October 20, 1997

U.S. Says Microsoft Violated 1995 Court Order on Windows

By MATT RICHTEL

Specifically, the government petition says that Microsoft is forcing computer manufacturers that bundle Windows 95 on new computers to also include the Microsoft Internet Explorer browser. Presently, Microsoft controls more than 80 percent of the PC operating system market, and is an increasingly potent player in office applications and server technology.

"Forcing PC manufacturers to take on Microsoft product as a condition of buying a monopoly product like Window's 95 not only is violation of the court order, it's just plain wrong," Attorney General Janet Reno said.

Microsoft immediately countered that the accusations were "unfair and misguided." A company spokesman, Mark Murray, said that Microsoft has never asked any computer maker not to ship Netscape's Navigator browser, the chief competitor to Microsoft. He said that Microsoft's efforts in the browser market have spurred innovation and led to better browsers.

The 1995 court order "specifically allows Microsoft to integrate new features into its operating system," Murray said. "That's what consumers want and that's exactly what Microsoft is doing here."

Credit: The Associated press Bill Gates introduces Microsoft's latest Web browser software at a news conference in 1997.



Netscape officials said its lawyers were still reviewing documents sent on Monday by the Department of Justice and had no comment.

Elsewhere in the high-tech community, news of the Department of Justice move was met with some surprise. Increasingly, it has been assumed that regulators would leave it to the private sector and private lawsuits to address Microsoft's dominance and any alleged anti-competitive practices, said Hank Barry, a partner with Wilson Soncini Goodrich & Rosati.

In some circles, the news was loudly applauded. Critics of Microsoft have said for years that the company has adeptly leveraged its dominance with Windows 95 to enter other businesses. Audrie Krause, executive director of a consumer watchdog group called NetAction, said Microsoft, without government intervention, "is poised to take over the most important sector of our economy."

"They are attempting to monopolize the Internet through access, content and commerce," said Krause, who writes an online newsletter called the "Micro$oft Monitor." "It looks like they're finally beginning to get a clue at the Department of Justice."

The accusations are nothing new to government regulators. In fact, the company has been a repeated target of federal anti-trust inquiries since 1990, when the federal trade commission first launched an in investigation into the company.

The lengthy investigated ended in a 1995 settlement between regulators and Microsoft called a consent decree, and it is that decree that Microsoft is accused of violating.

Reno is seeking a handful of results with her petition to the court. She is asking the court to stop Microsoft from requiring computer manufacturers to "accept" Internet Explorer as a condition of accepting Windows 95. She also asked the court to force Microsoft to notify PC consumers that they are not required to use Explorer and to instruct them how to remove the Explorer icon from their desktop.

Also, she asked the court to force Microsoft to eliminate non-disclosure agreements in its licensing contracts with computer makers. She said the contracts inhibit computer makers from disclosing the nature of the contracts to regulators. "Anyone should feel free to come talk to the department without Microsoft's knowledge and without fear of reprisal."

Finally, the government asked the court to impose a $1 million a day fine. The amount, while large in a historical context, may not be particularly intimidating to Microsoft, said Claude Stern, a partner and intellectual property trial lawyer with Fenwick & West in Palo Alto.

"To most players, it would be an enormous fine," Stern said. "But they make more than that on an hourly basis from interest."

Still, he added: "It's heartening to see that the Justice department is stepping up and doing something."

Lori Mirek, a spokesman for Netscape, said the company was "pleasantly surprised" this morning when it learned of the action. She said the company had been complying with Department of Justice requests for information but did not know if, or when, any action would take place.

Netscape sells its browser for $39, or a larger software package including the browser for $59. The Internet Explorer is offered for free.

Mirek alleged that Microsoft is offering the browser free because it is worried that Netscape - and the Internet - are "a major threat to their OS monopoly."

"We think that's what we're doing," she said. "We think that's why the Justice Department" took this action.

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Matt Richtel at mrichtel@nytimes.com welcomes your comments and suggestions.