Memorandum of Points and Authorities in Support of Sun Microsystems, Inc.'s Motion for Preliminary Injunction
 

Memorandum_of_Points_and_Authorities_in_Support_of_Sun_Microsystems_Motion_for_Preliminary_Injunction_filed_ February_27th_1998.

41. Memorandum of Points and Authorities in Support of Sun Microsystems,
Inc.'s Motion for Preliminary Injunction
Legal document filed with the court on February 27th, 1998.

Page
I.     Statement of Issue To Be Decided...........................................................................	1.
II.     Statement of Relevant Facts...................................................................................... Sun's JAVATM Technology ................................................................................................. Sun's Licensing Program for the JAVATM Technology............................................. The Overriding Importance of Securing Compatible Implementations of the JAVATM Technology....................................................................................................... Sun's Compatibility Test Program................................................................... The JAVA Compatible Logo................................................................................. Microsoft's License to Distribute Products That Incorporate Sun's JAVATM Technology.............................................................................................................. Microsoft's License to Mark Products Passing Sun's Test Suite with Sun's JAVA Compatible Logo................................................................................. Microsoft Must Use Sun's Logo on Products That Pass Sun's Test Suite. ........................................................................................................................... Microsoft Concedes the Validity of Sun's JAVA Compatible Logo. ..... Microsoft's Misuse of Sun's JAVA Compatible Logo to Promote IE 4.0. .......... Microsoft's IE 4.0 and SDKJ 2.0 Fail To Pass Sun's Compatibility Test Suite and Are Misbranded ............................................................................................... Sun's Tests Reveal That Microsoft's IE 4.0 Fails To Pass Sun's Test Suite................................................................................................................... Microsoft's SDKJ 2.0 Also Fails to Pass Sun's Compatibility Tests............................................................................................................................. Independent Tests Confirm That Microsoft's IE 4.0 and SDKJ 2.0 Fail To Pass Sun's Compatibility Test Suite................................................ Industry Commentator Confirms SDKJ 2.0 Incompatibility.................. Microsoft Admits That IE 4.0 and SDKJ Are Not Compatible................ Microsoft's Anti-Competitive Intent...........................................................................	1. 1. 2. 3. 5. 6. 6. 7. 7. 7. 7. 9. 9. 11. 11. 11. 12. 13.
III.     Legal Argument................................................................................................................ Sun Is Entitled To A Preliminary Injunction............................................................. Sun Is Likely To Prevail On The Merits Of Its Section 1125(a)(1)(A) Lanham Act Claim...................................................... Microsoft Concedes That Sun Is The Valid Owner Of The JAVA Compatible Logo.............................................. Microsoft's Use Of The JAVA Compatible Logo Is Unauthorized.............................................................................. Microsoft's Continuing Unauthorized Use Of The JAVA Compatible Logo Is Likely To Confuse Customers...................... Sun Will Suffer Irreparable Injury Unless Microsoft's Unauthorized Use Is Enjoined.......................................................................... The Public Interest Favors An Injunction.................................................... Alternatively, Sun Has Demonstrated That Serious Questions Exist And That The Balance Of Hardships Tips In Its Favor............................ The Inconvenience To Microsoft Is Minimal.................................. The Hardships On Both Sun And The Public Are Great............	15. 15. 16. 17. 17. 19. 20. 20. 22. 22. 23.
IV.     Conclusion...........................................................................................................................	23.

AMF, Inc. v. Sleekcraft Boats,      599 F.2d 341, 354 (9th Cir. 1979) Anthony Distributors, Inc. v. Miller Brewing Co.,      904 F.Supp. 1363, 1367 (D. Fla. 1995) Cadence Design Systems, Inc. v. Avant! Corp.,      125 F.2d 824, 826 (9th Cir. 1997) Digital Equipment Corp. v. Altavista Technology,      960 F. Supp. 456, 473 (D. Mass. 1997) Franchised Stores of New York, Inc. v. Winter,      394 F.2d 664, 668 (2d Cir. 1968) Hollywood Athletic Club Licensing Corp. v. GHAC-Citywalk,      938 F.Supp. 612, 614-615 (C.D. Cal. 1996) Microsoft Corp. v. Very Competitive Computer Products,      671 F.Supp. 1250, 1257, n.4 (N.D.Cal. 1987) Native Village of Quinhagak v. United States,      35 F.3d 388, 392 (9th Cir. 1994) Oakland Tribune, Inc. v. Chronicle Pub. Co.,      762 F.2d 1374, 1376 (9th Cir. 1985) Paisa, Inc. v. N & G Auto, Inc.,      928 F.Supp. 1009, 1013 (C.D. Cal. 1996) S & R Corp. v. Jiffy Lube Int'l, Inc.,      968 F.2d 371, 375 (3rd Cir. 1992) Star-kist Foods, Inc. v. P.J. Rhodes & Co.,      769 F.2d 1393, 1396 (9th Cir. 1985) Summit Tech., Inc. v. High-Line Med. Instr.,      933 F.Supp. 918, 928 (C.D. Cal 1996) Topanga Press, Inc. v. City of Los Angeles,      989 F.2d 1524, 1528 (9th Cir. 1993) Vision Sports, Inc. v. Melville Corp.,      888 F.2d 609, 612 N.3 (9th Cir. 1989) Westlands Water Dist. v. Natural Resources Defense Council,      43 F.3d 457, 459 (9th Cir. 1994)	22. 18, 19. 16. 18. 19. 17, 20, 23. 16. 22. 16. 16, 17, 19, 20, 23. 18, 20 17. 17. 22. 20. 16.
CODES U.S.C. \247 1125(a)(1)(A)	17.
PERIODICALS JavaWorld November 1997 Issue San Jose Mercury News Wall Street Journal, November 10, 1997 Gilbert & McCarty, Object-Oriented Programming in JAVATM (Waite Group Press 1997)	12. 12. 3. 2.

