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UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF COLUMBIA

____________________________________ 
) 
UNITED STATES OF AMERICA, ) 
) 
Plaintiff, ) 
) 
v. ) Civil Action No. 98-1232 (TPJ) 
) 
MICROSOFT CORPORATION, ) 
) 
Defendant. ) 
____________________________________) 
) 
STATE OF NEW YORK, et al., ) 
) 
Plaintiffs, ) 
) 
v. ) 
) 
MICROSOFT CORPORATION, ) 
) 
Defendant. ) 
____________________________________) Civil Action No. 98-1233 (TPJ) 
) 
MICROSOFT CORPORATION, ) 
) 
Counterclaim-Plaintiff, ) 
) 
) 
ELIOT SPITZER, attorney general of the ) 
State of New York, in his official ) 
capacity, et al., ) 
) 
Counterclaim-Defendants. ) 
____________________________________) 



CONCLUSIONS OF LAW


The United States, nineteen individual states, and the District of Columbia ("the plaintiffs") bring
these consolidated civil enforcement actions against defendant Microsoft Corporation ("Microsoft")
under the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2. The plaintiffs charge, in essence, that
Microsoft has waged an unlawful campaign in defense of its monopoly position in the market for
operating systems designed to run on Intel-compatible personal computers ("PCs"). Specifically,
the plaintiffs contend that Microsoft violated §2 of the Sherman Act by engaging in a series of
exclusionary, anticompetitive, and predatory acts to maintain its monopoly power. They also assert
that Microsoft attempted, albeit unsuccessfully to date, to monopolize the Web browser market,
likewise in violation of §2. Finally, they contend that certain steps taken by Microsoft as part of its
campaign to protect its monopoly power, namely tying its browser to its operating system and
entering into exclusive dealing arrangements, violated § 1 of the Act. 

Upon consideration of the Court's Findings of Fact ("Findings"), filed herein on November 5,
1999, as amended on December 21, 1999, the proposed conclusions of law submitted by the
parties, the briefs of amici curiae, and the argument of counsel thereon, the Court concludes that
Microsoft maintained its monopoly power by anticompetitive means and attempted to monopolize
the Web browser market, both in violation of § 2. Microsoft also violated § 1 of the Sherman Act
by unlawfully tying its Web browser to its operating system. The facts found do not support the
conclusion, however, that the effect of Microsoft's marketing arrangements with other companies
constituted unlawful exclusive dealing under criteria established by leading decisions under § 1. 

The nineteen states and the District of Columbia ("the plaintiff states") seek to ground liability
additionally under their respective antitrust laws. The Court is persuaded that the evidence in the
record proving violations of the Sherman Act also satisfies the elements of analogous causes of
action arising under the laws of each plaintiff state. For this reason, and for others stated below, the
Court holds Microsoft liable under those particular state laws as well. 

I. SECTION TWO OF THE SHERMAN ACT 

A. Maintenance of Monopoly Power by Anticompetitive Means 

Section 2 of the Sherman Act declares that it is unlawful for a person or firm to "monopolize . . .
any part of the trade or commerce among the several States, or with foreign nations . . . ." 15
U.S.C. § 2. This language operates to limit the means by which a firm may lawfully either acquire
or perpetuate monopoly power. Specifically, a firm violates § 2 if it attains or preserves monopoly
power through anticompetitive acts. See United States v. Grinnell Corp., 384 U.S. 563, 570-71
(1966) ("The offense of monopoly power under § 2 of the Sherman Act has two elements: (1) the
possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance
of that power as distinguished from growth or development as a consequence of a superior
product, business acumen, or historic accident."); Eastman Kodak Co. v. Image Technical
Services, Inc., 504 U.S. 451, 488 (1992) (Scalia, J., dissenting) ("Our § 2 monopolization
doctrines are . . . directed to discrete situations in which a defendant's possession of substantial
market power, combined with his exclusionary or anticompetitive behavior, threatens to defeat or
forestall the corrective forces of competition and thereby sustain or extend the defendant's
agglomeration of power."). 

