Reply_Motion_re_Unfair_Competition_in_Support_of_Sun_Microsystems_Motions_for_Preliminary_Injunction_9_10_98.

 

28. Reply Motion (re: Unfair Competition) in Support of Sun Microsystems,
Inc.'s Motions for Preliminary Injunction
Legal document in support of Sun's motion to be argued on September 10th,
1998.

 

Sun's Reply in Support Of Its Motion For Preliminary Injunction, Re: Unfair Competition

plain text version

DAY CASEBEER MADRID
WINTERS & BATCHELDER LLP
LLOYD R. DAY, JR. (90875)
VERNON M. WINTERS (130128)
JAMES R. BATCHELDER (136347)
DAVID J. ESTRADA (168105)
ROBERT M. GALVIN (171508)
JULIE S. TURNER (191146)
20400 Stevens Creek Boulevard, Suite 750
Cupertino, CA 95014
Telephone: (408) 255-3255

COOLEY GODWARD LLP
JANET L. CULLUM (104336)
JAMES DONATO (146140)
MICHAEL D. MOREHEAD (172672)
Five Palo Alto Square, 3000 El Camino Real
Palo Alto, CA 94306-2155
Telephone: (650) 843-5133

Attorneys for Plaintiff
SUN MICROSYSTEMS, INC.

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
SAN JOSE DIVISION

SUN MICROSYSTEMS, INC.,
a Delaware corporation,

v.

MICROSOFT CORPORATION,
a Washington corporation,

Defendant,

No. C 97-20884 RMW (PVT) ENE

SUN MICROSYSTEMS, INC.'S REPLY BRIEF
IN SUPPORT OF MOTION FOR
PRELIMINARY INJUNCTION UNDER CAL.
BUS. & PROF. CODE § 17200 ET SEQ.

DATE: SEPTEMBER 10, 1998
TIME: 9:00 A.M.
JUDGE: HONORABLE RONALD M. WHYTE
CTRM: 6

Refiled Pursuant to
10/21/98 Order of the Court

TABLE OF CONTENTS

I. INTRODUCTION 1
II. STATEMENT OF FACTS 2
III. STATEMENT OF DISPUTED AND UNDISPUTED ISSUES 9
IV. ARGUMENT 11
  A. THERE IS NO MERIT TO MICROSOFT'S ARGUMENTS THAT ANY "UTILITY" CREATED BY ITS BREACHES OF THE TLDA'S COMPATIBILITY REQUIREMENTS IMMUNIZES MICROSOFT FROM LIABILITY FOR UNFAIR COMPETITION. 11
  B. THERE IS NO QUESTION THAT MICROSOFT HAS ENTERED INTO EXCLUSIVE LICENSES REQUIRING OEMS TO ADOPT ONLY MICROSOFT'S VM AND NATIVE METHOD INTERFACES, AND MICROSOFT'S ARGUMENT TO THE CONTRARY SMACKS OF BAD FAITH. 13
  C. NEITHER "MODE" OF MICROSOFT'S COMPILER GENERATES OUTPUT THAT SATISFIES THE JCK 1.1A REQUIREMENT THAT COMPILER OUTPUT MUST "EXECUTE PROPERLY" ON A JAVASOFT VM. 14
  D. MICROSOFT IGNORES THE IRREPARABLE HARM SUFFERED BY SUN, AND INCORRECTLY ASSUMES THAT ANY INJUNCTION WOULD REQUIRE THE WINDOWS 98 OPERATING SYSTEM TO BE REMOVED FROM THE MARKET. 14

TABLE OF AUTHORITIES

CASES  
State Farm Fire & Casualty Co. v. Superior Court, 45 Cal. App. 4th 1093, 1109-10. (1996) 12
In Klein v. Nature's Natural Recipes, Inc., 59 Cal App. 4th 965 (1997) 12
Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 451 (1988) 12
Sun Microsystems, Inc. v. Microsoft Corp., 999 F. Supp. 1301, 1309-10 (N.D. Cal. 1998 4
The Ingle Co. v. Videotours, Inc., 1997 U.S. App. LEXIS 423 (9th Cir. 1997) 12
STATUTES  
Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1134 (9th Cir. 1986) 14
Circuit Rule 36-3 12
Cal. Bus. & Prof. Code § 17200 12

I. INTRODUCTION

Evidence obtained since Sun filed its opening papers reveals, in stark detail, Microsoft's unabashed scheme to fragment Sun's JAVA programming environment, to "pollute" the market with Microsoft's non-conforming, incompatible browsers, operating systems, applications, and tools, and to seize control of Sun's pioneering technology by leveraging Microsoft's monopoly in operating systems to establish its non-conforming variant as the de facto industry standard. On every front Microsoft has acted to break the compatibility of Sun's JAVA technology:

  • In the JAVA Language, where Microsoft has introduced incompatible key words;

  • In the JAVA Class Libraries, where Microsoft surreptitiously extended the standard java.* classes;

  • In the JAVA Compiler, where Microsoft has implemented incompatible compiler directives;

  • In the JAVA Virtual Machine, where Microsoft has excluded JNI and altered the VM to execute Microsoft's non-standard language extensions and compiler directives; and

  • In channels of distribution, where Microsoft's license agreements require developers and re-sellers to use only Microsoft's non-conforming "polluted" JAVA technology, and to refrain from using Sun's JAVA technology.