I.     Statement of Issue To Be Decided.

     The issue presented by this motion is straightforward: Will Microsoft be permitted to use Sun's JAVA Compatible Logo to promote and distribute its Internet Explorer 4.0 and related products even though its products fail to pass Sun's compatibility test suite, and therefore fail to satisfy the conditions for use of Sun's trademark?

     A.     Sun's JAVA^TM Technology.

     Sun is the developer and licensor of the JAVA^TM technology, which comprises a standardized application programming environment that affords software developers the opportunity to create and distribute a single version of programming code that is capable of operating on many different, otherwise incompatible systems platforms and browsers.

     It has long been an important goal of the computer industry to achieve a universal application programming environment, one in which different computer systems can conveniently interact with one another over electronic networks. Most computer systems implement platform-dependent programming environments, such as defendant Microsoft's Win32 programming environment. In other words, programs created to run on Microsoft's Win32-based systems generally cannot and will not function on other, different systems. The existence of multiple, platform-dependent systems, each implementing different incompatible programming environments, confronts software developers with a Hobson's choice: either they must develop and support different versions of each program for each different systems platform, or they must pick and choose among the many different possible systems platforms the one or more environments for which they will develop and support a version of their programs. Obviously, a better choice would be to develop a single program version that could run on all platforms without modification.

     By creating a standardized, platform-independent programming environment, one that can be implemented on many different systems platforms and browsers, Sun's JAVA^TM technology promises to fulfill the industry's long-standing quest for cross-platform compatibility. As aptly described by two independent observers, Sun's JAVA^TM technology creates the potential for a uniform, standardized environment that embraces many different systems platforms and browsers:

Gilbert & McCarty, Object-Oriented Programming in JAVA^TM (Waite Group Press 1997) at 50. See Armstrong Decl., Exh. H. The simplicity, cross-platform compatibility and rapid development cycles provided by Sun's JAVA^TM technology significantly increase the productivity of software development. This, in turn, dramatically reduces the costs and burdens of establishing and supporting computer networks.

     Immediately following Sun's introduction of the JAVA^TM technology, Sun received numerous requests to license its technology. In response to that interest, and to promote the widespread, uniform adoption of its technology, Sun embarked on an open licensing program, one designed to embrace as many different systems platforms as possible. Beginning in August 1995, and continuing thereafter, Sun entered into license and distribution agreements with every major platform manufacturer, including Apple, Bull, DEC, Fujitsu, Hewlett-Packard, Hitachi, IBM, Microsoft, Netscape, Novell, SCO, Siemens, Silicon Graphics, and others. Sun also entered into license agreements with the major software tools vendors, including Borland, Metrowerks and Symantec, and with the providers of many other computer hardware and software products. Paolini Decl. ¶ 7.

By granting each of the major systems manufacturers the right to incorporate Sun's JAVA^TM technology into their systems and browser products, Sun rapidly expanded the scope of the JAVA^TM programming environment to embrace a broad array of different systems platforms and browsers. In so doing, Sun also created a new and powerfully attractive market for software developers, one in which a single version of program code could now be developed for use on many hitherto incompatible systems.

     In general, Sun's license agreements grant each of its source code licensees the right to develop and distribute value-added products that incorporate Sun's JAVA^TM technology. In each case, the license agreement requires the products developed by Sun's distributor to pass certain compatibility tests made available by Sun, called the JCK compatibility test suite, before the product may be released for commercial distribution. Provided the distributor's product(s) pass Sun's test suite, the distributor is also generally licensed (indeed required) to display a Sun trademark on its product to signify the fact that its product incorporates Sun's JAVA^TM technology, and does so in a manner that passes Sun's compatibility test suite. Paolini Decl. ¶ 9.

     In order to maintain and extend the cross-platform benefits of the JAVA^TM programming environment, it is critically important that each systems platform or browser that implements the JAVA^TM programming environment does so in a manner that strictly adheres to Sun's published specification of the environment. Without strict adherence by each distributor to Sun's standard specifications, there can be no assurance that the set of functionality supported in one manufacturer's systems implementation will also be present and supported in each other manufacturer's implementation of the environment. Hankinson Decl. ¶ 15.

     The failure of one or more distributors to adhere to Sun's published specifications of the JAVA^TM programming environment may eventually fragment or "balkanize" the environment, and thereby diminish the potential benefits of the standardized environment for everyone who implements or uses it. Hankinson Decl. ¶ 16.

     Microsoft itself clearly recognizes Sun's overriding interest in ensuring that its distributors each implement the JAVA^TM programming environment in a standard, uniform manner. Indeed, in a November 10, 1997 essay in the Wall Street Journal, Microsoft's chairman, Bill Gates, emphasized the need to ensure that the set of application programming interfaces ("APIs") that comprise a programming environment be uniformly implemented by each distributor of the environment. Although Mr. Gates's comments were literally directed to the Windows programming environment, they apply with equal force to Sun's JAVA^TM

See Hankinson Decl., Exh. A. The day after Mr. Gates's essay, his lawyers echoed his sentiments in Microsoft's response to the Justice Department's contempt petition:

See Armstrong Decl., Exh. F.

     Ironically, the "balkanization" Microsoft so strenuously seeks to avoid for its Windows programming environment is precisely the result Microsoft strives to accomplish for Sun's JAVA^TM programming environment. By unilaterally implementing its own, non-conforming version of Sun's standard programming environment, Microsoft's actions will quickly "Balkanize" the JAVA^TM programming environment and thereby reduce its commercial value to Sun and each of its licensees.

     For each of the reasons so forcefully put by Mr. Gates's lawyers in defense of Microsoft's "need" to require its distributors "to ship Windows the way it was designed," Sun has contracted with each of its distributors -- including Microsoft -- to do the same, and Sun enforces that contractual obligation through the further requirement that each distributor's product pass Sun's compatibility tests prior to its commercial distribution.

