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February 15, 2001 -- New York.

A Conversation with David Boies

with David Boies and Ken Auletta.

Sponsored by:
The Newhouse School at Syracuse University, The New Yorker, Cushman & Wakefield, UBS Warburg, and Booz Allen Hamilton

On February 15th, Syracuse University's Newhouse School of Public Communications hosted a breakfast symposium marking the publication of "World War 3.0: Microsoft and Its Enemies," a new book by Ken Auletta, The New Yorker's media columnist. At the event, Auletta was cross-examined by David Boies, who was the chief prosecutor in the government's antitrust suit against Microsoft, about how he reported the book, about the trial, and about what effect the decision will have, not only on Microsoft but on the entire technology industry. The Microsoft trial moves into its appeals phase this week, and Judge Thomas Penfield Jackson's coöperation with Auletta is expected to figure in the hearings. Following are edited excerpts from the Boies-Auletta conversation:


A TEMPORARY MONOPOLY?

DAVID BOIES: I must say, Ken, that, after having you ask me questions for two years, this is a good turnaround.

KEN AULETTA: That's your opinion. [Laughter]

BOIES: As you and I and probably most of the people here know, the Microsoft case was about whether or not Microsoft had a monopoly. But it really has two elements. First, whether the company had monopoly power and, second, whether the company engaged in fair competition. In terms of both the trial and your own observation, did you ever sense there was any question that Microsoft had monopoly power?

AULETTA: I thought the evidence was pretty overwhelming that it had temporary monopoly power.


RE: COMPETITIVE PRACTICES

BOIES: Once you concede that a company like Microsoft has monopoly power, which I think everybody pretty much agreed it had, then the question hinges on whether or not a company engages in fair competition. We have these E-mails that seem to suggest otherwise. When you talked to the Microsoft people, did they say, "Well, these E-mails are just wrong"? Or did they say, "Even if we were doing what was in those E-mails, that's O.K."?

AULETTA: No, they were saying you were taking snippets out of context. They were saying that this is not how people act. This is how they talk in this other medium, E-mail, which is not the same. That there's an intent you can't gauge from E-mail.

BOIES: Now, you use E-mail.

AULETTA: Yes, I do.

BOIES: Now, is it your experience, when you're using E-mail, that you tend to be candid? Maybe even more candid than you do when you're writing a letter?

AULETTA: Candid and sometimes sloppy.

BOIES: Sloppy and—spontaneous?

AULETTA: Mmm-hmm.

BOIES: So that you don't really think about the words you're using?

AULETTA: Well, you think about it in that you—you know, you think about it, but you don't check the spelling. What I'm saying is that it tends to be emotive. More emotive.

BOIES: Emotive. And, as a journalist, do you find that people tend to be more candid when they're being emotive?

AULETTA: I'm not going to answer, on the grounds that it may incriminate me. [Laughter]


MICROSOFT AND ITS ENEMIES

BOIES: When did you decide on the subtitle to "World War 3.0: Microsoft and Its Enemies"?

AULETTA: We had some longer, tongue-twisting subtitles, and Scott Moyers, who edited the book, came up with "Microsoft and Its Enemies," which I thought was better.

BOIES: One thing I always wondered was—

AULETTA: Do you want to know why I picked "Enemies"?

BOIES: Well, yeah.

AULETTA: Actually, I've made a cardinal mistake. The witness is not supposed to volunteer information. [Laughter] Particularly involving questions.

BOIES: O.K. One of the things that always interested me was why you picked that title from among numerous titles.

AULETTA: I was trying to do a couple of things in this book. One was to talk about the trial inside the courtroom, where Microsoft's enemies clearly had a stake in the outcome. In fact, many of them testified—Sun Microsystems testified, Apple testified, which was half enemy, half ally. But also I was writing about this battle outside, the war outside the courtroom, where Microsoft was pitted against companies like A.O.L. and Sony and a lot of others.