The evidence of Microsoft's efforts to flood the distribution channels with Microsoft's polluted variant of JAVATM technology grows daily:

  • In the retail software channel, Microsoft has placed 1.3 million units of Windows98 in distribution, and expects to place 167,000 units per month in the next three to four months alone.

  • In the OEM channel, over 70,000 original equipment manufacturers ("OEMs") are distributing Windows98 (by pre-installing it) all around the world, including over 17,000 OEMs here in the United States alone. More than 17.5 million computers with Windows98 will be sold in the OEM channel in the quarter ending September 1998, and another 21.5 million computers with Windows98 will be sold in the quarter ending December 1998.

  • In the tools market, Microsoft has distributed about 1.25 million copies of its polluted software developers' toolkits (the tools developers use to write programs) to several hundred thousand developers; as Microsoft intended, these toolkits write programs tied to the Windows platform, breaking compatibility with the JAVATM Technology.

  • In the browser market, and as Microsoft has loudly proclaimed in the antitrust lawsuit brought by the Department of Justice, Microsoft insists that Internet Explorer is bundled with Windows98. There are thus millions of copies of Internet Explorer in the market, with tens of millions poised to be injected. Internet Explorer is tied to the Windows platform, breaking compatibility with the JAVATM Technology.

Microsoft's actions harm more than Sun alone - although such harm would, by itself, require an injunction. Microsoft's actions also harm software developers, by denying them access to the markets that Sun's JAVA technology creates and opens. Microsoft's actions harm consumers, by further entrenching Microsoft's operating systems monopoly and all the inefficiencies, reduced consumer welfare, and reduced innovation that monopolists inflict. Microsoft's actions harm Sun's other licensees, by denying them the benefits of the widespread distribution of a cross-platform technology that Microsoft should have effected. Burton Decl. ¶¶ 5-7 (Oracle); LeFaivre Decl. ¶¶ 3, 7-9 (Inprise); Sueltz Decl ¶¶ 3-9 (IBM).

In short, the harm Microsoft's actions inflict is both wide and deep. Microsoft would have this Court conclude it is powerless to stop the Microsoft juggernaut. The § 17200 jurisprudence teaches otherwise, and Sun asks the Court to invoke its power to end the harm caused by Microsoft's illicit scheme.

II. STATEMENT OF FACTS

Microsoft's illicit purpose is two-fold. First, Microsoft seeks to neutralize and ultimately destroy the competitive threat that Sun's JAVATM technology poses to Microsoft's continued dominance of the desktop operating systems market. It seeks to accomplish this by fragmenting the JAVA environment, thereby devaluing its utility as an alternative platform to Windows. Second, Microsoft seeks to appropriate for itself alone the technical advantages and goodwill associated with Sun's pioneering technology. It seeks to accomplish this by rapidly distributing as broadly as possible a non-conforming variant of Sun's technology, one that is inextricably tied to and dependent on the use of Microsoft's products. Arrow Decl. ¶ 3; see also ¶¶ 6, 9, 15, 23-27.

Even before the TLDA was signed, Microsoft appreciated that the cross-platform compatibility of Sun's JAVA technology threatened to create "a new level playing field free from [M]icrosoft dominance." Ex. 11. The threat Microsoft perceived was all the more dangerous because Microsoft knew it "will not win a head-on battle against JAVA - it simply has too much momentum based on the appeal of the technology and broad anti-Microsoft sentiments." Ex. 2.

At the same time, Microsoft also perceived that complying with its license agreement with Sun would further erode Microsoft's marketplace dominance. While the TLDA permits Microsoft to add new class libraries to the standard JAVA platform (section 2.8), it expressly requires that Microsoft's implementations pass Sun's test suites (section 2.6). Thus, as Microsoft's Charles Fitzgerald wryly observed, the TLDA "puts Microsoft on an interesting treadmill; we are racing to improve a technology that competes with our core franchise." Ex. 3. In short, Microsoft found itself in a no-win situation: Sun's JAVA technology was too popular to ignore; it was too formidable to compete with; and the enhancements permitted by the TLDA threatened to improve the very platform that posed the greatest competitive threat to Microsoft's Windows franchise.

So paramount were these concerns within Microsoft that they led its Chairman, Bill Gates, to lash out at the head of Microsoft's JAVA development team, Ben Slivka, and accuse him of "trying to destroy Windows." Ex. 4.2 At the same meeting, Mr. Gates also directed some pointed questions at Mr. Slivka, as reflected in Mr. Slivka's subsequent email to Mr. Gates:

"When I met with you last, you had a lot of pretty pointed questions about JAVA, so I want to make sure I understand your issues/concerns. ...