In the software industry, the customary procedure employed to ensure that a product implementation conforms to a standard specification, such as the JAVA^TM programming environment, is to subject the product implementation to an array (or "suite") of conformance tests. Hankinson Decl. ¶ 15. Conformance tests are customarily designed to ensure that the specified elements of a specification for a programming environment have been implemented in conformity with the specification, and that no non-conforming element has been added to the implementation. Id.

     In connection with its licensing program for the JAVA^TM technology, Sun has developed and distributes a suite of conformance tests, commonly called the JAVA^TM Compatibility Kit ("JCK"), to test whether the products developed by its distributors conform to Sun's specifications for the JAVA^TM technology. Sun's compatibility test program is a self-test program that relies in large measure upon each distributor to administer and pass the required JCK test suite prior to the commercial distribution of any product incorporating Sun's JAVA^TM technology. In Sun's experience, its licensees customarily inform Sun of any compatibility tests their products fail to pass, and discuss with Sun the reasons or causes for such test failures, prior to the commercial distribution of their products. On occasion, Sun has discovered, subsequent to a licensee's commercial release of a product incorporating the JAVA^TM technology, that the product fails to pass one or more required JCK tests. In all such instances of which Sun is aware, Sun has contacted the subject licensee and, with the sole exception of Microsoft, secured its written agreement to modify its product implementation in a current or subsequent release to bring the non-compatible product into conformity with Sun's specifications for the JAVA^TM technology, and to pass Sun's JCK test suite. Schroer Decl. ¶ 6.

     To identify and distinguish those products marketed by Sun's distributors that incorporate the JAVA^TM technology in conformity with Sun's published specifications, Sun created a distributor's logo, combining Sun's distinctive coffee cup mark and the words "Java Compatible" placed on an angular background (the "JAVA Compatible Logo"). See Paolini Decl. ¶ 10; Exh. E. Since at least as early as March 1996, and pursuant to license from Sun, the JAVA Compatible Logo has been placed by Sun's distributors on products that incorporate the JAVA^TM Technology to reflect that they pass Sun's compatibility test suite. Id. ¶¶ 9-11.

     D.     Microsoft's License to Distribute Products That Incorporate Sun's JAVA^TM Technology.

     In the Fall of 1995 Microsoft approached Sun for a license to distribute products that incorporate Sun's JAVA^TM technology. Six months later, on March 11, 1996, Microsoft entered into a Technology License and Distribution Agreement ("TLDA") with Sun. Baratz Decl., ¶¶ 3-5; Exh. A.

     Pursuant to section 2.2 of the TLDA, Sun granted Microsoft a license to distribute certain value-added products that incorporate Sun's JAVA^TM technology, provided, however, that each such product first passes Sun's compatibility test suite. Thus, pursuant to section 2.6(a)(vi) of the TLDA, each new version of any Microsoft product that incorporates Sun's JAVA^TM technology must, prior to its commercial distribution by Microsoft, pass Sun's compatibility test suite. In addition, section 2.8(d) of the TLDA specifically prohibits Microsoft from making any modification to any "public" class or interface declaration whose name begins with "java" and further requires Microsoft to adhere to specific naming conventions if it adds any additional interface, package, class, method or field to Sun's set of APIs.

     Concurrent with the execution of the TLDA, Microsoft also executed a Trademark License with Sun. See Baratz Decl., Exh. B. The Trademark License granted Microsoft a limited license to use Sun's JAVA Compatible Logo, but only in connection with such products as first successfully pass Sun's compatibility test suite and otherwise comply with all other compatibility and certification requirements of the TLDA. (Baratz Decl., Exh. B, sec. 3).

     As to all products that successfully pass Sun's compatibility test suite, Microsoft is required to display the JAVA Compatible Logo on:

See Baratz Decl., Exh. B, sec. 4.

     In the Trademark License between Microsoft and Sun, Microsoft expressly concedes the validity of the JAVA Compatible Logo as well as Sun's rights in and to the Logo. In addition, Microsoft has waived any right to challenge Sun's logo:

See Baratz Decl., Exh. B, sec. 5.

     F.     Microsoft's Misuse of Sun's JAVA Compatible Logo to Promote IE 4.0.

     On or about September 30, 1997, Microsoft introduced a new version of its browser product, called Internet Explorer ("IE") 4.0. Approximately three weeks later Microsoft shipped a retail version of IE 4.0 packaged on a CD-ROM. The box containing Microsoft's CD-ROM version of IE 4.0 prominently displays Sun's JAVA Compatible Logo on the front and side panels of the box. Deutsch Decl., Exh. D.

     During the months preceding the release of IE 4.0, Microsoft's Website displayed Sun's JAVA Compatible Logo in varying locations, at various times, including in close proximity to Microsoft's IE logo, which served as a button to transfer to a download site for a pre-release version of IE 4.0. At the same time, Microsoft also disseminated a series of statements via its Website which falsely represented that Microsoft's implementation of the JAVA^TM technology conformed to Sun's specifications. For example, Microsoft represented that IE 4.0 has "full compatibility with all the cross-platform features of [Sun's] JDK 1.1." Schroer Decl., Exh. A.

     Following Microsoft's commercial release of IE 4.0, and until very recently, the Microsoft Website continued to display the JAVA Compatible Logo immediately adjacent to the IE logo, again constructed as a hypertext link to transfer to the Webpage from which a binary copy of IE 4.0 could be electronically downloaded. Indeed, as recently as November 7, 1997, Microsoft's Web page discussing the JAVA^TM technology (http://www.microsoft.com/java/) displayed the Java Compatible Logo at the end of the page immediately beneath a link to IE 4.0. See Armstrong Decl., Exh. A. However, as of November 10, 1997, the Java Compatible Logo has been removed from Microsoft's Website. Id. Exh. B. Microsoft's SDK for Java Homepage (http://www.microsoft.com/java/sdk/151) similarly displayed the Java Compatibility Logo immediately beneath the Internet Explorer link through November 7, 1997 (id. Exh. C), but has now removed it. Id. Exh. D.

