Software execs state case for Microsoft antitrust suit

Sen. Patrick Leahy says he
wonders whether Congress should rewrite antitrust laws.

Executives of large and small software companies gathered on Capitol Hill last month to
plead again for enforcement of antitrust laws against Microsoft Corp.

Mitchell Kertzman, chief executive officer of Sybase Inc., told the Senate Judiciary
Committee investigating Microsoft’s business practices that Microsoft abuses monopoly
power through intimidation and other practices that “should be viewed as violations
of the law.”

The practice of bundling Microsoft products, coupled with predatory pricing, is clear
evidence of intent to harm competitors, he said.

Kertzman accused Microsoft of waging a public relations campaign around the idea that
antitrust enforcement of any kind is tantamount to government intervention in the
marketplace.

“I am frankly alarmed by suggestions that it is exclusively up to Microsoft to
decide which products to bundle or integrate into their monopoly products, without any
laws or restrictions,” Kertzman told the committee.

In other testimony at the July 23 hearing, Oracle Corp. chairman Lawrence J. Ellison
said Microsoft’s leveraging of its Windows operating system monopoly to control other
software markets will destroy the U.S. software industry.

“We can look forward to living in the age of Windows controlled by one company and
one person,” Ellison said.

Sen. Orrin Hatch (R-Utah), the committee’s chairman, said the software executives
had testified “at great risk to yourselves and to your companies.”

Although invited to testify at the committee hearing, Microsoft declined, citing the
current Justice Department antitrust lawsuit, he said.

Hatch said the committee has received complaints “from all over the place”
about Microsoft business practices. Outside the committee room, however, Sen. Slade Gorton
(R-Wash.) said Hatch is waging a political vendetta against Microsoft and its chairman
Bill Gates.

Kertzman testified that Microsoft has moved aggressively against component transaction
server vendors, including Sybase, by adding its own transaction software to Windows NT
Server, “hollowing out and undermining competitors’ products,” he said.

Jeffrey Papows, president and chief executive officer Lotus Development Corp.,
complained that Microsoft took advantage of a near-monopoly position in office suites to
bundle its messaging client in the Office suite, “driving the price for comparable
products to zero.”

Robert Glaser, founder of RealNetworks Inc. of Seattle, accused Microsoft of bundling
in its OSes a Media Player that disables his company’s RealAudio and RealVideo player
software. A Microsoft spokesman later said the claim is untrue.

RealNetworks’ products created the market for streaming media software, which
Microsoft wants to control by setting its own standard, Glaser said.

“Our engineers are developing a feature that watches for attempts by Microsoft
[software] to break our RealPlayer and automatically undoes the damage,” Glaser said.
“But is this how consumers want us to spend our engineering resources?”

Sen Patrick Leahy (D-Vt.) said he uses the RealNetworks media player to view Senate
floor debates on his office computer.

Besides wielding its desktop monopoly power “to chill future innovation and
eliminate competition,” Kertzman said, Microsoft takes away other companies’
intellectual property rights when they license technology to Microsoft.

The Microsoft Open Tools License agreement, which Kertzman presented in his testimony,
prevents Sybase and other tool vendors from suing Microsoft for infringing their patent
rights to any software licensed under the agreement, he said.

Sybase’s Mitchell Kertzman
says Microsoft’s bundling and pricing practices violate laws.

The immunity extends not just to Microsoft, Kertzman said, but also to its licensees,
original equipment manufacturers and users.

“Once a software vendor signs this agreement, it has agreed that it cannot sue
virtually anyone for violating its patents, whether the infringement is accidental or
intentional,” Kertzman said.

“You’ve got to be kidding,” Hatch said.

“I wish that were true, Senator,” Kertzman replied.

The government has rarely used its authority against a computer or communications
industry monopoly, Kertzman said. But when it has intervened—to break apart AT&T
Corp. or, in the case of IBM Corp., to create a separate software industry—the
results have benefited not only the public but also the companies and their shareholders,
Kertzman said.

Ellison said if nothing is done to stop Gates’ “just-add-it-to-Windows
strategy,” Microsoft will extend its monopoly to dozens of other software markets.
“Want to control video? Just add it to Windows. Want to control Java? Just add it to
Windows,” he said.

Ellison drew chuckles from the senators for his description of Microsoft’s
bundling: “It’s as if your television showed up with a toaster and a washing
machine attached.”

Leahy asked the industry representatives to think about whether Congress needs to
rewrite the antitrust laws to protect competition in the software industry.

Another hearing on the topic is likely, though not yet scheduled, a committee
representative said. Similar hearings took place in November and March.