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Inside the MS trial part 1: how they brought Gates to tears

Much useful inside dope revealed in Wired special report

Bill Gates broke down and cried at a Microsoft board meeting on 24 January 1999, after delivering "an extended and emotional tirade" against the DoJ, Judge Jackson, and the circumstances that had befallen the company. So says John Heilemann in a 52-page article in the November issue of Wired, entitled "The truth, the whole truth and nothing but the truth". The unanswered question is of course, who told Heilemann about the tears?

Heilemann's story is a sterling account of the antitrust case, although at least half of the "untold story of the Microsoft antitrust case" has appeared elsewhere (including in The Register), so the interest is mostly in what Heilemann found out from the players, which is substantial and interesting. There is a wealth of new information, because the author had access to DoJ antitrust chief Joel Klein, Gates, and many other senior figures. We're treated to considerable new detail, including the behind-the-scenes role played by lawyer Gary Reback, the DoJ's considerable initial reluctance to act and subsequent problems with witnesses, Sun's "Project Sherman", Judge Posner's mediation effort, and Gates' intransigence, micro-management, and subsequent breakdown.

Heilemann's story begins in 1996 after the consent decree was signed. Susan Creighton and Gary Reback of Wilson Sonsini were retained by Netscape. In 1995, Reback suggested the DOJ should ask for Mark Andreessen's notes from the key 'carve-up' meeting with Microsoft, but the dozy DoJ didn't act at the time. Creighton wrote a 222-page agitprop white paper, but Jim Barksdale decided that it would only be seen by the DoJ lest Wall Street react adversely - to the consternation of Creighton & Reback.

Pushing the DoJ forward

The DoJ investigation of Microsoft was desultory at the time, so Reback and Creighton decided to goad Klein into action by canvassing. Mark Tobey, the Texas assistant attorney general became a staunch ally. (Just before the trial, Microsoft influenced Texas-based Compaq and Dell to ensure that Texas would not to be one of the litigant states.) The DoJ was sent a second white paper by Reback; this focused on Microsoft's bid to control online commerce. A conference was arranged to fire-up Philip Malone, who was in charge of the investigation for the DoJ. Tobey suggested - to amazement from Malone - that Microsoft should be broken up.

Senator Orrin Hatch's judiciary committee became interested in the case, and staffer Mike Hirshland soon discovered that Klein didn't like Reback. But Dan Rubinfeld, the new DoJ chief economist, agreed with the Reback-Creighton analysis and persuaded Klein to issue a broader CID (document demand) to Microsoft, which yielded email containing Allchin's gloom about how IE could succeed unless leveraged with Windows, and the evidence that Compaq' Windows licence would be revoked by Microsoft if Compaq used Netscape instead of IE.

Klein agreed to a surgical strike against Microsoft by mounting the contempt action, but he did say at the press conference in October 1997 that a wide-ranging investigation would continue. Around this time, Steve Ballmer blurted out his "to heck with [attorney general] Janet Reno" comment. Ballmer also acknowledged to Heilemann - in a fit of rage - that Microsoft had signed the Java contract in bad faith.

Gates: 'more powerful than Clinton'
Heilemann has several new quotes from Gates. "The minute we start worrying too much about antitrust, we become IBM" is one, but in 1993, after Clinton's election, Gates said in all seriousness at a dinner: "Of course, I have as much power as the president has" - to the consternation of Gates' then-fiancé. It's probably worth noting too that Karenna Gore (yes, daughter) worked at Microsoft's Slate for a time. After Andreessen said in 1995 that Netscape would "reduce Windows to a set of device drivers" Jon Lazurus, a close Gates' aide at the time, emailed John Doerr, who was on Netscape's board: "Boy waves large red flag in front of herd of charging bulls and is surprised to wake up gored".

TechNet was a 1997 move by Sun, Intuit, @home and other Microsoft competitors to increase political awareness in Washington and lobby against Microsoft. At the same time Ralph Nader was organising his influential Appraising Microsoft meeting, jurist Robert Bork was being recruited (to general astonishment) to support ProComp (the anti-Microsoft pressure group founded by Sun, Netscape and Sabre), and Senator Hatch was arranging a judiciary committee hearing. When Gates was told in Hatch's office that it was planned that he would be seated between Barksdale and McNealy, he jumped up and said, with much consternation, he wouldn't appear if that happened. He was allowed to go first and then exit.

Sun turns up the juice

The pressure increased when early in 1998 Sun general counsel Mike Morris started the $3 million Project Sherman, which involved a high-powered group of antitrust specialists meeting every couple of weeks at O'Hare airport in Chicago, then in Reback's offices in late-March for a dress rehearsal before making their pitch - sans Reback - in mid-April to the DoJ. Rubinfeld subsequently commented that for the DoJ, the meeting was "memorable... impressive... it reinforced in our minds that what we were doing wasn't crazy".

On 5 May, Gates and Neukom met Klein after Microsoft was told the DoJ would file a new case before 15 May, and that the state attorneys general intended to do the same. Gates lectured about the nature of the software business, and when asked if Netscape's browser was designed to compete with Windows, replied "Not compete. Eliminate". Further negotiations to avoid a suit were unsuccessful, although it was clear that had Microsoft agreed then to offer two versions of Windows 95 - one with and one without IE, there would have been no case. It was also evident that Microsoft was on a fishing expedition, trying to find the strength of the DoJ's case - although Microsoft must have had an inkling from the documents that it had sent to the DoJ. The DoJ filed on 18 May and Microsoft thought it was a browser case. Sun, along with the Valley thought the same and was disappointed, since the browser war was considered to be over. ®

Inside the MS trial Part 2: Keystone Cops go into action


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