspecified product billings, or UPBs) which might be lost, to its new Windows contract -- in short, a price break on Windows:
If we want to attract them using UPBs, we
could apply some of the UPB to the new Windows license that is about
to be signed which has a totally separate min commit schedule.
Pros: this will be attractive to them since it will decrease their
cash flow to us. Cons: we will get less NEW OEM revenue for FY90 by
doing this.
Exhibit 36 (emphasis
added)
62. After Windows 3.0 launched, and Microsoft found Windows becoming a standard, what once was a carrot became a stick. See infra 110-116, 281-284.
Dreaming of The DOS/Windows Merge
63. Although Windows 95 was still years away, Microsoft was already dreaming of a way to physically tie Windows to MS-DOS. As Caldera will demonstrate elsewhere below, Windows 95 is not an operating system built from the "ground up" like OS/2 or Windows NT, but is simply the fusion of an updated version of MS-DOS and an updated version of Windows. See infra 320-340, 391-401, 414-418.
64. The record of the decision to offer these two products together in a single box traces back prior even to Microsoft's OS/2 gambit. An interview transcript of Bill Gates from around 1986 states:(13)
Q. The future?
A. Well, you can't really say too much about
the future. We always say . . . we believe in graphics user
interface, but the way the graphics user interface works, you
don't just want to throw it into DOS one day all of a sudden and say
everybody's gotta have this if they want the next new version of
DOS. It's an evolutionary thing, where some people realize they
want it, and some won't, so you know, Windows we've done as an
extension of MS-DOS that's optional. We can improve the buffering and
the networking and stuff like that and still Windows just sits on top
of it. If Windows ever gets to the point where 90% of the people
are using it, then maybe we'll just stick it together and call it one
product. . . . For now, we've decided to be flexible about
that.
Exhibit 10 (emphasis added)
65. At every point when Microsoft considered merging MS-DOS and Windows into one product, the issue was always how best to foreclose other competitive markets. On May 8, 1989, Nathan Mhryvold -- Microsoft's principal technical strategist -- wrote the Microsoft executive staff about plans for a "Dos/Win merge," and noted:
Benefits
The good points of this approach are:
--The MONEY! This obviously will give
tremendous systems revenue.
-- It also should give great apps revenue --
this is something like a 5X-10X increase in the total number of
platforms on which we can sell our apps. Our success may not be
completely linear in the market size, but it sure helps.
Those two are huge and obvious wins, and are the main reason to do this. The strategic side is:
. . .
--We put a bullet in the head of our would
be competitors on Dos like DRI, Desqview, dos extenders etc.
Exhibit 24 at MS5001654
(emphasis added)
66. Mhryvold suggested no technological benefit -- in fact, his memo recognized extensive problems with the "merge," including how to convince OEMs to accept it, and whether the bundle could be coded to overcome poor quality. Id. Still, cash and bullets became a tempting reward.
67. As late as August 1989, Microsoft was planning to implement Mhryvold's idea. In a memo to the executive staff on August 15, 1989, Kempin wrote:
As I understand the release of WIN 3.0, available at the end of CY 89, will be a superior product and create exciting APPS-ISV momentum. This core product will be merged with DOS 4.x and made the standard OS/1 (?).
. . .
During the transition time from DOS and
separate WIN 3.0 to OS/1 we will have to cease retail distribution of
stand alone WIN 3.0 completely.
Exhibit 31 at X517570-571
(emphasis added)
Gates had previously suggested renaming the merged DOS/Windows product as "OS/1." Exhibit 27 at MS0048939.
68. Windows 3.0 ultimately launched in May 1990 without any forced bundle from Microsoft explicitly tying it to MS-DOS. A "Rude Q&A" prepared for the launch of Windows 3.0 contained an interesting talking point:
Q10. Are you going to merge DOS and
Windows?
A10. We expect that some OEMs will bundle
Windows with DOS, which is effectively a merge.
Exhibit 48 at X531048
With Windows 95, Microsoft merged MS-DOS and Windows, and OEMs no longer had a choice whether to bundle them.