     While Microsoft has ceased to display Sun's Logo on its Website in proximity to IE 4.0, and fails to use the Logo in any end-user documentation describing IE 4.0, it nonetheless asserts that it is entitled to use the Logo on its IE 4.0 packaging, and continues to ship CD-ROM versions of the product displaying the Logo. See Baratz Decl., ¶ 8, Exh. D; Deutsch Decl. ¶ 28; Exh. D.

     Microsoft's conflicting and contradictory use of the JAVA Compatible Logo poses an inexplicable conundrum for Microsoft: Either its products are compatible, in which case they are not properly branded, or its products are not compatible, in which case they are misbranded. As the evidence submitted in support of this motion demonstrates, Microsoft's products fail to pass Sun's test suite, and Microsoft's misuse of Sun's JAVA Compatible Logo to promote its products infringes Sun's trademark.

     G.     Microsoft's IE 4.0 and SDKJ 2.0 Fail To Pass Sun's Compatibility Test Suite and Are Misbranded.

          1.     Sun's Tests Reveal That Microsoft's IE 4.0 Fails To Pass Sun's Test Suite.

     From September 30, through October 6, 1997, Sun performed compatibility testing of Microsoft's commercial version of IE 4.0 to determine whether IE 4.0 passes the JCK 1.1a test suites. After downloading a binary copy of the commercial version of IE 4.0 from the Microsoft Website, Sun performed each of the JCK 1.1a compatibility tests, and found that IE 4.0 fails to pass the JCK 1.1a compatibility test suite. Sun promptly informed Microsoft of the result and demanded, inter alia, that Microsoft refrain from any further use of the JAVA Compatible Logo. Baratz Decl. ¶ 7; Exh. C. Microsoft's response claims that it is entitled to use Sun's Logo without ever addressing the fact that its products fail Sun's tests. Baratz Decl. ¶ 8; Exh. D.

     Among the JCK compatibility tests IE 4.0 fails to pass, one test, "SignatureTest," is a particularly important and significant test. The purpose of "SignatureTest" is to verify that the set of public API elements in the "java" class and interface declarations of IE 4.0 conform to the set of public "java" API elements specified by Sun for the JAVA^TM Class Libraries. Any addition, deletion or modification to the public elements of the specified set of "java" APIs can significantly impair the ability to achieve cross-platform compatible implementations of the JAVA^TM technology. Deutsch Decl. ¶18; Hankinson Decl. ¶ 22. For example, if a product implementation adds non-conforming elements to a public "java" interface or class declaration, programs developed to invoke or utilize the added but non-conforming elements will fail to perform as intended on any implementation that does conform to the published specification. Alternatively, if a product omits to implement specified elements in a public "java" interface or class declaration, programs developed to invoke or utilize the specified elements will fail to perform as intended on the non-conforming implementation. Deutsch Decl. ¶ 19; Hankinson Decl. ¶ 23.

     By checking the public "java" API elements of the product or system implementation being tested for conformity with the specified set of public "java" API elements, "SignatureTest" is designed to determine whether a distributor's product implements the same specified set of public "java" class and interface declarations as each other compatible implementation of the JAVA^TM technology. In other words, "SignatureTest" is designed to maintain the integrity of the specified set of public "java" APIs comprising the JAVA^TM programming environment, which is necessary in order to achieve platform-independent implementations of the JAVA^TM technology. Deutsch Decl. ¶ 20; Hankinson Decl. ¶ 24.

     The "SignatureTest" results show that the set of public APIs for the "java" class libraries implemented in Microsoft's IE 4.0 have been modified by Microsoft to delete various classes to the "java." class hierarchy, and to add and delete various methods and fields in the "java" class declarations. Schroer Decl. ¶15. These non-conforming modifications were not previously disclosed to Sun by Microsoft and result in the failure of IE 4.0 to pass the JCK 1.1a "SignatureTest." Id. ¶ 17.

     In addition to IE 4.0's failure to pass "SignatureTest," it also fails to pass any of the 343 required tests for the RMI class library, and all 239 required tests for JNI.

     At or about the end of October 1997, Microsoft released a CD-ROM version of IE 4.0 for retail distribution. On or about November 7, Sun's engineers performed the JCK 1.1a "signature" compatibility test on the CD-ROM version of IE 4.0 and confirmed that the IE 4.0 binary code contained on the CD-ROM is identical to the binary code contained in the version downloaded from the Microsoft Website on September 30, 1997. Consequently, as Sun's tests confirm, the CD-ROM version of IE 4.0 fails to pass the JCK 1.1a compatibility test suite for each of the same reasons that the September 30, 1997 downloaded version of IE 4.0 fails to pass the JCK 1.1a test suite. Schroer Decl. ¶ 20.

          2.     Microsoft's SDKJ 2.0 Also Fails to Pass Sun's Compatibility Tests.

     Sun has also performed compatibility testing on Microsoft's commercial version of its SDKJ 2.0. On October 7, 1997, Sun engineers downloaded a binary copy of the commercial version of SDKJ 2.0 from the Microsoft Website, and performed each of the JCK 1.1a compatibility tests on the downloaded binary code. Microsoft's SDKJ 2.0 exhibits all of the same changes, additions and deletions as Microsoft has made in IE 4.0, and similarly fails to pass Sun's JCK 1.1a test suite. Schroer Decl. ¶ 23; Exh. H.

          3.     Independent Tests Confirm That Microsoft's IE 4.0 and SDKJ 2.0 Fail To Pass Sun's Compatibility Test Suite.

     The "SignatureTest" results obtained by Sun have been independently confirmed and validated -- not once -- but twice. First, KeyLabs, an independent software testing house in Provo, Utah, independently obtained copies of IE 4.0 and SDKJ 2.0, then subjected each product to Sun's compatibility test suite. Sumsion Decl. ¶¶ 9-17. The "SignatureTest" results obtained by KeyLabs are identical in every respect to the results obtained by Sun. Hankinson Decl. ¶¶ 25-30; Deutsch Decl. ¶¶ 22-30.