BOIES: What I was wondering is whether or not, by choosing "Microsoft and Its Enemies," you were trying to show that this was not just about Microsoft—that this was about other companies in pursuit of Microsoft.

AULETTA: Well, that was part of it. There was no question in my mind that there were companies who were trying to use the government to harm Microsoft, for two reasons. One is that they felt that Microsoft was a competitor, but they also felt that Microsoft was the competitor that crossed the line they didn't cross. I was also trying to deal with the question of business ethics in this book. What is permissible behavior for a company? I mean, Microsoft might have made a stronger argument than it did, but it was too pious to make this argument. It might have said in defense against you, "Yes, we acted rough, and, yes, some of this E-mail we're embarrassed by, but look how rough these other people play against us." The only time they conceded that, [Microsoft attorney] John Warden said, "This is competition, it's not civics." But other than that, the Microsoft people preferred to act like pious missionaries. In fact, I think it is a question of the behavior of a company, not just this company. But I do think Microsoft crossed a line that most companies didn't cross.


GATES ON THE STAND

BOIES: Who do you think would've been the best witness to tell Microsoft's story to the people?

AULETTA: Well, if they'd got him before you got him, in late August of 1998, Bill Gates. Bill Gates gave a video deposition in August and Septmeber of '98, twenty hours' worth, mostly with David Boies. And Judge Jackson told me, as you know, that the single most damaging thing to the company's case was the Gates deposition. And you, David, said something interesting to me when we were talking during the spring break of 1999. I said, "Microsoft has three rebuttal witnesses. If it were you, would you call Bill Gates?" And you said . . .

BOIES: That I would. Because at that point I thought Microsoft was very far behind and needed to take some kind of bold step. And Bill Gates might have turned the case around in the rebuttal phase. You need something dramatic to do that.


THE OTHER WITNESSES

BOIES: What about the witnesses at the trial? Who did you think Microsoft's most effective witness was?

AULETTA: I guess I thought [the former Microsoft vice- president] Paul Maritz. Maritz was an effective witness in part because he came closest to making the argument that this is the nature of business competition. I thought you roughed him up the least of the witnesses. Most of the others were bleeding when they got off.

BOIES: Who do you think Microsoft's worst witness was?

AULETTA: Actually, this is interesting. Although I thought Gates was far and away the worst witness—

BOIES: Let's say who testified at trial.

AULETTA: I actually thought Schmalensee was the worst witness. He was Microsoft's economics expert, its last witness, and then he was also its chief rebuttal witness. He's the dean of the Sloan School of Management at M.I.T. And I thought he was a horrid witness. I interviewed him afterwards, some months later, and he thought Microsoft thought he was great. And I just thought, What?

BOIES: But you don't really believe Microsoft thought he was great?

AULETTA: I do. That's why the Microsoft people called him back to rebut. All I can tell you is what they were telling me. If they didn't think he was effective, why did they call him back?

BOIES: Who do you think was the most effective witness for the government?

AULETTA: James Barksdale. He was the head of Netscape, and he was the most effective with Judge Jackson. The judge kept this big green notebook, which he used to keep notes throughout the trial. Over the course of four long interviews with him, I said to him, "Could I see that notebook?" He said, "Why?" I said, "Well, I really would like to relive some of the moments of the trial." We went to the day where you called Barksdale, and in his handwriting, which was very small, the judge had written down, "Credible," and things like that. Barksdale is very effective. He was your first witness, and probably the most compelling. At least in the mind of the jury of one, the judge.


AUDIENCE QUESTIONS, ASKED AND ANSWERED

QUESTION: Are the case and the decision still relevant to the future of Microsoft?

