States seek Microsoft penalties

WASHINGTON -- Monday, nine states asked a judge to impose tougher penalties against Microsoft, citing internal memos as evidence the software giant had persisted in thwarting competitors even as it was being found guilty of antitrust violations. \nThe states asked U.S. District Judge Colleen Kollar-Kotelly to force Microsoft to create a stripped-down version of its flagship Windows software that could incorporate competitors' features and to divulge the blueprints for its Internet Explorer browser. \nThe latter software dominates the Web browser market and is a centerpiece of Microsoft's Internet-based business strategy. \nMicrosoft lawyers countered that the proposed penalties would force the company to pull Windows off the market. "At the end of the day, the product would have very little value," lawyer Dan Webb argued. \nBoth sides made opening statements in a court proceeding to determine whether Microsoft should face additional penalties beyond those in its antitrust settlement with the federal government last fall. \nThe states opened their case by airing Microsoft executives' words in e-mails and internal memos detailing how the company responded to threats from competitors. \nDell Computer had plans to put Linux, a free operating system that competes with Windows, on some of its computers in 2000, the states' lawyers said. But Dell abandoned the plans under pressure from Microsoft, they said. \nSteven Kuney, a lawyer for the states, cited an internal document that laid out talking points for a meeting between Microsoft chief executive Steve Ballmer and Dell executives. \nMicrosoft would give "a reminder of the meat behind why it's smart to be partnered with," the document stated. "It's untenable for our 'Premier Partner' on Windows 2000 to be doing aggressive market development for another operating system," the talking points said. \nIn an e-mail to Microsoft chairman Bill Gates, Joachim Kempin, then in charge of computer maker relations for Microsoft, said he was "thinking of hitting the (computer makers) harder than in the past with anti-Linux actions." \nBy June 2001, Dell laid off its head Linux employee and reassigned the rest of his team. Lawyers for the states said Microsoft pursued a similar course with Compaq when that company flirted with Linux in 1999. \nKuney said the events showed a "pattern of conduct" that can only be addressed by imposing tough new sanctions. \nWebb, Microsoft's lawyer, argued against the additional penalties, saying they would let competitors confiscate billions of dollars worth of Microsoft's intellectual property. \n"They're actually much worse" than the penalty sought by the government earlier in the case that would have broken Microsoft into two separate companies, Webb said. \nMicrosoft argued the proposal to force it to release a "modular" version of Windows, in which Microsoft features can be removed in favor of alternatives from competitors. They believed it would be impossible to carry out. \nMicrosoft estimates the penalty would create over 4,000 "mutant" versions of Windows that the company would have to test to make sure they worked properly, Webb said. \nOver the course of the hearing, which is expected to last two months, Microsoft plans to call top Microsoft executives, including Gates and Ballmer, as witnesses. \nThe states that rejected the government's settlement with Microsoft and have continued to pursue the antitrust case are: Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia. The District of Columbia also rejected the settlement. \nThe proposed federal settlement would prevent Microsoft from retaliating against partners for using non-Microsoft products; require the company to disclose a limited number of its software blueprints so software developers can make compatible products, and make it easier for consumers to remove icons for extra Windows features.