     Separate and independently of KeyLabs, L. Peter Deutsch, a renowned and widely respected developer of object-oriented programming environments, obtained his own copy of the CD-ROM version of IE 4.0 from a local software store and ran "SignatureTest" on the binary code contained in the CD-ROM. Once again, Mr. Deutsch obtained the identical results as KeyLabs and Sun. Deutsch Decl. ¶¶ 28-30. In light of the repeated and independent validations of Sun's results, there is simply no further room for doubt that Microsoft fails to pass Sun's compatibility test suite, and that the failures are numerous and significant. Hankinson Decl. ¶¶ 32-35.

          4.     Industry Commentator Confirms SDKJ 2.0 Incompatibility.

     In addition to the tests conducted by Sun, Key Labs, and Mr. Deutsch, an independent software developer has identified the very same non-conforming modifications to the "java" class libraries of SDKJ 2.0 as Sun and KeyLabs found. In the November 1997 issue of JavaWorld, John Zuckowski highlights "seven areas that should be of great concern to developers if they want to develop solutions with Microsoft's SDK for Java that will work in other Java 1.1 certified environments." See Deutsch Decl., Exh. F, p. 2 of 12. As Mr. Zuckowski observes,

Deutsch Decl. ¶ 31; Exh. F at 2.

          5.     Microsoft Admits That IE 4.0 and SDKJ Are Not Compatible.

     Now that Sun's compatibility test results expose the truth behind Microsoft's steps to fragment and "balkanize" the JAVA^TM technology, Microsoft's executives are struggling to put the best possible face on their breach. For example, on October 10, 1997, three days after Sun's original complaint was filed, Microsoft's Executive Vice President of Sales and Support, Steven Ballmer, admitted in an interview with the San Jose Mercury News that Microsoft had added methods to the "java" classes in the SDKJ 2.0 and IE 4.0:

See Armstrong Decl., Exh. A.

     The test suite results described above and Microsoft's own statements prove the truth of Sun's allegations: Microsoft has tampered with the JAVA^TM technology by eliminating JNI and RMI and by making non-conforming additions and deletions to Sun's specified set of "java" APIs. Microsoft's deceptive effort to hide its tracks by implementing its non-conforming additions as "java" rather than "com.ms" classes is irrefutable.

     The reason for Microsoft's misconduct stems from its correct perception that Sun's JAVA^TM programming environment poses a serious competitive threat to Microsoft's continued dominance of the market for desktop operating systems.

     In a high level, formerly confidential, Microsoft document filed by the Department of Justice in connection with its recent contempt petition against Microsoft, Paul Maritz, Microsoft's chief negotiator for the agreements with Sun, laid out Microsoft's strategy to "neutralize" Sun's JAVA^TM technology just 17 days before signing the agreements with Sun. In a February 22, 1996 strategic overview entitled "The Problem: Browser Market Share," Maritz posed the critical question:

See Armstrong Decl., Exh. G at MS6 6006232.

     Recognizing that Sun's JAVA^TM technology was "becoming the `brand' for software components" (id. at MS6 6006237), Mr. Maritz proceeded to lay out Microsoft's strategy to "neutralize Java" by "tying" the "user interface" and "APIs" "back to Windows" (id. at MS6 6006240), by getting "control of JAVA with JAVA support/tools" (id. at MS6 6006241), and by getting "control of, then leverage the programming model." Id. at MS6 6006242. Microsoft's bad faith and illegal purpose, carefully documented two weeks prior to the TLDA, is now manifest in its non-conforming IE 4.0 and SDKJ 2.0 product implementations. Recognizing, as it must, that its products "[n]eed to be cross platform" (id.), Microsoft seeks to wrest control from Sun over the specifications and APIs that define the cross-platform programming environment created by the JAVA^TM technology. By unilaterally abrogating its contractual obligation to conform its products to Sun's specifications, and by unilaterally implementing a different, incompatible "Java" programming environment for its products, one that is dependent on and tied to Microsoft's Win32 operating system (Deutsch Decl. ¶36), Microsoft seeks to place Sun in precisely the predicament it says it must avoid for Windows: the proliferation of multiple, incompatible versions of the JAVA^TM programming environment. And all the while it has the unbridled audacity to do so under the false and misleading guise of Sun's JAVA Compatible Logo.

     As confirmed by Allen Hankinson, the former Chief of the Computer Systems Laboratory of the federal government's National Institute of Standards and Technology, and a leading authority on standardized programming environments, the non-conforming additions and deletions made by Microsoft in its IE 4.0 and SDKJ 2.0 implementations of the JAVA^TM technology -- if allowed to persist -- can and will have the effect of "balkanizing" the standardized programming environment created by the JAVA^TM technology. Insofar as developers utilize the non-conforming set of "java" APIs implemented by Microsoft to develop programs for the JAVA^TM programming environment, such programs will function as intended only on Microsoft's implementation of the JAVA^TM technology and not on any other implementation that conforms to Sun's specifications. Consequently, for those developers who wish to develop programs operable on all systems that incorporate Sun's JAVA technology, it will be necessary to develop, test and support at least two versions of programs, one for the standard JAVA^TM programming environment as specified by Sun, and another separate and different program version for Microsoft's "balkanized" IE 4.0 and SDKJ 2.0 implementations of the environment. Hankinson Decl. ¶ 34.

     In truth, however, Microsoft's real motives run deeper than simply an effort to "balkanize" the JAVA^TM environment and "neutralize" its competitive threat. Microsoft's true motives are revealed by the manner in which it has altered its implementations to break compatibility with the Sun's standard specifications. In this regard, Microsoft's addition of non-conforming API elements to those specified in Sun's standard specification for the JAVA^TM Class Libraries has a particularly significant and deleterious effect on each other implementor of the JAVA^TM technology, including Sun. Were Microsoft to delete specified elements from the standard set of APIs, it would render its own product implementations of the JAVA^TM technology incapable of operating programs that are developed in accordance with Sun's standard specifications. Thus, to delete any standard element of the "java" API set would limit and reduce the commercial appeal of Microsoft's products. It would not, however, affect the ability of any other implementation, such as Netscape, IBM, or Sun, to operate any program written for the JAVA^TM programming environment. Not surprisingly, Microsoft's modifications include virtually no deletions from Sun's specified set of "java" APIs. Hankinson Decl. ¶ 35.

