IBM testimony sets scene for attempt to prove Microsoft monopoly

Somewhat hampered by the O word, Soyring goes in to bat

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John Soyring, previously in charge of IBM OS/2 development, had an unhappy role to play as the representative of a company humbled by Microsoft's business practices. His written testimony contained a gloomy history of the rise and fall of OS/2 - down to 6 per cent of sales in 1996 compared with Microsoft's 92 per cent, according to IDC. Soyring's testimony pointed out that "many of the agreements under which Microsoft licenses tools to ISVs restrict use of the tools to developing for Windows", with the consequence that developers often could not use the same tools to develop for OS/2. Microsoft swiftly pointed out that IBM did exactly the same thing, but failed in its marketing efforts with OEMs when it had the opportunity - and of course it did not help when the PC Company went with Windows early on, and subsequently with IE. Soyring drew attention to a Microsoft trick - including redistributable code which made it very difficult to port applications to OS/2. The bottom line was that Soyring admitted that ISVs "have no commercially viable choice but to license Windows and to offer it on the vast majority of PCs they ship." Soyring continued with a litany of problems that confronted IBM, and which it usually had not had the foresight to avoid. The clincher, of course, was the impossibility of duplicating the functions of several thousand APIs that can be changed by Microsoft as it wishes. IBM's Web Explorer browser was separate from OS/2, but it was soon technically outmoded. Microsoft attorney Steven Holley tried to show that the browser was integrated into OS/2, since IBM's promotional literature speaks of browsing being "integrated" and "built in" to OS/2, but the argument was too thin. Soyring said that this was marketing language and not a technical description. The real point of Soyring's testimony was to set the scene for a proof that Microsoft has a legal monopoly in Windows. The sub-text of his written testimony was that there is an extremely high barrier that prevents new entrants from competing with Microsoft. The implication was meant to be that if IBM could not manage it, nobody could - but this argument is flawed because of IBM's management mistakes with OS/2. The point of the tools argument was to give evidence of another kind of barrier to market entry erected by Microsoft. IBM has also had the chance, if it believed that Microsoft was acting illegally, to take on Microsoft in the courts with a private antitrust action, but chose not to do so. Soyring also elaborated on the combining of Windows with IE, observing that "It can be done in ways that make it relatively easy or relatively difficult to separate them" depending on how tightly the developer wished to integrate the programs. Soyring also testified that "Microsoft does not provide on a timely basis the information that would be required" for the development of any competing product. At first, this might seem to be unsurprising, but there is a body of law concerned with the abuse of a dominant position (especially in Europe) that makes such practices anti-competitive if carried out by a dominant player. Soyring did a good job of setting out the issue of the first screens. Testimony from a company like IBM is likely to influence Judge Jackson, especially as it was given in a cool way as part of an historical account of what happened, without hype or any hint that IBM might later be seeking damages. Soyring's testimony elaborated the dynamics of the marketplace, and in one sense at least, Microsoft could use the example to its own benefit: "see what happened to mighty IBM with its operating system when IBM was a stronger brand than Microsoft: the same could happen to Microsoft". IBM's actions also gave Holley the chance to suggest that IBM's customers must prefer Windows as IBM loads it exclusively on its PCs, and not OS/2. The second day of Soyring's cross-examination, which concluded yesterday, was notable for Judge Jackson's sustaining a DoJ objection to a question by Holley. "Do you think it's appropriate, Mr Soyring, for six of the largest software companies in the world to agree with each other to collude with one another against Microsoft?" We shall never know Soyring's opinion on this, which is a pity. His then-boss John M Thompson, IBM's software group executive, emailed Sun CEO Scott McNealy on 13 August 1997, saying: "we must minimise the performance gap between Microsoft's implementation [of Java] and the implementation shipping with Netscape's Navigator. We must engage our other partners to bundle Navigator and/or Java-compatible JVMs with their products." Thompson suggested that he would call Eric Schmidt at Novell and asked McNealy to call Larry Ellison at Oracle and get Ellison to call Apple. Thompson's message also suggested that the collaborators "put Microsoft on the defensive" over Java. Microsoft would of course like to prove a conspiracy against it, but despite producing Thompson's email, it was just the usual Microsoft refrain that nobody loves Microsoft. There is no legal problem with a collaboration where the collaborators do not have dominant market power, and Microsoft's basic line of defence that "everybody does it" is legally unhelpful to its defence. Holley tried to play the card that the six collaborators eclipsed Microsoft in terms of combined revenue, but lost the point when Soyring snapped back "except in market capitalisation." Holley also introduced an email from IBM Internet strategist Rodney Smith to Sun VP and Java general manager John Kannegaard about a plan for Sun and IBM to collaborate broadly. Holley asked Soyring if the email concerned an agreement Sun had with IBM not to enter the database business or the systems management area, but Soyring said he did not know. Judge Jackson evidently did not like Holley's line of questioning, since he called the lawyers from both sides to the bench and recessed the court. It is likely that he admonished Holley, since there appeared to be no other reason to recess. Frederick Warren-Boulton will be cross-examined today. His evidence is directed at proving, legally, that Microsoft is a monopolist and that it uses its monopoly power to lever itself into other markets. ® Complete Register trial coverage


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