  1. What is our business model for JAVA?

  2. How do we wrest control of JAVA away from Sun?

  3. How do we turn JAVA into just the latest, best way to write Windows applications?

  4. What are we doing to leverage/expose Windows to JAVA developers?

  5. Implications of our Sun contract to our evolution of JAVA?" Ex. 6.

As it turned out, Mr. Slivka had posed the same questions 4 months earlier, and had answered them in a 39-page slide presentation for Microsoft management (titled "Microsoft API Strategy: JAVA is our Destiny"). Ex. 7. Given the technical benefits of Sun's JAVA technology, Slivka concluded that Microsoft could not viably compete if it did not continue to incorporate the JAVA technology into Microsoft's products. "Microsoft has no choice, we must seize control [of] the JAVA platform!" Id. at 28. To achieve that end, Mr. Slivka concluded that Microsoft would "need to do a better job of cross platform than our competitors." Id. at 7. In short, he proposed that Microsoft honor its agreement with Sun, invest in cross-platform enhancements to the JAVA technology, and outrace the competition by transforming the Windows platform to a JAVA platform. Id. at 8-10, 26-27. Otherwise, Slivka concluded, "[s]omeone else will execute on the above strategy (Sun)" and "Windows becomes irrelevant in bigger and bigger sections of the market." Id.at 28.

Four months later, in April 1997, Mr. Gates rejected Mr. Slivka's approach:

"[Mr. Gates] said that JAVA class library work is wrong. Platform-neutral code does not advantage Microsoft, only performance and feature improvements to our VM and to interfaces that depend on Windows have worth. We should be promoting nothing but use of the Windows APIs." Ex. 8 (emphasis in original).

Once Mr. Gates made clear that Sun's JAVA technology was not Microsoft's "destiny," Microsoft sought to neutralize the threat by attacking the core value of the JAVA technology -- cross-platform compatibility. As this Court previously found, cross-platform compatibility of the JAVA programming environment is the "purpose behind . . . the JAVATM technology itself." Sun Microsystems, Inc. v. Microsoft Corp., 999 F. Supp. 1301, 1309-10 (N.D. Cal. 1998). By introducing incompatibilities into its products, Microsoft defeats one of the major benefits of the JAVA technology, making it less attractive to software developers and consumers. Sueltz Decl. ¶ 11. Microsoft's fragmentation strategy increases the burden and costs on programmers, requiring them to chose whether to support both the standard JAVA programming environment and Microsoft's corrupted JAVA programming environment, or only one. Gosling Reply Decl. ¶ 17; Burton Decl. ¶¶ 5-7; LeFaivre, ¶ 5. By fragmenting cross-platform compatibility of the JAVA technology Microsoft effectively destroys its value as a competitive alternative to the Windows monopoly. Initially, Microsoft pursued its strategy by impermissibly changing the standard JAVA classes and excluding support for Sun's standard native code interface -- JNI. The Court addressed these incompatibilities in its prior order. Sun, 999 F. Supp. 1309-11. Microsoft, however, continues to introduce new incompatibilities in the form of unauthorized keywords and compiler directives that further fragment the JAVA programming environment. Microsoft's strategy is clear: devalue Sun's JAVA technology so it is just another fragmented computer language, rather than a comprehensive, cross-platform solution which threatens Microsoft's Windows franchise.

Microsoft's first move to " wrest control of the JAVA platform away from Sun" was to design its virtual machine ("VM") so that applications written for it would execute properly only on the Windows platform:

"[W]e've agreed that we must allow ISVs [independent software vendors] to redistribute the JAVA VM standalone, without IE. ISVs that do this are bound into Windows because that's the only place the VM works, and it keeps them away from Sun's APIs." Ex. 9.

Mr. Slivka agreed, stressing that the "impurities" of the Microsoft VM would tie applications to the Windows platform:

"If an ISV is going to ship an application that requires a JAVA VM, we want it to be our JAVA VM. I do not think any significant ISVs will ship a product that uses our VM without also using Windows-specific extensions. ... [I]f we say no ISV can ship our VM then these ISVs will use Sun's VM or Symantec's VM, and they won't have anywhere near as much chance to become 'impure'." Ex. 10 (emphasis added).

Microsoft's next move was to induce ISVs to write applications for the Microsoft VM. As Microsoft recognized, "JAVA VM adoption by ISVs (esp. tools vendors) is a critical part of our JAVA strategy." Ex. 11. To induce developers to write applications that would be anchored to the Windows platform, Microsoft adopted a four-pronged approach.

First, Microsoft refused to implement the JNI upgrade in its VM. JNI is the native method interface developed by Sun. JNI maintains binary compatibility between every VM implemented for the Windows platform. By excluding JNI, Microsoft fragmented the JAVA programming environment for the Windows platform, and ensured that developers cannot write a single JAVA/native application that will execute properly on every VM.3 As explained in the Declaration of James Gosling, inventor of the JAVA Language, the incompatibility introduced by Microsoft's refusal to implement JNI increases the cost of development, manufacture and distribution for programmers that use the JAVA environment. Gosling Decl. ¶¶ 15-17. Moreover, by substituting non-standard native method interfaces, such as RNI and J/Direct, Microsoft ensured that developers who wish to distribute applications for use with the Microsoft VM have no choice but to use Microsoft's tools to create applications that are tied to and dependent on both the Windows operating system and the Microsoft VM. Id.; 5/11/98; Deutsch Decl. ¶¶ 7, 81-83. Microsoft knew full well that its exclusion of JNI would break compatibility with every other VM vendor and tie developers to the use of its VM alone:

"Having these ISVs redist our jvc [Java compiler] gives us great leverage. First, we can require them to redist our VM as well. Secondly, we control the code they generate - get them to use native code, we generate [RNI],4 and then all the apps built with that tool are tied to our VM." Ex. 12.