     To the extent that Microsoft adds non-conforming elements to the standard set of APIs for the JAVA^TM technology, and does not clearly identify and distinguish each such non-conforming element, Microsoft can achieve the opposite effect. That is, insofar as developers are induced to create programs that use Microsoft's added "java" APIs, such programs will operate as intended only on Microsoft's products and on no other product. Moreover, Microsoft's addition of non-conforming APIs deleteriously impacts every other implementation of Sun's specifications, because programs that use Microsoft's non-conforming additions will not operate as intended on any implementation other than Microsoft's. Again, not surprisingly, the overwhelming majority of Microsoft's non-conforming changes to the "java" class libraries of IE 4.0 and SDKJ 2.0 are additions to the standard set of "java" APIs, and in many instances these changes implement methods or fields that are operable only on Microsoft's Win32 systems. Hankinson Decl., ¶¶ 34 to 35; Deutsch Decl. ¶ 36. In short, by adding non-conforming elements, particularly elements that are uniquely tied to Microsoft's Win32 system, Microsoft will not only break the cross-platform compatibility of the JAVA^TM environment, but just as Mr. Maritz proposed in February 1996, it can restrict the operability of any program that uses its added APIs to its products alone. In short, Microsoft's true objective is to extend its dominance to include the JAVA^TM programming environment, and in so doing to render its version of that environment dependant on its Win32 systems.

III.     Legal Argument.

     A.     Sun Is Entitled To A Preliminary Injunction.

     A preliminary injunction may be granted if the moving party demonstrates "either a likelihood of success on the merits and the possibility of irreparable injury [] or that serious questions going to the merits were raised and the balance of hardships tips sharply in its favor." Cadence Design Systems, Inc. v. Avant! Corp., 125 F.2d 824, 826 (9th Cir. 1997) (internal cites and quotation marks omitted). These are not different tests, but rather represent "two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success on the merits decreases." Oakland Tribune, Inc. v. Chronicle Pub. Co., 762 F.2d 1374, 1376 (9th Cir. 1985). In addition, if a public interest is involved, the Court should also consider if the grant of a preliminary injunction favors the public interest. Westlands Water Dist. v. Natural Resources Defense Council, 43 F.3d 457, 459 (9th Cir. 1994); Paisa, Inc. v. N & G Auto, Inc., 928 F.Supp. 1009, 1013 (C.D. Cal. 1996).

     In the present case, a preliminary injunction is warranted because Sun can demonstrate both that Microsoft's use of the JAVA Compatible Logo is infringing and that such use will cause Sun irreparable injury³. Further, because Microsoft's use of the JAVA Compatible Logo is misleading and confusing to the public, the public interest also weighs in favor of granting a preliminary injunction.

          1.     Sun Is Likely To Prevail On The Merits Of Its Section 1125(a)(1)(A) Lanham Act Claim.

     Section 1125(a) of the Lanham Act prohibits the use in commerce of "any word, term, name, symbol or device" which is "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods . . . by another person." 15 U.S.C. § 1125(a)(1)(A). A claim of trademark infringement under this section is thus proven by demonstrating: (1) ownership of a protectable trademark; (2) unauthorized use of that trademark by the defendant; and (3) a likelihood of consumer confusion. Hollywood Athletic Club Licensing Corp. v. GHAC-Citywalk, 938 F.Supp. 612, 614-615 (C.D. Cal. 1996); also see Paisa, 928 F.Supp. at 1013. All three of these requisite elements are present here.

               a.     Microsoft Concedes That Sun Is The Valid Owner Of The JAVA Compatible Logo.

     As described in section II.E.2, supra, Microsoft has conceded the validity of the JAVA Compatible Logo and Sun's rights in and to this mark. In the Trademark License, Microsoft waived any right it might have to challenge the mark. Just as critically, Microsoft has contractually bound itself not to "knowingly or intentionally do anything that might harm the reputation or goodwill of the Compatibility Logo." See Baratz Decl., Exh. B, sec. 5 (emphasis added).

               b.     Microsoft's Use Of The JAVA Compatible Logo Is Unauthorized.

     "It is well settled that one who licenses a trademark must retain control over the quality of goods sold by the licensee under the trademark." Star-kist Foods, Inc. v. P.J. Rhodes & Co., 769 F.2d 1393, 1396 (9th Cir. 1985). "The purpose of this rule is to protect the public from deception." Id. The trademark owner thus has not only the right to control quality, "it has the duty to control quality." McCarthy, J. Thomas, "McCarthy on Trademarks and Unfair Competition," §§ 18-42 at pp. 18-66 (4th ed. 1997).

     Consequently, where a licensee fails to abide by the quality control measures set forth in the licensing agreement, the licensee loses the right to continue to use the mark. In such cases, the licensee's use is rendered unauthorized and the licensor can protect its mark by seeking relief, including injunctive relief under the Lanham Act. See Anthony Distributors, 904 F.Supp. at 1367 ("[distributor] clearly does not have the consent of the registrant to sell a product which does not adhere to the quality control standards of the trademark owner"); also see, S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 375 (3rd Cir. 1992) (where terms of franchise agreement are violated, franchisor may terminate the agreement and enjoin further use of trademark by the franchisee); Digital Equipment Corp. v. Altavista Technology, 960 F. Supp. 456, 473 (D. Mass. 1997) (granting preliminary injunction based on licensee's misuse of logo on internet outside the express uses permitted by the license and stating, "[a]ny `sales of good or services under the mark which are outside the area of consent granted in the license are regarded as infringements of the mark'") (quoting McCarthy on Trademarks and Unfair Competition, § 2506 at p.44 (3d ed. 1996)).

