Classic One-Two Punch: AOL Sues Microsoft Over Tactics On Browser

Stephen D. Williams sdw@lig.net
Wed, 23 Jan 2002 13:16:01 -0500 (EST)


The Classic One-Two Punch:
AOL Triggers full frontal assault on the Microsoft Monopoly Monster.

January 22, 2002
By Stephen D. Williams, OpenPress  (OpenPress.org)

In the first two steps of a new frontal assault on Microsoft, AOL has shown
skill in timing, judgment, and planning.  Using a shocking, but plausible,
leak as a feint, AOL caused the technology and financial markets to consider
new arrangements between the mass market titans all vying for World
Domination.  Priniciple titans include:

AOL, owner of the Netscape legacy, who has a lock on the low-end ISP,
Instant Messaging, and a large share of media content and outlets,

Microsoft, a guilty monopolist with control of desktop operating systems,
office software, and plans for total domination and 'taxing' of nearly
everything,

RedHat, the most visible developer and vendor of Linux distributions,
employing a number of Linux legends and making impressive sales of an Open
Source product that can be freely copied.

Sun, provider of highly scalable Unix and Java, the main component of the
enterprise development alternative to Microsofts .NET plan.  Many anticipate
a continuation and extension of Sun's legal strategy against Microsoft.  Sun
also now owns Star Office, a complete cross-platform equivalent to Microsoft
Office.  Sun has made this open source, called Open Office (openoffice.org),
and allowed free use for any platform and any reason.  It is quickly
becoming a standard in certain segments and has the potential for quickly
gaining ground in education, government, and many corporate and personal
environments.

IBM, a true Linux, Java, and Open Source convert with, again, growing
respect and inroads into enterprise development and implementation.  IBM
currently seems to be mostly a sideline player, although it has significant
interest in market dominance of Linux, Java, and avoiding another Microsoft
OS/2 debacle.


Step one of AOL's current strategy was apparently to leak to the press on
January 19th, 2002 that AOL was seriously considering the purchase of
RedHat.  This generated copious discussion among technologists, especially
those interested in the Microsoft/AOL/Linux/Sun/Java battles.  Some worried
that RedHat would be fatally tinged, or even that Linux could suffer
negative effects.  Others pointed to the seeming rescue of Netscape and
continued support of Mozilla and the Open Directory Project.  AIM, as
always, is a mostly closed system that is an example of potential monopoly
position that worries and irritates many.  Looking ahead, it is possible to
see some synergy with set-top boxes, cable modem and otherwise, where Linux
is already being used and also possible plans for an XBox competitor.

AOL, being a mass market provider of ISP service, content, and other killer
Internet applications like presence, instant messaging, and online gaming,
is looking for ways to increase the overall market, market share, and
control over their destiny.  As acknowledged in press accounts and detailed
in court proceedings, Microsoft is willing to use any means necessary to win
over adversaries.  AOL has been long feared attempts to force MSN on users.

On January 21st, AOL officially denied that it was in discussions to
purchase RedHat.

On January 22nd, AOL announced that it was planning to sue Microsoft over
tactics used against Netscape.  From the Post article:

'"Netscape's lawsuit is a logical extension of the (court) findings . . .
that Microsoft thwarted competition, violated the antitrust laws and
illegally preserved its monopoly at Netscape's expense," said Randall J.
Boe, general counsel for AOL.'

The timing is very good.  AOL waited until the Justice department ruled on
the court order demanding a breakup, Microsoft struck and agreement with
Justice, and many of the states filed an independant suite.  While the final
standing of the court is being decided, AOL has gone forward with its own
lawsuit based on the repeatedly confirmed findings of illegal actions my
Microsoft.  The court should be experiencing pressure against settlement
with so many parties with standing disagreeing strongly with the fairness,
and especially the likely effectiveness of the agreement.  In particular,
even the requirements that are within the agreement are laden with easy
loopholes, many legal scholars argue.