Second, Microsoft sought to tie developers to Windows dependency by massively distributing free copies of Microsoft's incompatible Microsoft-dependent toolkits using the distribution channels created by its operating systems monopoly. Microsoft vice president Paul Gross described this prong of Microsoft's strategy as a "Trojan Horse," and then explained:

"[T]he way to influence platform purchases is to first and foremost achieve high market share with a given development tool; and then, over time, allow that tool to provide unique capability for the platform." Gross Depo at 180:7-11.5

Toward this end, Microsoft has flooded the market with beta versions of its VJ++6.0 and SDKJ 3.0 toolkits. Button Decl. ¶¶ 2-3 ("Microsoft has distributed approximately 1.25 million copies of VJ6 beta to developers worldwide," and has succeeded in enticing approximately 200,000 developers to use it to write applications.)6

Unwilling to leave developers free to choose, Microsoft has also resorted to exclusive dealing agreements that tie the right of ISVs to redistribute Microsoft's compiler to their agreement to use Microsoft's VM, and to use the Microsoft-dependent native method interfaces. As Sara Williams proposed:

"definitely agree that we should extract full platform support in return for redist rights. requirements:
0. redist our VM and IE4
1. use RNI and COM and not JNI for any native code calling
2. use our debug and jit api
3. support SQL Server, IIS
4. no support for sun interfaces where a MS one exists." Ex. 12 (emphasis added).7

Prior to its most recent language extensions and the exclusion of JNI, Microsoft's exclusive dealing strategy was particularly important because it was the only means by which Microsoft could "lock" the use of its compiler to the Microsoft VM and Windows operating system.

"The compiler does not force them to be tied to our platforms in any way. ... We are willing to evaluate licensing JVC to supporters of MS systems strategy. However, we need to make sure that the lock to our platform is in the contract because the lock isn't in JVC [Java compiler]." Id.

That is why Microsoft's agreements with Aimtech, Fujitsu and others expressly provide:

"[Aimtech] shall ... redistribute the Microsoft virtual machine for JAVA ... and not any other virtual machine;

use only the Microsoft native code interface that is part of the MS JAVA VM for any native code calling." Ex. 15.

Finally, to ensure that the applications created by independent developers who use Microsoft's tools work as intended only on Microsoft's VM, Microsoft created the missing technological "lock in" between its VM and the output of its JAVA compiler. By unilaterally implementing incompatible keywords and compiler directives, Microsoft causes its toolkit compilers to generate output that will execute properly only on Microsoft's VM, and not those of Sun or its other licensees. See Hankinson Decl. ¶¶ 23-27; Schroer Decl. ¶¶ 4-14; Gosling Decl. ¶ 33; 5/11/98 Deutsch Decl. ¶¶ 67-70; 8/20/98 Deutsch Decl. ¶¶ 3-20.

Microsoft knew its language extensions would fragment the JAVA programming environment and confuse applications developers. Indeed, as Mr. Slivka explained in his deposition, the "fragmentation" that results form language extensions would be a "super outcome" for Microsoft because it would confuse developers.

"Q: 'If Sun and we disagree on [these language extensions] and diverge in these areas, as long as Netscape doesn't buddy up with Sun, that is a super outcome for us (more fragmentation).' Why would that be a super outcome?
A: Because it would just confuse JAVA developers about which JAVA platform they should write for.
Q: That was a good thing from Microsoft's perspective?
A: Correct." Slivka Depo at 203:2-10.; Ex. 16.

Microsoft feared, however, that its strategy would backfire if it was seen by the industry for what it was - an attempt by Microsoft to "seize control" of the JAVA programming environment and gain a competitive advantage over Sun and its other licensees. Microsoft therefore secretly approached third party ISVs to ask them to champion Microsoft's language extensions:

"I am talking to [personnel in Microsoft's Developer Relations Group] to see what we need to do in order to plant the seeds in some of the right isvs ears, and have them run with this. ... I think MS needs to lay low on this, or it will likely blow up big time." Ex. 17.

When the ISVs approached by Microsoft refused, Mr. Slivka proposed calling a meeting of leading tools vendors to encourage them to join Microsoft in extending the JAVA language. The head of Microsoft's Tools Division, Paul Gross, balked, fearing that Microsoft's true motives would be transparent: "I believe that our true goal, controlling the future of JAVA, will be totally transparent and mostly unacceptable to all JAVA OEMs." Ex. 18.

Mr. Slivka proceeded with the meeting nonetheless. It took place on February 7, 1997, was attended by the leading tools vendors of the industry, and proved to be a disaster for Microsoft.8 Ex. 19. Symantec, the leading JAVA tools vendor, was adamant that no extensions to the JAVA language should be undertaken. Ex. 19; Slivka Depo at 282:21-283:1. The group did, however, reach consensus on one core principle: language extensions undertaken unilaterally by any vendor, were to be avoided at all costs. LaFaivre Decl. ¶ 6; Gosling Decl. ¶¶ 45-46. The group (including Microsoft) agreed that such unilateral language extensions create divergent implementations that hurt customers9 and other tools vendors.10 Indeed, when a Powersoft representative asked Mr. Slivka whether Microsoft would unilaterally attempt to extend the language, Slivka responded: "We would like to proceed in a standard way, not do the cowboy thing." Ex. 19. As Slivka confirmed in his deposition, "do the cowboy thing" refers to unilateral language extensions. Slivka Depo at 337:10-21.