3: The Lanham Act specifically provides the Court with the "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, . . . to prevent a violation under section 1125(a) of this title." 15 U.S.C. 1116(a). The right to injunctive relief under the Lanham Act is independent of any contractual remedies the parties may have. See Anthony Distributors, Inc. v. Miller Brewing Co., 904 F.Supp. 1363, 1367 (D. Fla. 1995) (sustaining Lanham Act claim despite the availability of contractual remedies); see also Microsoft Corp. v. Very Competitive Computer Products, 671 F.Supp. 1250, 1257, n.4 (N.D.Cal. 1987). (In analogous copyright case stating "A copyright owner's remedies against copiers who possess a valid sublicense but have failed to satisfy a condition upon which the rights of the license depend are not limited to breach of contract. Such use . . . may constitute infringement . . . Defendant's argument that plaintiff's sole remedy is a breach of contract action if the court finds that . . . the sublicensee did not comply with conditions of the license is without merit.")

     Consequently, a licensor may proceed with the protection of its trademark and enforcement of quality standards independently of any contractual rights that it may have. See Anthony Distributing. ("[t]he trademark owner may be entitled to cumulative damages resulting from the infringement in addition to damages flowing from breach of contract.") (emphasis added). Also see Franchised Stores of New York, Inc. v. Winter, 394 F.2d 664, 668 (2d Cir. 1968). In Franchised Stores, the Second Circuit reversed the district court's grant of summary judgment in favor of the licensee. In that case, the licensor sued the licensee for using unauthorized ingredients in connection with goods licensed under the "Carvel" name. The licensee argued that the existence of the trademark license precluded an action for infringement while the license was still in effect. Id. at 668. In rejecting the licensee's arguments as "unsound," the Court noted that, in order for a licensor to control its mark and avoid deception to the public, the licensor had an "affirmative duty" to enforce its mark.

     Here, Sun's Trademark License to Microsoft set forth Sun's strict criteria for use by Microsoft of the JAVA Compatible Logo. Specifically, the license provides that the JAVA Compatible Logo may, only be used on "versions of Licensee's Products that have successfully passed the Java Test Suites made available to Licensee by Sun pursuant to the TLDA, and which otherwise fully comply with all other compatibility and certification requirements of the TLDA." (Baratz Decl., Exh. B, sec. 3). Therefore, since Microsoft's IE 4.0 and SDKJ 2.0 do not pass Sun's compatibility test suite, Microsoft is not authorized to use the JAVA Compatible Logo in connection with those products (see sections II.G.i. to II.G.5, supra, Declarations of Schroer 15, 23 and Deutsch 22-30), and an injunction against such use is warranted.

               c.     Microsoft's Continuing Unauthorized Use Of The JAVA Compatible Logo Is Likely To Confuse Customers.

     Where a licensee persists in the unauthorized use of a licensor's trademark, courts have uniformly found that this continued use alone establishes the likelihood of customer confusion. Paisa, 928 F.Supp. at 1012-12, n.4. This is true because the trademark being used by the licensee is identical to the mark owned by the licensor. Seeing identical marks, the consumer will simply assume there is some affiliation or sponsorship between the licensee and licensor. See Paisa, 928 F.Supp. at 1012, n.4 (use of "identical" mark by licensee will confuse public); Hollywood Athletic Club, 938 F.Supp. at 614 (likelihood of confusion is undisputed where licensee is using the exact same mark); S & R Corp., 968 F.2d at 375 (where an ex-licensee is using the "exact trademark" of the licensor, "their concurrent use is highly likely to cause consumer confusion about [defendant's] affiliation with the franchise").

     Microsoft is using Sun's JAVA Compatible Logo. Deutsch Decl., Exh. D. Microsoft concedes that it is using the Logo to signify that its products are compatible. Baratz Decl., Exh. D.

          2.     Sun Will Suffer Irreparable Injury Unless Microsoft's Unauthorized Use Is Enjoined.

     "As a general rule, 'once the plaintiff establishes a likelihood of confusion, it is ordinarily presumed that the plaintiff will suffer irreparable harm.'" Hollywood Athletic Club, 938 F.Supp. at 615, quoting Vision Sports, Inc. v. Melville Corp., 888 F.2d 609, 612 N.3 (9th Cir. 1989). Further, in the "licensor/licensee case, the reasons for issuing a preliminary injunction for trademark infringement are even more compelling than in the ordinary case." Id. This is due to the licensor's "strong need to control the use of its mark both to preserve the quality of the mark and to maintain the rights to the mark." Id. The confusion occasioned by a defendant's continuing unauthorized use "invariably threatens injury to the economic value of the goodwill and reputation associated with [the plaintiff]'s mark." Paisa, 928 F.Supp. at 1012-13. Indeed, the loss of control over one's mark and reputation "is the very thing that constitutes irreparable harm in the licensing context." Hollywood Athletic Club, 938 F.Supp. at 615 (internal cite and quotation marks omitted).

     The reasoning of these cases applies with equal force here. Microsoft is willfully and improperly using Sun's JAVA Compatible Logo. Absent an injunction, Sun will have lost the power to control the meaning, goodwill and reputation associated with its mark. As such Sun is being continuously and irreparably harmed.

          3.     The Public Interest Favors An Injunction.

     The harm to the public from Microsoft's deception is manifest. Over several months leading to its release of IE 4.0 and SDKJ 2.0, Microsoft skillfully used a combination of Sun's Java Compatible Logo and false statements about its incorporation of the JAVA? technology to lead consumers, and in particular developers, to believe that Microsoft was faithfully implementing the JAVA? technology. Developers would therefore conclude that, by using SDKJ 2.0 to develop programs that would run on IE 4.0, they would be creating programs that were cross-platform compatible, namely that those programs would run, without modification, on the Netscape browser or other operating systems incorporating the JAVA? virtual machine. Because Microsoft's changes to the JAVA? technology were hidden with false labels, and apparent only after Sun's testing, developers were likely to begin to write programs without ever knowing that their work product would not operate effectively on systems other than Microsoft's. Further, developers purchasing IE 4.0 as a basis for writing programs for IE 4.0 and other consumers purchasing the browser believing that a broad array of programs developed in the Java programming environment will run on the browser as promised by Sun will be deceived because Microsoft's incorporation of the Java technology does not pass Sun's test suite.