What is the next step?  Microsoft's Internet Explorer, during nearly all of
the so-called "Browser Wars", had AOL users as a majority of its market
share.  Partly, this was due to an agreement between Microsoft, spearheaded
by Bill Gates himself, with AOL to guaruntee that AOL's icon and
bootstrapping software would remain on Windows 98 operating system
installations and CDs along with Microsoft's MSN service software and icon.
 This agreement, itself a topic in the illegal monopoly maintenance court
case against Microsoft, has now expired.  Microsoft, in fact, is publicly
arguing that AOL isn't allowed to use Internet Explorer in the traditional
way.
>From the Post article:
'AOL still uses Internet Explorer for its dominant online service, under an
agreement struck several years ago. That agreement expired in 2000, and
talks to extend it broke down last summer, in part because Microsoft
insisted that AOL promise not to ever sue it.

An AOL spokesman said the company believes it still has the right to use
Explorer because Microsoft failed to live up to portions of its past
agreement. Microsoft disagrees and says the agreement is terminated.'

The next blow may be for AOL to get serious about bringing the Netscape
browser up to date technically and aesthetically and to prepare users for
the switch.  With their pervasive user base, AOL could significantly change
the computing landscape in a fairly short time, possibly with an added bonus:

'"Netscape is almost all the way home in proving some entitlement to
relief," said Hillard Sterling, a Chicago antitrust attorney who specializes
in technology cases. But deciding on economic damages will be tricky,
Sterling said, because for quite some time Netscape gave its product away.

Today, Internet Explorer has about 80 percent of the browser market. But AOL
argues that had Microsoft not engaged in illegal conduct, Netscape would
have a much higher share. Legally, those damaged by anticompetitive conduct
are entitled to an award three times greater than the actual cost of the
harm.'
Microsoft, it seems, is doomed to live in very interesting times indeed for
the forseeable future.



sdw
-- 
sdw@lig.net http://sdw.st
Stephen D. Williams
43392 Wayside Cir,Ashburn,VA 20147-4622 703-724-0118W 703-995-0407Fax Dec2001

Original Article:
http://www.washingtonpost.com/wp-dyn/articles/A22077-2002Jan22.html AOL Sues
Microsoft Over Tactics On Browser
Damages, Curbs Sought On Behalf of Netscape


? AOL Time Warner Press Release: Netscape Files Suit Against Microsoft For
Violations of the Antitrust Laws (Jan. 22, 2002)
? Netscape Communications Corp. v. Microsoft Corp.: Complaint Filed With the
U.S. District Court for the District of Columbia
? AOL in Negotiations to Buy Red Hat (Jan. 19, 2002)
? Ballmer Says Microsoft Is Backing AOL Rivals (Dec. 5, 2001)
? Microsoft Parries Foe In AT&T Bidding (Dec. 4, 2001)
? Antitrust Settlement Sharpens AOL-Microsoft Rivalry (Nov. 2, 2001) ? For
Rival AOL, Microsoft Ruling Has Dual Impact (June 29, 2001)
? AOL, Microsoft Clash Again Over Messaging (June 20, 2001)
? AOL, Microsoft Break Off Software Negotiations (Jun. 17, 2001)
? Heavyweights AOL and Microsoft Duel for Internet Supremacy (Jun. 7, 2001)
? Microsoft Targets AOL Users (May 29, 2001)


By Jonathan Krim and Alec Klein
Washington Post Staff Writers
Wednesday, January 23, 2002; Page E01

Last June, when a federal appeals court ruled that Microsoft Corp. had
broken antitrust laws and crushed its competition, the companies it damaged
had to decide whether to sue or rely on the government to rein in the
software giant.

Yesterday, AOL Time Warner, Microsoft's arch rival, decided it was time to
go to court.

In a move that widens the software giant's legal battles, AOL sued for
unspecified monetary damages and restrictions on Microsoft's conduct on
behalf of Netscape Communications Corp., which pioneered software for
browsing the World Wide Web and was a prime catalyst for the Internet
revolution that began in the mid-1990s.

By the time Netscape was purchased by AOL for $10 billion in 1999, however,
the company was in tatters, its Navigator software having been overwhelmed
by Microsoft's Internet Explorer.