One year later, Microsoft did exactly what it promised it would not do. It unilaterally extended the JAVA language to add non-standard, incompatible keywords and compiler directives. A Microsoft colleague of Mr. Slivka characterized Microsoft's strategy in blunt terms: "Screw Sun, cross-platform will never work. Let's move on and steal the JAVA language." Ex. 20.

By unilaterally extending the JAVA language, Microsoft finally achieved the technological "lock- in" it had long sought between its JAVA compiler and its VM. The output generated by Microsoft's JAVA compiler executes properly only on Microsoft's VM implementation, and fails to execute properly on the VM implementations of Sun or any of its other licensees. Ex. 12; Hankinson Decl. ¶¶ 23-24; Schroer Decl. ¶¶ 4-14; Deutsch Decl. ¶¶ 67-70. Mr. Slivka acknowledged in his deposition that this "lock" injures both competitors and customers by preventing interoperability between different competitors' compiler and VM implementations. Slivka depo at 343:23-345:1.

Microsoft is the only licensee of the JAVA technology that has refused to support JNI; it is the only licensee to have added keywords, compiler directives or any other extension to the JAVA language; and it is the only licensee to have failed the Compiler Output Requirement. Button Decl. ¶¶ 307; Sueltz Decl. ¶ 8; LaFaivre Decl. ¶ 3; Kannegaard Decl. ¶¶ 5-6; 8/14/98 Schroer Decl, ¶¶ 7-8, 14.

III. STATEMENT OF DISPUTED AND UNDISPUTED ISSUES

Microsoft's Opposition raises notably few issues:

  1. Microsoft does not deny that it monopolizes the desktop operating systems market.

  2. Microsoft does not deny that it perceives the JAVA technology as a profound threat to Microsoft's operating systems monopoly.

  3. Microsoft does not deny that Sun's primary incentive to enter into the TLDA was to achieve widespread distribution of compatible implementations of Sun's JAVA technology.

  4. Microsoft does not deny that its unilateral actions have fragmented the JAVA programming environment.

  5. Microsoft does not challenge the economic principle articulated by Nobel laureate Kenneth Arrow that, as a result of Microsoft's monopoly, its broad dissemination of incompatible implementations of the JAVA technology would effectively force developers and consumers to choose Microsoft's incompatible implementations, and would therefore wrest from Sun control of the JAVA technology.

  6. Microsoft does not deny that its "Strategic Objective" was to "Kill cross-platform JAVA by grow[ing] the polluted JAVA market."11 Nor does Microsoft deny the authenticity of, or the truth of the statements contained in, any of the documents cited in Sun's motion.

  7. Microsoft does not deny the existence of the JCK 1.1a test requirement that "the output of your JAVA compiler implementation (if applicable) must execute properly with the JavaSoft VM of the same version as the JAVA Compatibility Kit you are using." Nor does Microsoft appear to challenge the validity of that requirement.

  8. Microsoft does not deny that, as a result of the Microsoft-specific keywords and compiler directives introduced by Microsoft without Sun's authorization, Microsoft's compiler generates output that achieves its intended functionality only on Microsoft's VM implementation, and fails to achieve that intended functionality on the non-Microsoft VM implementations of Sun and its other licensees.

  9. Microsoft does not deny the existence of the 214 JCK 1.1a JNI tests, or the failure of those tests by all of Microsoft's products at issue.

  10. Finally, under California law, Microsoft does not dispute that this Court should find unfair competition if a competitor: (a) executed on a strategy to leverage its operating systems monopoly to wrest from Sun control of the JAVA programming environment; or (b) developed and distributed incompatible implementations of the JAVA technology to fragment the JAVA programming environment and establish Microsoft's corrupted implementations as the de facto standard; or (c) entered into exclusive dealing agreements that require OEMs to incorporate only Microsoft's VM into their products and to implement only Microsoft's native method interfaces; or (d) publicly uttered false statements with the intent or effect of deceiving customers, developers or other third parties into believing that Microsoft's incompatible implementations of the JAVA technology were in fact compatible.

Based on the foregoing undisputed facts and legal principles alone, Sun's motion for preliminary injunction should be granted. Cal. Bus. & Prof. Code § 17200, et seq. Microsoft's Opposition does, however, raise four disputes that should be resolved in Sun's favor. Each of these disputes is addressed below.

IV. ARGUMENT

  1. THERE IS NO MERIT TO MICROSOFT'S ARGUMENTS THAT ANY "UTILITY" CREATED BY ITS BREACHES OF THE TLDA'S COMPATIBILITY REQUIREMENTS IMMUNIZES MICROSOFT FROM LIABILITY FOR UNFAIR COMPETITION.
    2.