69. In its first year of sales, DR DOS showed strong growth, especially in the OEM channel. DRI's management report for the fiscal year ending August 31, 1989, recorded the quick progress achieved by DR DOS:
General purpose operating systems (GPOS)
revenues grew 43% from 1988. This included significant growth through
OEM channels (62% over 1988) atrributable primarily to DR DOS. The
company expects a minimum growth rate of 24% in 1990 as new
functionality is provided with DR DOS and it gains even more
widespread OEM acceptance worldwide.
Exhibit 32 at C0956284
Importantly for DRI, DR DOS's emerging sales success was taking shape with OEMs all around the globe. See id. (U.S. OEM growth of 46%; license of 1 million copies to Pacific Rim OEMs; European OEM sales for 1989 outstripping 1988).
70. Gates noticed the encroachment, noted the declining market share, and saw his revenue base eroding. See supra 30, 53-56. By the close of 1989, Gates had made his decision on how to handle the threat: Microsoft would take back control of the DOS standard from IBM. Exhibit 39. Microsoft knew well the weapons it had at its disposal as it laid future plans for MS-DOS.
IV.
MAY 1990-JULY 1991: DR DOS 5.0, THE REAL COMPETITION
BEGINS
71. By the late 1980s, PC users' two biggest complaints were, first, not enough memory, and second, limitations on "logical" hard disk size. The problem lay not in the hardware, but rather in DOS's inability to take advantage of increased memory size and increasingly large disk drives. Many popular and valuable software programs simply did not have enough room to be loaded on PCs with standard memory limited by DOS constraints, and users frequently complained of seeing the message, "You don't have enough free memory to run [your application]." Users faced a similar problem with hard disks. Disks larger than 32-megabytes were available, but since DOS could not recognize anything larger than a 32-megabyte disk, the new larger disks had to be "partitioned" into several drives, which created real problems for users. See Goodman Report, Exhibit C.
72. Despite the fact that users had been complaining about these problems for years, neither IBM nor Microsoft gave any indication that they were interested in, or planning on, resolving these issues for users. As such, the release of DR DOS 5.0 in June 1990 -- a product which solved these problems, and included numerous other improved functionalities as well -- was considered a breakthrough. Not only did the product include memory management and expanded disk drive capabilities, but it also included such other features as on-line help; the ability to sort file directory listings in a number of ways; a file transfer utility; and a very easy-to-use setup program to install the product. See Goodman Report, Exhibit C.
73. MS-DOS provided none of these features in June 1990 when DR DOS 5.0 shipped. See Appendix B. Comparable features in MS-DOS did not appear until one year later.
74. DRI recognized that DR DOS 5.0, code-named "Leopard," had a feature set clearly superior to MS-DOS. The DR DOS 5.0 Launch Plan recognized this critical moment in the product's and the company's life:
The Leopard launch marks the first time that DR
DOS can truly compete head-to-head with Microsoft. . . . In order for
Leopard to have a bright future, it is necessary to immediately
exploit our product superiority and gain name recognition. This is
our opportunity and we must take advantage of it.
Exhibit 43 at C0726133
75. Microsoft realized, too, that it was in the uncomfortable position of playing catch-up. It embarked on a series of anti-competitive tactics to deny DRI the revenue that should have flowed from DR DOS 5.0. See infra 83-154.
Awards,
Praise, and Compatibility
76. Formal reviews after the launch of DR DOS 5.0 were overwhelmingly positive:
While Microsoft has been busy showing Windows
3.0 to the world, Digital Research has unleashed DR DOS 5 -- its
rival to MS-DOS. . . .
Installation -- excellent
Ease of use -- excellent
MS-DOS compatibility -- excellent
Use of K's features -- excellent
Functionality -- excellent
Value for money -- excellent
*PC USER VERDICT This is the first
time I've given any product an all "excellent" verdict, which speaks
for itself.
Exhibit 61 (PC User,
July 4, 1990)
The latest incarnation of DR DOS, Digital
Research's MS-DOS clone, is an innovative and intriguing operating
system that's thoughtfully designed. Version 5.0 is also packed with
the extra features that Microsoft's own operating system should have
(and might eventually have if the long-rumored MS-DOS 5.0 becomes a
reality). As the people at DRI make very clear, its not pronounced
Doctor DOS, although the analogy isn't far off the mark, since it
indeed cures many (but not all) of MS-DOS's shortcomings.