1. Monopoly Power 

The threshold element of a § 2 monopolization offense being "the possession of monopoly power in
the relevant market," Grinnell, 384 U.S. at 570, the Court must first ascertain the boundaries of the
commercial activity that can be termed the "relevant market." See Walker Process Equip., Inc. v.
Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) ("Without a definition of [the relevant]
market there is no way to measure [defendant's] ability to lessen or destroy competition."). Next,
the Court must assess the defendant's actual power to control prices in - or to exclude competition
from - that market. See United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 391
(1956) ("Monopoly power is the power to control prices or exclude competition."). 

In this case, the plaintiffs postulated the relevant market as being the worldwide licensing of
Intel-compatible PC operating systems. Whether this zone of commercial activity actually qualifies
as a market, "monopolization of which may be illegal," depends on whether it includes all products
"reasonably interchangeable by consumers for the same purposes." du Pont, 351 U.S. at 395.
SeeRothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986)
("Because the ability of consumers to turn to other suppliers restrains a firm from raising prices
above the competitive level, the definition of the 'relevant market' rests on a determination of
available substitutes."). 

The Court has already found, based on the evidence in this record, that there are currently no
products - and that there are not likely to be any in the near future - that a significant percentage of
computer users worldwide could substitute for Intel-compatible PC operating systems without
incurring substantial costs. Findings ¶¶ 18-29. The Court has further found that no firm not
currently marketing Intel-compatible PC operating systems could start doing so in a way that
would, within a reasonably short period of time, present a significant percentage of such consumers
with a viable alternative to existing Intel-compatible PC operating systems. Id. ¶¶ 18, 30-32. From
these facts, the Court has inferred that if a single firm or cartel controlled the licensing of all
Intel-compatible PC operating systems worldwide, it could set the price of a license substantially
above that which would be charged in a competitive market - and leave the price there for a
significant period of time - without losing so many customers as to make the action unprofitable. Id.
¶ 18. This inference, in turn, has led the Court to find that the licensing of all Intel-compatible PC
operating systems worldwide does in fact constitute the relevant market in the context of the
plaintiffs' monopoly maintenance claim. Id. 

The plaintiffs proved at trial that Microsoft possesses a dominant, persistent, and increasing share
of the relevant market. Microsoft's share of the worldwide market for Intel-compatible PC
operating systems currently exceeds ninety-five percent, and the firm's share would stand well
above eighty percent even if the Mac OS were included in the market. Id. ¶ 35. The plaintiffs also
proved that the applications barrier to entry protects Microsoft's dominant market share. Id. ¶¶
36-52. This barrier ensures that no Intel-compatible PC operating system other than Windows can
attract significant consumer demand, and the barrier would operate to the same effect even if
Microsoft held its prices substantially above the competitive level for a protracted period of time.
Id. Together, the proof of dominant market share and the existence of a substantial barrier to
effective entry create the presumption that Microsoft enjoys monopoly power. See United States v.
AT&T Co., 524 F. Supp. 1336, 1347-48 (D.D.C. 1981) ("a persuasive showing . . . that
defendants have monopoly power . . . through various barriers to entry, . . . in combination with the
evidence of market shares, suffice[s] at least to meet the government's initial burden, and the
burden is then appropriately placed upon defendants to rebut the existence and significance of
barriers to entry"), quoted with approval inSouthern Pac. Communications Co. v. AT&T Co., 740
F.2d 980, 1001-02 (D.C. Cir. 1984). 

At trial, Microsoft attempted to rebut the presumption of monopoly power with evidence of both
putative constraints on its ability to exercise such power and behavior of its own that is supposedly
inconsistent with the possession of monopoly power. None of the purported constraints, however,
actually deprive Microsoft of "the ability (1) to price substantially above the competitive level and
(2) to persist in doing so for a significant period without erosion by new entry or expansion." IIA
Phillip E. Areeda, Herbert Hovenkamp & John L. Solow, Antitrust Law ¶ 501, at 86 (1995)
(emphasis in original); see Findings ¶¶ 57-60. Furthermore, neither Microsoft's efforts at technical
innovation nor its pricing behavior is inconsistent with the possession of monopoly power. Id. ¶¶
61-66. 