Microsoft contends that, even if the incompatibilities resulting from its keywords and compiler directives, and from its exclusion of JNI, were found to breach the TLDA and to fragment the JAVA programming environment, Microsoft could not be held liable for unfair competition because these incompatibilities create "utility." MS Opp. at 19:17-19, 21:14-18. Microsoft's argument fails both legally and factually.

The legal proposition advanced by Microsoft is that a licensee should be permitted to misappropriate and alter the subject matter of the license as long as the licensee can show that the public benefited from his conduct. Under this theory, a licensee obligated to distribute a licensor's movie could change the movie's ending -- and alter the film medium to run only on licensee's projectors -- as long as licensee could amass evidence that his alterations improved the viewing experience. For good reason, Microsoft cited no legal authority supporting this proposition.

The only case raised in Microsoft's argument is wildly off the mark. In Klein v. Nature's Natural Recipes, Inc., 59 Cal App. 4th 965 (1997), the court rejected a consumer protection claim brought under section 17200 by the purchaser of tainted dog food. The decision turned not on whether the benefit accruing to the dog food seller outweighed the harm of poisoning dogs, but rather on the absence of any "deceptive or sharp practices" by the seller. Id. at 970. In stark contrast to the facts here, the court found in favor of the seller because it had no knowledge that its dog food was tainted before sale and had made every effort to inform the public and recall the tainted food upon discovery of the problem. Id. at 968-70. This consumer protection case has no bearing on the commercial claim brought by Sun, based on Microsoft's attempt to leverage its operating systems monopoly to wrest from Sun control of the JAVA technology, destroy the value of that technology to Sun and its licensees, and reap the benefits of that technology for itself.12

Microsoft's argument also fails factually, for two reasons. First, Microsoft claims to have created "utility" only by extending the language, and this so-called "utility" is illusory. The functionality of Microsoft's language extensions is entirely redundant of the "Inner Classes" already a part of the JDK 1.1 technology. LeFaivre Decl. (Inprise), ¶ 10. Second, Microsoft purports to conduct a "weighing analysis" (Opp. at 21:14-18), but it omits any discussion of the harm caused by its conduct. As addressed in Sun's motion and elsewhere herein, Microsoft has harmed Sun, its licensees and their customers by: (1) mass-distributing products that exclude JNI and support incompatible language extensions, locking Microsoft's compiler output to its VM; (2) improperly requiring third parties to include in their products only Microsoft's incompatible VM and native method interfaces; and (3) making false public statements (including unauthorized use of Sun's JAVA Compatible Logo) designed to deceive third parties into believing that Microsoft's incompatible implementations of the JAVA technology were in fact compatible.

As explained by Dr. Arrow, Microsoft's misconduct also threatens to discourage groundbreaking innovation because it communicates to would-be innovators that, if they dare pose a threat to a monopolist's core franchise, they risk having their innovation misappropriated, and the value of it to them destroyed. 5/11/98 Arrow Decl. ¶27. The staggering injuries/costs resulting from Microsoft's misconduct unquestionably outweigh any marginal "utility" generated by Microsoft's improper and unauthorized corruption of the licensed JAVA technology.13

  1. THERE IS NO QUESTION THAT MICROSOFT HAS ENTERED INTO EXCLUSIVE LICENSES REQUIRING OEMS TO ADOPT ONLY MICROSOFT'S VM AND NATIVE METHOD INTERFACES, AND MICROSOFT'S ARGUMENT TO THE CONTRARY SMACKS OF BAD FAITH.
    2.

Microsoft flatly denies Sun's allegation that it entered into exclusive licensing agreements requiring OEMs to incorporate into their products Microsoft's VM implementation and Microsoft's native method interfaces to the exclusion of all others. MS Opp. at 2:27-28 ("Contrary to Sun's representations, Microsoft's license agreements do not restrict Microsoft's licensees from supporting competing JAVA implementations or technologies."); see also MS Opp. at 16:3-5.

Microsoft's representations are contrary to demonstrable fact. The June 27, 1997 license agreement between Microsoft and Aimtech Corporation, for example, contains the following language requiring Aimtech to use Microsoft's VM and no others, and to use Microsoft's native method interfaces and no others:

"During the term of this Agreement, Company shall:

(a) redistribute the Microsoft VM for JAVA included in the Licensed Software (the 'MS JAVA VM') as part of Company Product and not any other VM;
(b) use only the Microsoft native code interface that is part of the MS JAVA VM for any native code calling." Ex. 15.

Microsoft has required the same commitments from other licensees. See, e.g., Ex. 22. There is no excuse for Microsoft's misrepresentation of these facts to the Court.14

  1. NEITHER "MODE" OF MICROSOFT'S COMPILER GENERATES OUTPUT THAT SATISFIES THE JCK 1.1A REQUIREMENT THAT COMPILER OUTPUT MUST "EXECUTE PROPERLY" ON A JAVASOFT VM.
    2.