Exhibit 69 (Byte,
August 1990)
Compatibility and memory availability claims
made by DR DOS 5.0's developer, Digital Research Inc., are supported
by PC Week Labs' recent evaluation of the operating system,
which was shipped in June.
Exhibit 71 (PC Week,
August 13, 1990)
DR DOS 5.0 is an almost-perfect superset of
MS-DOS 3.3 and 4.0. In the course of a normal day's work you probably
wouldn't notice any difference between how you'd interact with MS-DOS
or DR DOS. I found no compatibility problems with a broad selection
of applications including several word processors, programming tools,
debuggers, TSRs, DOS extender applications, 3Com network software,
the various Norton Utilities, and (to my surprise) Windows 3.0.
Exhibit 78 (PC
Magazine, September 25, 1990)
OPERATING ENVIRONMENTS
. . .
FINALISTS
DR DOS, Version 5.0
Digital Research is the microcomputer operating
system company that predates Microsoft. As if to prove it hasn't lost
its touch, DR DOS 5.0 does all the things you wish MS-DOS did. Its
features include . . . full compatibility with MS DOS. . . .
Everybody's DOS should be this advanced.
Exhibit 106 (PC
Magazine, January 15, 1991)
No one is going to try a different DOS,
regardless of the features it contains, if it does not run the
applications already installed. DR DOS 5.0 meets that challenge. PC
Labs' testing shows that for the most part, DR DOS 5.0 is
interchangeable with MS-DOS. In fact, DR DOS 5.0 is at least as
compatible with MS-DOS 3.3 as MSDOS 4.01 -- probably more so.
DR DOS 5.0 will run nearly any program that runs under MS-DOS, including Microsoft Windows 3.0.
. . .
Compatibility is not an issue with DR DOS 5.0.
. . .
DR DOS 5.0 is a completely competitive
operating system built on an aggressive philosophy that promises to
force innovation. In a stodgy software world that has changed
only reluctantly, this technological breath of fresh air is certainly
refreshing.
Exhibit 109 (PC
Magazine, February 12, 1991) (emphasis added)
77. DR DOS 5.0 went on to win the Byte Award of Distinction, and PC Magazine Award for Technical Excellence. See Exhibit 105 (Byte, January 1991); Exhibit 106 (PC Magazine, January 15, 1991).
78. Infoworld confirmed that DR DOS 5.0 in fact exceeded MS DOS 5.0, which was released over one year later. Infoworld's review of DR DOS 5.0 yielded an overall score of 7.2, while its later review of MS-DOS 5.0 gave it an overall score of 6.8. Exhibit 130 (Infoworld, May 27, 1991); Exhibit 144 (Infoworld, July 8, 1991).
79. DR DOS 5.0 received endorsement even from within Microsoft itself. On April 15, 1991, Phil Barrett received the following review from one of his subordinates:
Last Thursday you asked me for a user's view of
DR DOS 5.0. When I worked for David Weise's brother Ira, I used DR
DOS 5.0 with a HUGE number of apps. I found it INCREDIBLY superior to
MS DOS 3.31 and IBM DOS 4.01.
1) DOS compatibility
The most important reason to use ANY version of
DOS is to run DOS apps. DR DOS 5.0 runs every DOS app I know.
DR DOS 5.0 works successfully with Windows (2.11, Win 386 2.11 and Windows 3.0 and 3.0a).
. . .
CONCLUSION:
DR DOS 5.0 is vastly superior to MS/PC DOS 3.31
and 4.01. It is about as good as MS DOS 5.0. Both have nearly
identical features (386/UMB memory management, command history, help
included in utilities, format-optional installation, high
compatibility with existing DOS apps). I don't see any real 'cutting
edge' advantage of one over the other.
Exhibit 123 at MS5061758,
-760
80. This was high praise indeed. Microsoft knew it was facing a legitimate and credible threat, and escalated hostilities accordingly.
Monopoly
Maintenance: Building the Perfect Beast
81. In May 1991, Microsoft's executive staff attended an annual executive staff retreat. Though perhaps not an explicit agenda item, monopoly maintenance was clearly on everyone's mind, as evidenced by the following presentation excerpt:
On the desktop, we have a strategic win today (monopoly)
We must keep the desktop
Exhibit 50 at X205851