The Appeals Court Ruling: What's in it for Linux?

The big news--the headline news--is that Microsoft won't be broken up any time soon, if ever. But there's much more to the appeals court's decision in US v. Microsoft, which is unquestionably one of the most important antitrust rulings in a generation, if not the last century. Already, leading legal scholars, including Stanford University's Lawrence Lessig, are praising the decision for offering (
So What is Illegal?

According to the appeals court, introduced incompatibilities and product bundling aren't inherently illegal. What is illegal under the Sherman Act, however, is any exclusionary action undertaken by a monopoly that uses the introduced incompatibilities or bundling as a platform for engaging in anticompetitive actions or relationships. For example, there's nothing inherently illegal about bundling Internet Explorer with Microsoft Windows, the court ruled. It is illegal, however, for Microsoft to have excluded Internet Explorer from the Add/Remove Programs utility and combined code related to browsing and other code in the same files, so that any attempt to delete the files containing Internet Explorer would, at the same time, cripple the operating system. These actions were undertaken, the court concluded, for no other reason than to maintain Microsoft's monopoly position in the operating system market.

To illustrate the way the court drew this distinction, consider Microsoft's "First Wave" agreements, in which the company required independent software vendors (ISVs) to make Microsoft's JVM the default in any software they developed. In addition, these deals were deceptive and manipulative. At the same time that Microsoft was telling ISVs that the company intended to cooperate with Sun, it was secretly introducing incompatibilities that, taken together, would ensure that Java applications written with Microsoft's tools would run only Windows-equipped computers. The appeals court held that these deals were anticompetitive and illegal; they were undertaken for no other reason than to destroy Sun's marketing plan for Java--and Microsoft succeeded in its aim.

Microsoft's anticompetitive actions with respect to ISVs were paralleled by the firm's behavior with a key market ally, Intel, which was developing its own cross-platform Java interpreter. Microsoft threatened to retaliate against Intel unless the project was dropped, and in 1997, Intel complied. The appeals court held that Microsoft's actions with respect to Intel were also illegal under the Sherman Act. The appeals court's reasoning is admirably clear. For a company possessing monopoly power in a given market, it isn't necessarily illegal to introduce new, innovative technology, even if it's incompatible with other products or combines existing products in a new way. But it's quite illegal under the Sherman Act for a monopoly to engage in anticompetitive, deceptive or retaliatory practices that have no credible justification other than to squash competitors.

Toward .NET: What's Legal and What Isn't?

Coming as it does on the dawn of Microsoft's .NET and Hailstorm initiatives, the appeals court decision couldn't be more timely. One reading of the decision is that it's good news for Microsoft. As Microsoft executives enthused after learning of the decision, the court has clearly raised the bar for Microsoft's "embrace and extend" policy. You can bet that Windows XP (and .NET generally) will take the "embrace and extend" strategy to new highs--or new lows. The question is, will Microsoft be content to introduce innovative new technology, or will it continue to combine innovation with anticompetitive marketplace relationships, including exclusionary licensing, deception and threats of retaliation?

I wouldn't place bets on a change of heart. (As an industry observer recently noted, "Tigers don't change their stripes.") A New York Times editorial noted with concern that Microsoft has already engaged in talks with America Online and other firms in an effort to provide them with preferential access to Windows XP, in exchange for favoring Microsoft's products over competitors. And just last week, Microsoft released a beta version of key .NET software, the Mobile Internet Kit, that includes what would appear to be patently anticompetitive and exclusionary licensing restrictions aimed squarely at Microsoft's latest target: free software.

Microsoft to ISVs: Don't Use "Potentially Viral Software"

The restrictions in question are found in an End User License Agreement (EULA) for a downloadable beta version of Microsoft's Mobile Internet Toolkit, part of the company's still-developing .NET strategy. The license requires developers to refrain from using free software tools [2] to develop Mobile Internet software; it also requires them to refrain from distributing developed software with free software programs [3].

What's at stake here? Plenty. The Mobile Internet Toolkit is an "embraced and extended" version of HTML forms; with Toolkit-developed software (and the requisite server extensions), web pages will display forms that are far more interactive and visually attractive than the ones you're used to seeing on the Web.

Is this license illegally anticompetitive? Using the appeals court decision as guidance, one could argue that it all boils down to whether the licensing provision is included for no other reason than to squash Microsoft's competitors.

To be sure, Microsoft has a ready explanation for the anti-free-software provisions in this EULA, and they're contained in the EULA itself. Free software, in Microsoft's view, is "potentially viral software", that could "infect" Microsoft's software or give some third-party rights to Microsoft's intellectual property; the company could argue that it included this language for self-defense.

But this is balderdash. As the GPL FAQ states, merely developing software with free software tools does not affect the licensing of the developed software. Furthermore, distributing GPL-licensed programs with commercial code, even if done in a fashion that violates the GPL, has absolutely no effect whatsoever on the copyright or licensing of the commercial program. Lastly, you cannot steal someone else's copyrighted commercial code, include it in a derivative program developed from GPL code and then claim the GPL nullifies the commercial program's copyright. Microsoft's position on the GPL can be best described in one word: deceptive. (Sound familiar?)

The absurdity of Microsoft's contentions with respect to the GPL are deliciously lampooned in John Lettice's "Open Source Terror Stalks Microsoft's Lawyers" (The Register, 27 June 2001, available on-line at If Microsoft's position on the GPL's legal implications is correct, Lettice notes, Microsoft had better release the source code for NT 4.0, since the NT 4.0 Resource Kit reportedly contains POSIX utilities subject to the GPL.