Even if Microsoft's rebuttal had attenuated the presumption created by the prima facie showing of
monopoly power, corroborative evidence of monopoly power abounds in this record: Neither
Microsoft nor its OEM customers believe that the latter have - or will have anytime soon - even a
single, commercially viable alternative to licensing Windows for pre-installation on their PCs. Id. ¶¶
53-55; cf. Rothery, 792 F.2d at 219 n.4 ("we assume that economic actors usually have accurate
perceptions of economic realities"). Moreover, over the past several years, Microsoft has
comported itself in a way that could only be consistent with rational behavior for a
profit-maximizing firm if the firm knew that it possessed monopoly power, and if it was motivated
by a desire to preserve the barrier to entry protecting that power. Findings ¶¶ 67, 99, 136, 141,
215-16, 241, 261-62, 286, 291, 330, 355, 393, 407. 

In short, the proof of Microsoft's dominant, persistent market share protected by a substantial
barrier to entry, together with Microsoft's failure to rebut that prima facie showing effectively and
the additional indicia of monopoly power, have compelled the Court to find as fact that Microsoft
enjoys monopoly power in the relevant market. Id. ¶ 33. 

2. Maintenance of Monopoly Power by Anticompetitive Means 

In a § 2 case, once it is proved that the defendant possesses monopoly power in a relevant market,
liability for monopolization depends on a showing that the defendant used anticompetitive methods
to achieve or maintain its position. See United States v. Grinnell, 384 U.S. 563, 570-71 (1966);
Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 488 (1992) (Scalia, J.,
dissenting); Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1353 (Fed. Cir. 1999). Prior cases
have established an analytical approach to determining whether challenged conduct should be
deemed anticompetitive in the context of a monopoly maintenance claim. The threshold question in
this analysis is whether the defendant's conduct is "exclusionary" - that is, whether it has restricted
significantly, or threatens to restrict significantly, the ability of other firms to compete in the relevant
market on the merits of what they offer customers. See Eastman Kodak, 504 U.S. at 488 (Scalia,
J., dissenting) (§ 2 is "directed to discrete situations" in which the behavior of firms with monopoly
power "threatens to defeat or forestall the corrective forces of competition").(1) 

If the evidence reveals a significant exclusionary impact in the relevant market, the defendant's
conduct will be labeled "anticompetitive" - and liability will attach - unless the defendant comes
forward with specific, procompetitive business motivations that explain the full extent of its
exclusionary conduct. See Eastman Kodak, 504 U.S. at 483 (declining to grant defendant's motion
for summary judgment because factual questions remained as to whether defendant's asserted
justifications were sufficient to explain the exclusionary conduct or were instead merely pretextual);
see also Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 605 n.32 (1985)
(holding that the second element of a monopoly maintenance claim is satisfied by proof of
"'behavior that not only (1) tends to impair the opportunities of rivals, but also (2) either does not
further competition on the merits or does so in an unnecessarily restrictive way'") (quoting III Phillip
E. Areeda & Donald F. Turner, Antitrust Law ¶ 626b, at 78 (1978)). 

If the defendant with monopoly power consciously antagonized its customers by making its
products less attractive to them - or if it incurred other costs, such as large outlays of development
capital and forfeited opportunities to derive revenue from it - with no prospect of compensation
other than the erection or preservation of barriers against competition by equally efficient firms, the
Court may deem the defendant's conduct "predatory." As the D.C. Circuit stated in Neumann v.
Reinforced Earth Co., 

[P]redation involves aggression against business rivals through the use of business practices that
would not be considered profit maximizing except for the expectation that (1) actual rivals will be
driven from the market, or the entry of potential rivals blocked or delayed, so that the predator will
gain or retain a market share sufficient to command monopoly profits, or (2) rivals will be
chastened sufficiently to abandon competitive behavior the predator finds threatening to its
realization of monopoly profits. 


786 F.2d 424, 427 (D.C. Cir. 1986). 

Proof that a profit-maximizing firm took predatory action should suffice to demonstrate the threat of
substantial exclusionary effect; to hold otherwise would be to ascribe irrational behavior to the
defendant. Moreover, predatory conduct, by definition as well as by nature, lacks procompetitive
business motivation. See Aspen Skiing, 472 U.S. at 610-11 (evidence indicating that defendant's
conduct was "motivated entirely by a decision to avoid providing any benefits" to a rival supported
the inference that defendant's conduct "was not motivated by efficiency concerns"). In other words,
predatory behavior is patently anticompetitive. Proof that a firm with monopoly power engaged in
such behavior thus necessitates a finding of liability under § 2. 