Microsoft has contended that it competed fairly and that Internet Explorer
was deemed superior by consumers. But two federal courts have ruled that
Microsoft, fearing that Web browsers could be the next platform for major
software advances, employed a number of illegal tactics to shut off
distribution channels for Navigator.

The Netscape suit is designed to parallel and assist the efforts of state
prosecutors, who are seeking numerous sanctions against Microsoft, including
forcing the company to separate its Explorer software from its Windows
operating system.

The Justice Department, which had taken the lead in prosecuting Microsoft,
settled with the company in November, without requiring such a separation.
The states pursuing the case, and AOL, have deemed the agreement inadequate
and filled with loopholes.

Microsoft now faces two antitrust cases in federal courts in Washington, a
case brought by European regulators and several class-action lawsuits, all
related to its anticompetitive conduct. In addition, a federal judge must
decide whether to approve the deal between the company and the Justice
Department.

"Netscape's lawsuit is a logical extension of the (court) findings . . .
that Microsoft thwarted competition, violated the antitrust laws and
illegally preserved its monopoly at Netscape's expense," said Randall J.
Boe, general counsel for AOL.

"AOL has been using the political and legal system to compete against
Microsoft for many years, and this is just the next legal tactic in their
business plans," responded Microsoft spokesman Vivek Varma.

The relationship between AOL and Microsoft has grown increasingly
acrimonious over the past year, and yesterday's filing makes it even less
likely that the two can work together.

Varma said Microsoft is "disappointed that AOL has chosen litigation."

"We've consistently tried to work more closely with them in a variety of
areas, including instant messaging; they have consistently turned us down."

Legal experts, who predicted that the case could take three to five years,
said the previous court rulings mean that it will be relatively easy for
Netscape to prove its case.

The courts found that Microsoft strong-armed computer manufacturers into
making Internet Explorer the default browser, bundling it into the operating
system so that it was difficult or impossible to remove, and giving
preferred treatment to outside software developers and Internet service
providers if they made their applications favor Explorer.

"Netscape is almost all the way home in proving some entitlement to relief,"
said Hillard Sterling, a Chicago antitrust attorney who specializes in
technology cases. But deciding on economic damages will be tricky, Sterling
said, because for quite some time Netscape gave its product away.

Today, Internet Explorer has about 80 percent of the browser market. But AOL
argues that had Microsoft not engaged in illegal conduct, Netscape would
have a much higher share. Legally, those damaged by anticompetitive conduct
are entitled to an award three times greater than the actual cost of the
harm.
The two companies are battling out of court as well.

Both companies recently introduced personalized alert services that allows
consumers to get automatic e-mail updates on such information as stock
quotes and sports scores. AOL and Microsoft also offer competing interactive
television services, Internet service providers and instant-messaging
systems.
In a recent interview, AOL Chairman Steve Case acknowledged that the two
companies are in a race for the same technological future, which includes
the merging of devices and content in a seamless home network.

AOL is also seeking ways to find alternatives to Microsoft software.
Netscape, for one, has been winning back some browser business, according to
the company. Netscape browser technology has been incorporated into a
Gateway Inc. computer appliance and the Sony Corp. PlayStation 2 video-game
console.

AOL still uses Internet Explorer for its dominant online service, under an
agreement struck several years ago. That agreement expired in 2000, and
talks to extend it broke down last summer, in part because Microsoft
insisted that AOL promise not to ever sue it.

An AOL spokesman said the company believes it still has the right to use
Explorer because Microsoft failed to live up to portions of its past
agreement. Microsoft disagrees and says the agreement is terminated.

If Microsoft were to force AOL to stop using Internet Explorer, the Netscape
browser would be pressed into service at a time when many technologists
believe it remains inferior. Engineers at Netscape in Mountain View, Calif.,
continue to refine the browser, and insist it represents a viable
alternative.
The other major company found by the courts to have been damaged by
Microsoft is Sun Microsystems Inc., whose Java applications enable
interactive graphics on Web pages. Sun officials have not said whether the
company intends to sue.



sdw
-- 
sdw@lig.net http://sdw.st
Stephen D. Williams
43392 Wayside Cir,Ashburn,VA 20147-4622 703-724-0118W 703-995-0407Fax Dec2001