BOIES: Well, I think the case and the decision are relevant, because I think that what happens in the future is going to be determined by what the rules of the game are. I think there's no doubt that Microsoft in the future, going forward, is going to have some elements of monopoly power. How it is free to use that monopoly power is a very important issue in terms of the case. I would say, however, that if this were a case that only related to Microsoft it would have been a much less interesting case, and a much less important case. I mean this was a case that really took on the issue of whether or not the antitrust laws should apply in high-technology industries. And at the beginning of the case, if you go back and think about it, that's where the debate hinged—whether the antitrust laws should or should not apply to high technology. I think this case has settled that debate. I think we will still be debating, and they're going to be debating in a court of appeals this month, and perhaps in the United States Supreme Court later, whether this particular high-technology company really did violate the antitrust laws. But I think the one thing the case has accomplished is that I don't hear anymore the debate, except from a few people on the extreme right, that the antitrust laws shouldn't apply to high technology.

AULETTA: I also think that one of the things that's interesting here is that you can make a case that the government solution for Microsoft, to break it up, is the weakest part of the government's case, and that the marketplace is already breaking up Microsoft as we speak.

QUESTION: My question is about the notion of a temporary monopoly. I mean, Genghis Khan had a temporary monopoly. Aren't all monopolies temporary? Is that really a valid defense?

AULETTA: All monopolies are temporary, even Standard Oil. In fact, if you look at Ron Chernow's biography of John D. Rockefeller, "Titan," he makes the point that Standard Oil, by the time the Supreme Court broke it up, had lost considerable market share. But the question is whether monopolies are more temporary now than they ever were—because of the speed of change, because of the new distribution system of the Internet, and because of the technology itself. And I think you can make a fair argument here. I mean, just look how fast things have moved. Netscape didn't exist before 1994, and by 1996 it had eighty per cent of the market for all Web browsers, and then a few years later it was down to twenty per cent. And look at all the companies that burst on the scene. But I would suggest to you, and maybe David and I differ on this, that if you look at the world of other platforms, such as handheld cell phones, Palm Pilots, and other personal digital assistants, digital cable boxes, game consoles, network computers—all these other platforms that, in a way, compete with the P.C., with the Windows-operating-system platform—Microsoft has a relatively small market share. Palm Pilot has a seventy per cent market share in handhelds. Overnight. Microsoft has tried to leverage its might and its cash and has not been successful in extending its dominance from the P.C. to all these other devices and platforms. So that, you know, might suggest temporary monopoly.

BOIES: I think that one of the things to keep in mind is that Microsoft's market share of the P.C. operating systems was relatively stable, at eighty-five or ninety-five per cent, for over a dozen years. That really isn't temporary in any kind of time frame. And although I think Microsoft has had problems extending its monopoly into other areas, I think the company has been very successful at protecting its P.C. monopoly from emerging competition, like Netscape. It's one of the reasons that Netscape went from eighty per cent to twenty per cent—Microsoft was able to tie the browser to the operating system. I agree that it is hard to extend your monopoly, but what you're talking about here is protecting a monopoly that's gone on for more than a dozen years in one of the most important industries in the country.

QUESTION: We had a change in Administrations recently. The question I have for both of you is: As Microsoft goes through these appeals, what if any effect does a change in the Administration have?

BOIES: I would certainly hope that the change in Administrations would not affect the pending case. In general, changes of Administration do not affect law-enforcement decisions with respect to pending cases in the antitrust area or anyplace else. And I see no indication that the current Administration intends to back away from this case. I would hope it would not. And I would think, based on prior precedent, it would not. Some of the most vigorous enforcement of the antitrust laws that we've had in the past has come from Republican Administrations. Bill Baxter was the head of the antitrust division during the first Reagan Administration, and he was the one who broke up A.T.&T. So I think that there is no indication, at least at present, that you're going to see a withdrawal of the vigor with which this case is being prosecuted.