Microsoft apparently contends that its toolkits should be found to satisfy the JCK 1.1a testing requirement that "the output of your JAVA compiler implementation (if applicable) must execute properly with the JavaSoft VM of the same version as the JAVA Compatibility Kit you are using" (the "Compiler Output Requirement"). Opp. at 19:22-20:2 ("the Windows-specific features complained of by Sun do not cause Microsoft's products to fail any JCK tests"). Microsoft is wrong. Regardless of the mode in which Microsoft's compiler is operating, its output will not execute properly on the JavaSoft JDK 1.1 VM. 8/14/98 Schroer Decl. ¶¶ 7-8, 10-11; 8/20/98 Deutsch Decl. ¶¶ 17-20; 8/20/98 Hankinson Decl. ¶¶ 7-8, 36.15

  1. MICROSOFT IGNORES THE IRREPARABLE HARM SUFFERED BY SUN, AND INCORRECTLY ASSUMES THAT ANY INJUNCTION WOULD REQUIRE THE WINDOWS 98 OPERATING SYSTEM TO BE REMOVED FROM THE MARKET.
    2.

There is no question that Sun has suffered irreparable harm from Microsoft's corruption of the JAVA programming environment. Absent from Microsoft's argument on this issue (Opp. at 23:4-24:11) is any mention of Microsoft's language extensions, which, as set forth above, Microsoft witnesses acknowledged harm consumers and vendors, and destroy the interoperability of implementations that Sun designed the JAVA technology to achieve. Slivka Depo at 310:9-20; 337:10-21; 343:23-345:1. See also Burton Decl. (Oracle), ¶¶ 3, 6-7; Sueltz Decl. (IBM), ¶¶ 11-12.

Microsoft also fails to address its exclusive licensing practices in this section of the brief, perhaps because Sun is irrefutably harmed by Microsoft's demand that licensees use only Microsoft's incompatible VM implementation and only Microsoft's incompatible native method interfaces. Similarly, Microsoft ignores the fact that, unlike Microsoft's native method interfaces, JNI enables programs invoking native methods to run compatibly across all VM implementations on the same platform. Opp. at 23:7-15. Microsoft's exclusion of JNI destroys that compatibility, and the obvious resultant harm to Sun and its licensees may explain why Microsoft's papers attempt to dodge the issue. Burton Decl. (Oracle), ¶¶ 4-5; Sueltz Decl. (IBM), ¶¶ 7-9; 5/11/98 Deutsch Decl. at 7-8; 8/20/98 Deutsch Dec., ¶ 28; Lindholm Decl. ¶¶ 8-12; Gosling Decl. ¶¶ 16-17, Exs. 5, 10, 12 and 26; Sharpe Depo ¶ 179:10-13.

Microsoft's contentions regarding the hardships that would be wrought by the requested injunction are also unconvincing. Microsoft acknowledges that its toolkits are currently pre-release products, and are not scheduled to be shipped until the end of September. Button Decl. ¶¶2-3. Microsoft estimates that the costs of adding JNI support would total just $5 million, and provides no estimate for the substantially lower cost of removing support for Microsoft's incompatible language extensions. Id.

As to Windows 98, Microsoft cites to the declaration of Stephen Schiro (Opp. at 25:1), whose testimony is based on the false premise that Microsoft would need to remove the Windows 98 operating system from the market in order to add JNI support to its browser. Schiro Decl. ¶¶ 12, 15-17. To the contrary, Sun would be satisfied with a remedy requiring Microsoft to disseminate within 90 days a curative "patch" that could be downloaded by end-users to add JNI support to the browsers already on the market. Microsoft cannot contest the feasibility of this approach, given that it used precisely this "patch" technology to cure its failures of the JCK 1.1a "Signature Test." Sharpe Depo at 52-53; 69-70

Finally, Microsoft contends that "[i]f Sun really thought it was being damaged, it would have brought its motion months ago, before Windows® 98 was shipped, when it learned that Microsoft was not going to include JNI in its products." Opp. at 24:8-10. In fact, this is precisely what Sun did. Sun brought its motion on May 14, well before Windows 98 shipped. 8/5/98 Akerlind Decl, ¶2 (attesting to shipment of Windows 98 on June 25.) Microsoft's argument is also undercut by its contention elsewhere in its papers that Sun filed its motions prematurely, and should have waited until the toolkits were final products. (Copyright Opp. at 2:14-15.)

Dated: October 20, 1998 DAY CASEBEER MADRID
WINTERS & BATCHELDER LLP

 

By:__________________________________
            Lloyd R. Day, Jr.

Attorneys for Plaintiff SUN MICROSYSTEMS, INC.

 

FOOTNOTES

1 Unless otherwise indicated, all exhibits and deposition pages referred to herein are attached to the 8/21/98 Declaration of J. Paul Armstrong. back to text

2 Mr. Slivka described Mr. Gates' onslaught as follows: "[B]ill is really pissed about this JAVA stuff, doesn't respond to my e-mail, and that one review meeting we had he just jumped all over me, accusing me of trying to destroy Windows. He was amazingly, unnecessarily rude to me." Id. back to text

3 See Sharpe depo at 179:2-13 (by excluding JNI, "[w]e knew it would be a problem to reach the goal of being able to move code freely between VMs.") back to text

4 Mr. Slivka confirmed that this document contained a typographical error, and that "RNI" was the reasonable insertion. Slivka depo at 436:22-24. back to text

5 Sara Williams of Microsoft's Developer Relations Group concurred: "making the jvc [Java compiler] redistributable as part of the JAVA SDK [software developers kit]" "would do tons to promote (and entrench) our systems position." Ex. 13. See also 3/9/98 slides on VJ++ 6.0, which describes "mass distribution of VJ" via "freely downloadable Web Preview" and other means. Ex. 14. back to text

