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Microsoft targets AOL deal
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June 3, 1999: 6:17 p.m. ET
Defense attorneys mount challenge to credibility of former Netscape chief
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NEW YORK (CNNfn) - Microsoft Corp.'s defense team turned its attention to America Online Inc.'s acquisition of Netscape Communications Corp., challenging the credibility of former Netscape chief James Barksdale during the software titan's antitrust trial in Washington Thursday.
During cross examination of government witness Franklin Fisher, an economics professor at the Massachusetts Institute of Technology, Microsoft lawyer Michael Lacovara produced dozens of internal documents from AOL (AOL) and Netscape that suggest Microsoft (MSFT) had done nothing to harm Netscape's competitive viability.
When Barksdale testified as the government's first witness last October, he maintained that Microsoft's anticompetitive behavior had effectively run Netscape out of the Web browser distribution channel.
Because Microsoft began bundling its Internet Explorer Web browser for free within Windows, Barksdale and the government contended Microsoft illegally leveraged its Windows monopoly to crush the competitive threat posed by Netscape.
Barksdale gave his testimony three weeks before Netscape executives met with investment bankers at Goldman Sachs (GS), who advised AOL on its $10.1 billion acquisition of Netscape.
In court Thursday, however, Microsoft produced a document Netscape presented to Goldman Sachs that indicated 22 percent of computer makers shipped the Netscape Navigator Web browser and 24 percent of the top 20 Internet service providers offered Navigator.
One of Microsoft's long-running arguments is that the government brought antitrust charges against the company at the bidding of its competitors, particularly Netscape, whose Navigator browser competes directly with Microsoft's Internet Explorer offering.
Antitrust experts have said Microsoft intends to use the AOL-Netscape deal as a cornerstone of its defense during the rebuttal phase of the trial.
While Microsoft claims the deal proves that competition is healthy in the computer industry, AOL's Chief Executive Officer Steve Case has maintained that AOL has no plans to compete with Microsoft and that the company's alleged monopoly is unshakable.
The Justice Department and 19 states sued Microsoft last year for using its alleged Windows operating system monopoly to stifle competition in other segments of the computer industry.
Another trial begins
Separately, an antitrust trial pitting software giant Microsoft against small Connecticut firm Bristol Technology Inc. opened in federal court Thursday.
Bristol, a 70-employee company with $8 million in revenues, alleges that the $14.5 billion Microsoft has stifled competition by controlling access to its Windows NT source code -- a charge that Microsoft hotly disputes.
Patrick Lynch, a Bristol Technology attorney, told the jury the company was a victim of what it called Microsoft's master plan to crush competition and illegally extend its monopoly in computer operating systems.
Danbury, Conn.-based Bristol claims Microsoft cynically manipulated its WISE (Windows Interface Source Environment) program to gain a foothold in the market for heavy-duty corporate computers and then prevent developers from writing software for the competing Unix operating system.
Bristol makes a product called Wind/U, which acts as a bridge between software written for computers based on Microsoft's Windows operating system and on Unix.
Bristol's original, three-year agreement to license source code from Microsoft under the WISE program expired in 1997.
"Microsoft's reason for establishing WISE, and its reason for hobbling WISE, was to destroy competition for its monopoly," Lynch told jurors.
Microsoft, however, shot back that the charge was ridiculous.
"You will hear from Bill Gates, Microsoft's chairman, saying that he was always in favor of continuing the WISE program, and that Microsoft therefore tried to negotiate new contracts with Bristol and Mainsoft," Microsoft lawyer David Tulchin told the court.
Videotaped testimony by Gates, recorded on March 17, is expected to be played in court on Friday or Monday, lawyers said.
The trial, held in U.S. District Court in Bridgeport, Conn., is expected to conclude by late July, and may be the first of several legal actions against the Redmond, Wash.-based software titan to receive a verdict.
Microsoft claims that Bristol is simply using the courts in a selfish attempt to obtain more favorable source-code licensing terms than those of its Sunnyvale, Calif.-based competitor, Mainsoft.
"Evidence will show that Bristol, instead of taking a new contract that was available to them, chose litigation instead of negotiation," Tulchin said.
Microsoft shares fell 2-1/16 to close at 76-3/8 in Thursday trade.
-- from staff and wire reports
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