In this case, Microsoft early on recognized middleware as the Trojan horse that, once having, in
effect, infiltrated the applications barrier, could enable rival operating systems to enter the market
for Intel-compatible PC operating systems unimpeded. Simply put, middleware threatened to
demolish Microsoft's coveted monopoly power. Alerted to the threat, Microsoft strove over a
period of approximately four years to prevent middleware technologies from fostering the
development of enough full-featured, cross-platform applications to erode the applications barrier.
In pursuit of this goal, Microsoft sought to convince developers to concentrate on
Windows-specific APIs and ignore interfaces exposed by the two incarnations of middleware that
posed the greatest threat, namely, Netscape's Navigator Web browser and Sun's implementation
of the Java technology. Microsoft's campaign succeeded in preventing - for several years, and
perhaps permanently - Navigator and Java from fulfilling their potential to open the market for
Intel-compatible PC operating systems to competition on the merits. Findings ¶¶ 133, 378.
Because Microsoft achieved this result through exclusionary acts that lacked procompetitive
justification, the Court deems Microsoft's conduct the maintenance of monopoly power by
anticompetitive means. 

a. Combating the Browser Threat 

The same ambition that inspired Microsoft's efforts to induce Intel, Apple, RealNetworks and IBM
to desist from certain technological innovations and business initiatives - namely, the desire to
preserve the applications barrier - motivated the firm's June 1995 proposal that Netscape abstain
from releasing platform-level browsing software for 32-bit versions of Windows. See id. ¶¶ 79-80,
93-132. This proposal, together with the punitive measures that Microsoft inflicted on Netscape
when it rebuffed the overture, illuminates the context in which Microsoft's subsequent behavior
toward PC manufacturers ("OEMs"), Internet access providers ("IAPs"), and other firms must be
viewed. 

When Netscape refused to abandon its efforts to develop Navigator into a substantial platform for
applications development, Microsoft focused its efforts on minimizing the extent to which
developers would avail themselves of interfaces exposed by that nascent platform. Microsoft
realized that the extent of developers' reliance on Netscape's browser platform would depend
largely on the size and trajectory of Navigator's share of browser usage. Microsoft thus set out to
maximize Internet Explorer's share of browser usage at Navigator's expense. Id. ¶¶ 133, 359-61.
The core of this strategy was ensuring that the firms comprising the most effective channels for the
generation of browser usage would devote their distributional and promotional efforts to Internet
Explorer rather than Navigator. Recognizing that pre-installation by OEMs and bundling with the
proprietary software of IAPs led more directly and efficiently to browser usage than any other
practices in the industry, Microsoft devoted major efforts to usurping those two channels. Id. ¶
143. 


i. The OEM Channel 

With respect to OEMs, Microsoft's campaign proceeded on three fronts. First, Microsoft bound
Internet Explorer to Windows with contractual and, later, technological shackles in order to ensure
the prominent (and ultimately permanent) presence of Internet Explorer on every Windows user's
PC system, and to increase the costs attendant to installing and using Navigator on any PCs running
Windows. Id. ¶¶ 155-74. Second, Microsoft imposed stringent limits on the freedom of OEMs to
reconfigure or modify Windows 95 and Windows 98 in ways that might enable OEMs to generate
usage for Navigator in spite of the contractual and technological devices that Microsoft had
employed to bind Internet Explorer to Windows. Id. ¶¶ 202-29. Finally, Microsoft used incentives
and threats to induce especially important OEMs to design their distributional, promotional and
technical efforts to favor Internet Explorer to the exclusion of Navigator. Id. ¶¶ 230-38. 

Microsoft's actions increased the likelihood that pre-installation of Navigator onto Windows would
cause user confusion and system degradation, and therefore lead to higher support costs and
reduced sales for the OEMs. Id. ¶¶ 159, 172. Not willing to take actions that would jeopardize
their already slender profit margins, OEMs felt compelled by Microsoft's actions to reduce
drastically their distribution and promotion of Navigator. Id. ¶¶ 239, 241. The substantial
inducements that Microsoft held out to the largest OEMs only further reduced the distribution and
promotion of Navigator in the OEM channel. Id. ¶¶ 230, 233. The response of OEMs to
Microsoft's efforts had a dramatic, negative impact on Navigator's usage share. Id. ¶ 376. The
drop in usage share, in turn, has prevented Navigator from being the vehicle to open the relevant
market to competition on the merits. Id. ¶¶ 377-78, 383. 