6 See also Ex. 21 (reflecting the advice of senior Microsoft engineer, Michael Toutonghi, that Microsoft allow competitive tools vendors to redistribute Microsoft's toolkits "to get our upcoming language extensions supported" and hence entrench "support of our platform.") back to text

7 Microsoft executed Ms. Williams' proposal, entering into a series of contracts in which its licensees were required to "redistribute the Microsoft VM for JAVA included in the Licensed Software (the 'MS Java VM') as part of Company Product and not any other VM" and "use only the Microsoft native code interface that is part of the MS Java VM for any native code calling." Ex. 15. back to text

8 Microsoft planned to hold the meeting without inviting Sun, but Symantec insisted that Sun be asked to attend. James Gosling, the inventor of the JAVA language and much of the JAVA technology licensed to Microsoft, attended the meeting on behalf of Sun. Slivka Depo at 283:20-25. back to text

9 As Mr. Slivka's minutes of the meeting reflect under the title "Overall goals/preferences," "Avoid divergent implementations - bad for customers." Mr. Slivka's deposition testimony on this subject was candid:

"Q: What is it about divergent implementations that's bad for customers?

A: It forces them to choose a particular compiler or tool, and it doesn't give them enough flexibility to switch between different development tools.

Q: And was that Microsoft's view at the time?

A: Um-hum.

Q: Is that a yes?

A: Yes, sorry.

Q: Did the other folks at the meeting seem to share that view?

A: I believe so, yes." Slivka Depo at 310:9-20. back to text

10 Mr. Slivka's minutes of the meeting reflect the group's understanding that unilateral language extensions by individual tools vendors create a "Prisoners' Dilemma" for tools vendors. Ex. 19. When questioned about this in his deposition, Mr. Slivka explained that, as the "Prisoners' Dilemma" is analogized to language extensions, when one tools vendor extends the language unilaterally, all other vendors are harmed; and when unilateral extensions are undertaken by more than one vendor, everyone is harmed. Slivka Depo at 325:5-326:5; 345:2-21. back to text

11 Microsoft consumes much of its Opposition suggesting (without contending) that Sun itself has engaged in unfair competition. Opposition at 5:1-28; 9:7-12:20. Aside from being legally irrelevant to Sun's motion, Microsoft's suggestions are factually baseless. Lindholm Decl. ¶¶ 3-25; Kannegaard Decl., ¶ 15; 8/14./98 Schroer Decl., ¶¶ 20-25; Seultz Decl. (IBM), ¶¶ 10, 15. back to text

12 In light of this gravamen of Sun's claim, there is no merit to Microsoft's argument that section 17200 cannot apply to this "simple breach of contract." Opp. at 21:9-10. It is well established that section 17200 properly remedies unfair competition between contracting parties. Allied Grape Growers v. Bronco Wine Co., 203 Cal. App. 3d 432, 451 (1988)(affirming application of section 17200 to defendant's provision of sub-standard grapes under a supply contract); State Farm Fire & Casualty Co. v. Superior Court, 45 Cal. App. 4th 1093, 1109-10. (1996) (affirming application of section 17200 to breach of insurance contract's implied covenant of good faith and fair dealing). The only case cited by Microsoft on this point is The Ingle Co. v. Videotours, Inc., 1997 U.S. App. LEXIS 423 (9th Cir. 1997). This case is inapposite, and in any event has been depublished, and as such was improperly cited by Microsoft. See Circuit Rule 36-3 (unpublished Ninth Circuit decisions or orders "shall not be cited to or by this Court or any district courts of the Ninth Circuit, either in briefs, oral argument, opinions, memoranda, or orders.") back to text

13 Mr. Slivka also listed "a ton of ways" that JAVA development tools vendors differentiate their products and compete with each other without extending the language. Slivka Depo at 349:19-350:15. See also 8/20/98 Kannegaard Decl., ¶ 8-14. This evidence rebuts the opinion of Dr. Lee (¶27) that "[i]f a compiler vendor could not implement extensions, its ability to gain a competitive advantage by offering a superior product would be impaired." back to text

14 If Microsoft intends to argue that these exclusionary clauses are no longer in effect, Microsoft has introduced no evidence to support such an argument. Each of the Microsoft licenses at issue contains a clause precluding modification except by a subsequent written agreement signed and dated by the parties. Id. Microsoft has not submitted any such subsequent documents. Nor would the existence of any such documents justify denial of Sun's requested injunction. Polo Fashions, Inc. v. Dick Bruhn, Inc., 793 F.2d 1132, 1134 (9th Cir. 1986) (reversing the district court's holding that defendant's cessation of unlawful conduct warranted denial of the requested injunction). back to text

15 The Compiler Output Requirement tests in part for violations of the JAVA Language Specification and the JAVA VM Specification. 8/21/98 Deutsch Declaration, ¶¶ 19; Gosling Decl., ¶¶ 33; 8/20/98 Hankinson Decl., ¶¶ 4, 6-7, 23-27, 32-38. Microsoft's apparent contention that its language extensions comply with these specifications (Opp. at 19:22-25) is misguided. Id. back to text