AULETTA: There are a couple of other things out there. Bush is going to wait for the court of appeals to sort out this case, presumably by the summer. And he's got nineteen state attorneys general who are party to this lawsuit, who would have to unanimously agree to drop the case. And there's another interesting thing that I don't think has been focussed on enough: in my book I report on the mediation process last winter, where the two sides came tantalizingly close to a settlement, and I summarized what the mediation documents say, what Microsoft offered to settle this case. By the way, had it offered a tenth of that in May of 1998, there wouldn't have been a trial. But if at some point the Bush Administration tries to settle the case—and presumably there will be an effort after the court of appeals to do that—one of the pressures will be whether or not the government can settle for less than Microsoft itself offered in these mediation documents. Does that ring true to you, David?

BOIES: Well, I think it does. I think that rings true. Because even if the Justice Department settles—if it settles for less than what Microsoft has put on the table—the state attorneys general are going to have a good argument that the Administration just caved in to Microsoft.

QUESTION: For companies planning on dealing with the government, what would you say the lesson of the Microsoft case is?

BOIES: I don't think the Microsoft case has much of a lesson as far as that issue is concerned. I think that every time the government has investigated a major company there are adversaries of that company that come in and try to push the government one way, and there are allies of that company that come in and try to push the government the other way. I think that, in general, the government approaches those people, as we did in the Microsoft case, as sources of information; I don't think they have a great deal of effect in terms of the policy decisions. I think that, as the Microsoft case went on, people were more and more prepared to come into court and say the kind of things that they would say in private. One of the things that was interesting to me is how much more difficult it was in this case than in any other case to get witnesses to say in a public environment what they would tell you in a private environment. So I think that the motivation to come forward is an important motivation. But I think that you have that on both sides, I think both the allies and the adversaries are treated sort of equally.

AULETTA: You could also make an argument—to expand on that point—that there is a big issue that this trial helped crystallize: what is the proper role of government? Should government be a spectator, as it was more in the Reagan Administration, or should it be a referee, blowing the whistle if someone commits a foul? And I think the notion that is much more acceptable today—despite what the new head of the F.C.C. says publicly—is that government has a legitimate role as a referee. And all you need to do to prove that is to spend a moment at the F.C.C., where A.T.&T. comes in one day to complain about the baby Bells, and the baby Bells come in the next day to complain about the cable guys. They all want government regulation, but they don't want themselves regulated.

QUESTION: What about the post-trial behavior of the judge, who let Ken take a look at his private notes?

BOIES: I think that, after a trial is over, it's always risky to talk to the press, because you can always be misunderstood, and there will always be people who single that out and criticize it to advance their own particular agenda. However, I don't think there's anything inappropriate about it. I think particularly in a case of this much public interest, in which every other participant is talking to the press, making available all the participants has its advantages. Although I've never talked to Judge Jackson about this, and really all I've done is read the results of those interviews—in Ken's book and in other publications—it seems to me that the judge was as he was during the trial: extremely direct and at the same time judicious, in terms of being responsive. Lots of judges in lots of contests do this. I think there is an unfortunate tendency to single out judges for criticism and try to find reasons to criticize the judge after you get an adverse result. I don't think that the comments that Judge Jackson made to Ken or other people really have anything to do with the merits of the case.

AULETTA: I was in Michigan and in Seattle last week, speaking at bookstores. In each question period, someone stood up and said, "Did you have any moral compunctions or ethical compunctions when the judge was talking to you? Maybe you should've stopped him and just sort of said, 'You shouldn't be saying this to the press.'" I couldn't stop smiling. I mean, is he crazy? I said, you know, my job is to get people to talk to me, not to shut them up. One of the things Jackson said to me early on is that his hero, his contemporary hero, is John McCain. And he says his early hero was Barry Goldwater. What both men have in common, aside from their right-wing politics, is that they are people who speak with the bark off. The last question I asked him, the one I saved for last, was "Why did you talk to me?" He said, "I talked to you because I'm talking to history. I gave an honest opinion. People can read my opinion. It's against Microsoft, clearly. I'm just amplifying it for you today."





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