Microsoft fails to advance any legitimate business objectives that actually explain the full extent of
this significant exclusionary impact. The Court has already found that no quality-related or technical
justifications fully explain Microsoft's refusal to license Windows 95 to OEMs without version 1.0
through 4.0 of Internet Explorer, or its refusal to permit them to uninstall versions 3.0 and 4.0. Id.
¶¶ 175-76. The same lack of justification applies to Microsoft's decision not to offer a browserless
version of Windows 98 to consumers and OEMs, id. ¶ 177, as well as to its claim that it could
offer "best of breed" implementations of functionalities in Web browsers. With respect to the latter
assertion, Internet Explorer is not demonstrably the current "best of breed" Web browser, nor is it
likely to be so at any time in the immediate future. The fact that Microsoft itself was aware of this
reality only further strengthens the conclusion that Microsoft's decision to tie Internet Explorer to
Windows cannot truly be explained as an attempt to benefit consumers and improve the efficiency
of the software market generally, but rather as part of a larger campaign to quash innovation that
threatened its monopoly position. Id. ¶¶ 195, 198. 

To the extent that Microsoft still asserts a copyright defense, relying upon federal copyright law as
a justification for its various restrictions on OEMs, that defense neither explains nor operates to
immunize Microsoft's conduct under the Sherman Act. As a general proposition, Microsoft argues
that the federal Copyright Act, 17 U.S.C. §101 et seq., endows the holder of a valid copyright in
software with an absolute right to prevent licensees, in this case the OEMs, from shipping modified
versions of its product without its express permission. In truth, Windows 95 and Windows 98 are
covered by copyright registrations, Findings ¶ 228, that "constitute prima facie evidence of the
validity of the copyright." 17 U.S.C. §410(c). But the validity of Microsoft's copyrights has never
been in doubt; the issue is what, precisely, they protect. 

Microsoft has presented no evidence that the contractual (or the technological) restrictions it placed
on OEMs' ability to alter Windows derive from any of the enumerated rights explicitly granted to a
copyright holder under the Copyright Act. Instead, Microsoft argues that the restrictions "simply
restate" an expansive right to preserve the "integrity"of its copyrighted software against any
"distortion," "truncation," or "alteration," a right nowhere mentioned among the Copyright Act's list
of exclusive rights, 17 U.S.C. §106, thus raising some doubt as to its existence. See Twentieth
Century Music Corp. v. Aiken, 422 U.S. 151, 155 (1973) (not all uses of a work are within
copyright holder's control; rights limited to specifically granted "exclusive rights"); cf. 17 U.S.C. §
501(a) (infringement means violating specifically enumerated rights).(2) 

It is also well settled that a copyright holder is not by reason thereof entitled to employ the
perquisites in ways that directly threaten competition. See, e.g., Eastman Kodak, 504 U.S. at 479
n.29 ("The Court has held many times that power gained through some natural and legal advantage
such as a . . . copyright, . . . can give rise to liability if 'a seller exploits his dominant position in one
market to expand his empire into the next.'") (quoting Times-Picayune Pub. Co. v. United States,
345 U.S. 594, 611 (1953)); Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409,
421 (1986); Data General Corp. v. Grumman Systems Support Corp., 36 F.3d 1147, 1186 n.63
(1st Cir. 1994) (a copyright does not exempt its holder from antitrust inquiry where the copyright is
used as part of a scheme to monopolize); see also Image Technical Services, Inc. v. Eastman
Kodak Co., 125 F.3d 1195, 1219 (9th Cir. 1997), cert. denied, 523 U.S. 1094 (1998) ("Neither
the aims of intellectual property law, nor the antitrust laws justify allowing a monopolist to rely upon
a pretextual business justification to mask anticompetitive conduct."). Even constitutional privileges
confer no immunity when they are abused for anticompetitive purposes. See Lorain Journal Co. v.
United States, 342 U.S. 143, 155-56 (1951). The Court has already found that the true impetus
behind Microsoft's restrictions on OEMs was not its desire to maintain a somewhat amorphous
quality it refers to as the "integrity" of the Windows platform, nor even to ensure that Windows
afforded a uniform and stable platform for applications development. Microsoft itself engendered,
or at least countenanced, instability and inconsistency by permitting Microsoft-friendly
modifications to the desktop and boot sequence, and by releasing updates to Internet Explorer
more frequently than it released new versions of Windows. Findings ¶ 226. Add to this the fact that
the modifications OEMs desired to make would not have removed or altered any Windows APIs,
and thus would not have disrupted any of Windows' functionalities, and it is apparent that
Microsoft's conduct is effectively explained by its foreboding that OEMs would pre-install and give
prominent placement to middleware like Navigator that could attract enough developer attention to
weaken the applications barrier to entry. Id. ¶ 227. In short, if Microsoft was truly inspired by a
genuine concern for maximizing consumer satisfaction, as well as preserving its substantial
investment in a worthy product, then it would have relied more on the power of the very
competitive PC market, and less on its own market power, to prevent OEMs from making
modifications that consumers did not want. Id. ¶¶ 225, 228-29. 