     The essence of a trademark's value is its ability to enable consumers to make efficient purchasing decisions; a consumer must be able to rely upon a trademark as signifying that the owner of the mark has ensured that product bearing the mark meets the trademark owner's requirements and thus the consumer can choose product based on his or her belief about the quality level associated with the mark. While these principles hold true across a variety of kinds of trademark use, nowhere is their importance more apparent than in the case at bar. Sun has developed a revolutionary technology which it is distributing via a broad and comprehensive licensing program. The entire value of that technology depends upon the acceptance by the public of the promise that Sun will stand behind implementations of that technology to ensure that product bearing Sun's JAVA Compatible Logo will deliver on the promise of cross-platform compatibility. Once the meaning of the JAVA Compatible Logo is undermined by product bearing the mark which does not fulfill that promise, Sun's mark and indeed its ability to further proliferate its technology stands to be lost. Microsoft is keenly aware of this inevitability and has set out to achieve exactly this result. The law presumes that Microsoft has accomplished its intent. (See AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341, 354 (9th Cir. 1979) "When the alleged infringer knowingly adopts a mark similar to another's, reviewing courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived.") If Microsoft is left to use Sun's JAVA Compatible Logo during this litigation, Microsoft will have achieved its end, notwithstanding the outcome on the contractual issues. The public and Sun should not be made to suffer this burden.

          4.     Alternatively, Sun Has Demonstrated That Serious Questions Exist And That The Balance Of Hardships Tips In Its Favor.

     Where the balance of hardships tips heavily in favor of the plaintiff, plaintiff need not establish that it is likely to prevail on the merits. Native Village of Quinhagak v. United States, 35 F.3d 388, 392 (9th Cir. 1994) (upholding district court's determination that a serious question existed even though the district court was not in a position to conclude that plaintiff was likely to prevail on the merits.)

     At a minimum, whether or not Microsoft is authorized to use the JAVA Compatible Logo, raises a "serious question of law worthy of litigation." See Topanga Press, Inc. v. City of Los Angeles, 989 F.2d 1524, 1528 (9th Cir. 1993), cert. denied, 511 U.S. 1030 (1994). Thus, as described below, because the balance of hardships strongly favors Sun, a preliminary injunction is warranted under this alternative test.

               a.     The Inconvenience To Microsoft Is Minimal.

     If the Court grants Sun's request for a preliminary injunction, Microsoft need only refrain from utilizing the JAVA Compatible Logo on its products that are not compatible and from falsely representing that its products are fully compatible with the JCK and that an application created with the SDKJ will run on any platform. This can be done by withdrawing or "stickering" non-compliant product already in the commercial sales channels; by removing the JAVA Compatible Logo from products yet to be manufactured or distributed by Microsoft; and by ensuring that the JAVA Compatible Logo is not displayed on Microsoft's Website.

     While Microsoft might contend that these simple measures are still too burdensome, Microsoft's lament should be ignored because the burden is self-created. Microsoft repeatedly ignored Sun's warnings that its products had not passed Sun's compatibility test suite. Baratz Decl., Exhs. C and D. Rather than comply with the terms of its license with Sun or, at a minimum, discontinue use of the JAVA Compatible Logo, Microsoft instead elected to proceed with the commercial release and sale of products wrongfully bearing the JAVA Compatible Logo. Having elected to place the JAVA Compatible Logo on products despite clear notice from Sun that such use was not authorized, Microsoft cannot now complain that basic remedial efforts are too burdensome.

               b.     The Hardships On Both Sun And The Public Are Great.

     In contrast to Microsoft, the harm to Sun if the injunction is not granted is considerable. Sun has spent enormous resources developing and perfecting its JAVA^TM programming environment that affords the possibility of truly cross-compatible programs, promoting the features and benefits of the JAVA^TM technology to the public, and proliferating the technology via an extensive licensing program involving virtually every major participant in the computer industry. If Microsoft is allowed to continue using the JAVA Compatible Logo on products that do not meet Sun's compatibility requirements, Sun stands to lose, perhaps permanently, the meaning, goodwill and reputation of its mark, thus, seriously jeopardizing Sun's ability to continue to promote and license the technology effectively. As courts have recognized, a licensor's loss of the meaning and reputation of its mark is a significant harm which presents a compelling justification for a preliminary injunction. Hollywood Athletic Club, 938 F.Supp at 615.

     The public, too, will be harmed by Microsoft's practices. Developers and other consumers, seeing Sun's JAVA Compatible Logo, will assume that the product incorporates the JAVA^TM technology so as to merit Sun's endorsement, namely that the product has passed all the compatibility requirements set forth by Sun. When the product later fails to support applications developed for the JAVA platform, or when applications written using Microsoft's SDKJ fail to perform adequately on platforms other than Windows, the customer will suffer because his or her expectations will have been disappointed. See Paisa, 928 F.Supp at 1013 (unauthorized use of a mark by a franchisee "confuses and defrauds the public"). An injunction is necessary to prevent these harms.

IV.     Conclusion.

     If Microsoft elects to breach its contractual obligations to Sun and suffer the consequences, so be it. The fact that it chooses to do so, however, does not entitle it to use the JAVA Compatible Logo to mislead the public into a false belief that its products conform to Sun's specifications for the JAVA^TM technology and pass Sun's compatibility tests. Nor does it entitle Microsoft to injure the meaning and value of Sun's mark by associating it with a non-conforming and incompatible implementation of the JAVA^TM technology.

     For all of the foregoing reasons, the Court should grant Sun's motion, and promptly enjoin Microsoft from any future use of the JAVA Compatible Logo.

Dated: November 17, 1997