SPECIAL EDITION:

SUN SUES MICROSOFT OVER JAVA

On Friday, March 8, Sun began a private antitrust lawsuit against Microsoft, based on injuries to Sun caused by Microsoft’s monopoly practices, as proven in the Federal antitrust case, now in its penalty phase. 

Sun is taking an interesting position.  On the one hand, it thinks it doesn’t need to prove much of anything except the extent of damages since Microsoft was already proven to be a monopolist and Java and the Browser market were proven to be harmed in the existing antitrust case, and that finding of fact was upheld by an appeals court. 

On the other hand:

Sun, who derives no substantial revenue from Java, (on its own word) may have some difficulty proving financial damages.  Last time I looked zero times anything was still zero.  Sun’s attorney noted (in answer to press and analyst questions) that Sun believes its sales of Sun servers was and is damaged by Microsoft’s monopoly practices in limiting users’ accessibility to Java, but I seem to remember that the current DOJ case against Microsoft was about the DESKTOP operating system market.  I’m having difficulty figuring out how Sun will get the argument to automatically extend to the server market.

Sun has requested a Preliminary Injunction against Microsoft, demanding that Microsoft be forced to place a copy of the current Sun version of Java in its currently distributed versions of Windows and Internet Explorer.  Understanding this requires a history lesson.

1. Sun wanted Microsoft to distribute Java with Windows.  The best way to the mainstream market is always to have the broadest, most integrated path.  In the DESKTOP market, that is (and was) the Windows OS.
   
   

2. Microsoft created its own variation of Java.  Sun sued Microsoft to prevent having them distribute this version and was ultimately successful in stopping them from doing so.  Last year (January 23, 2001) Sun and Microsoft settled, with Microsoft paying Sun $20 million and Microsoft receiving a limited license for a non-current version of the Java Virtual Machine, which Microsoft could distribute “without modification.” 

A copy of the Sun announcement of the settlement can be found at http://www.sun.com/smi/Press/sunflash/2001-01/sunflash.20010123.1.html.  A copy of the settlement agreement itself can be found at http://microsoft.com/presspass/Press/2001/Jan01/01-23SunPR.asp.

3. Microsoft distributed that JVM with Windows until they began shipping Windows XP.  At that time, Microsoft stopped including the non-current JVM with Windows, but continued to make it available as a download from a Microsoft web site.  It is, of course (and always was) also available as a download from Sun.

As far as we can tell from announcements at the time of the Sun/Microsoft settlement (see (2) above), Microsoft was not required to ship a JVM, only not to ship a non-compatible JVM.  Microsoft confirms that the settlement only permitted them to ship the JVM, but does not require it.  As we understand the terms of that settlement, Microsoft could not use the licensed code to connect to .Net frameworks so they may have eliminated the Sun JVM from Windows XP to make it legally possible to move forward with .Net development or interoperability approaches.

Sun’s lawyers, in answers to questions on Friday, agreed that Preliminary Injunctions are rarely granted.  In this case, since Microsoft’s lack of enthusiasm for the Sun version of Java is long-standing, the necessary urgency that compels preliminary injunctions seems entirely lacking.  He thought it might take as long as a year to get such an injunction.  I think, in that case, it might come under the heading of “by then, why will it matter?”

The case focuses on more than Java and the losses that flowed from Java.  The complaint includes a laundry list of issues including:

	Illegal monopolization and/or monopoly maintenance of the: Intel-compatible PC operating system market, web-browser market, Office productivity suite market
	Attempting to illegally monopolize the Workgroup server operating system market
	Illegal tying of its: Internet Explorer web browser to its Windows PC operating system, Windows workgroup server operating systems (e.g., Windows 2000 Professional and Windows XP Professional) to its PC operating systems, IIS Web server to its workgroup server operating system (e.g., Windows NT 4.0 and Windows 2000 Server),  and .NET framework to its PC and workgroup operating systems
	Illegally entering into exclusive dealing and exclusionary agreements including its agreements with independent software vendors (developers), Apple Computer and Intel not to develop for, distribute or use a non-Microsoft compatible implementation of the Java platform

Sun also claims that Microsoft engaged in copyright infringement, unreasonably restrained trade, and engaged in unfair competition.

Some Historical Footnotes

We were particularly perplexed by Sun’s insistence that Microsoft had “delayed the market for Java” while it built its .Net product, followed by a comment that “of course, Java included WebONE.”

It seems to me someone at Sun needs a calendar here.  Java was doing just fine during the entire time period under discussion, with Sun, IBM, and others making glowing announcements about its health, the number of Java downloads, the amount of Java software, and the number of trained Java programmers.  Doesn’t sound like anyone was impeded from anything. 

Microsoft .Net was announced on June 22, 2000.  The BizTalk Server (used by many early customers) reached Beta in August, 2000.  Microsoft’s Fall, 2000 Development Conferences (various) included briefings on using various .Net servers (BizTalk, SQL Server and others).  The Microsoft .Net Framework and Visual Studio .Net development environment were announced in beta (with significant availability to early users) in November 2000.  (By November 2001, Microsoft, still in Beta with .Net and Visual Studio .Net had over 2.5 Million developers and a broad infrastructure of developers, tool providers, and training underway.)  Microsoft has long made it a business practice to have very large, sometimes long, betas for major software releases.  Competitors may find this practice annoying, but it is scarcely, in itself, illegal.

Sun ONE was announced in February, 2001 and first shipped in October 2001.  Sun tried to say that it had always been a proponent of Web Services, but the press and analyst reaction was that Sun was late and that the initial offering was thin. We may not understand something here, but I don’t believe the dates are in question. 

Sun seeks not only the Preliminary Injunction (which we doubt they’ll get), but also a permanent injunction that closely tracks the demands of the nine non-settling states in the current DOJ case in demanding a disclosure and licensing of proprietary interfaces, protocols, and formats, and unbundling of products tied to Windows including Internet Explorer, IIS, and the .Net framework.

Sun is also seeking damages in an undetermined amount which Sun lawyers estimated to be at first “substantial” and then “more than $1 billion.”  They are, of course, seeking that these be trebled under the punitive damages provisions of the antitrust law.

We’d guess that this will be one of many law suits Microsoft will have to deal with in the wake of the DOJ findings and settlement.  Given the considerable costs of these undertakings we’d doubt that litigants like Sun will settle for less than substantial sums, but we’d guess that substantial is a lot less than the saber rattling that occurs at the start. 

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