ii. The IAP Channel 

Microsoft adopted similarly aggressive measures to ensure that the IAP channel would generate
browser usage share for Internet Explorer rather than Navigator. To begin with, Microsoft licensed
Internet Explorer and the Internet Explorer Access Kit to hundreds of IAPs for no charge. Id. ¶¶
250-51. Then, Microsoft extended valuable promotional treatment to the ten most important IAPs
in exchange for their commitment to promote and distribute Internet Explorer and to exile
Navigator from the desktop. Id. ¶¶ 255-58, 261, 272, 288-90, 305-06. Finally, in exchange for
efforts to upgrade existing subscribers to client software that came bundled with Internet Explorer
instead of Navigator, Microsoft granted rebates - and in some cases made outright payments - to
those same IAPs. Id. ¶¶ 259-60, 295. Given the importance of the IAP channel to browser usage
share, it is fair to conclude that these inducements and restrictions contributed significantly to the
drastic changes that have in fact occurred in Internet Explorer's and Navigator's respective usage
shares. Id. ¶¶ 144-47, 309-10. Microsoft's actions in the IAP channel thereby contributed
significantly to preserving the applications barrier to entry. 

There are no valid reasons to justify the full extent of Microsoft's exclusionary behavior in the IAP
channel. A desire to limit free riding on the firm's investment in consumer-oriented features, such as
the Referral Server and the Online Services Folder, can, in some circumstances, qualify as a
procompetitive business motivation; but that motivation does not explain the full extent of the
restrictions that Microsoft actually imposed upon IAPs. Under the terms of the agreements, an
IAP's failure to keep Navigator shipments below the specified percentage primed Microsoft's
contractual right to dismiss the IAP from its own favored position in the Referral Server or the
Online Services Folder. This was true even if the IAP had refrained from promoting Navigator in its
client software included with Windows, had purged all mention of Navigator from any Web site
directly connected to the Referral Server, and had distributed no browser other than Internet
Explorer to the new subscribers it gleaned from the Windows desktop. Id. ¶¶ 258, 262, 289.
Thus, Microsoft's restrictions closed off a substantial amount of distribution that would not have
constituted a free ride to Navigator. 

Nor can an ostensibly procompetitive desire to "foster brand association" explain the full extent of
Microsoft's restrictions. If Microsoft's only concern had been brand association, restrictions on the
ability of IAPs to promote Navigator likely would have sufficed. It is doubtful that Microsoft would
have paid IAPs to induce their existing subscribers to drop Navigator in favor of Internet Explorer
unless it was motivated by a desire to extinguish Navigator as a threat. See id. ¶¶ 259, 295. More
generally, it is crucial to an understanding of Microsoft's intentions to recognize that Microsoft paid
for the fealty of IAPs with large investments in software development for their benefit, conceded
opportunities to take a profit, suffered competitive disadvantage to Microsoft's own OLS, and
gave outright bounties. Id. ¶¶ 259-60, 277, 284-86, 295. Considering that Microsoft never
intended to derive appreciable revenue from Internet Explorer directly, id. ¶¶ 136-37, these
sacrifices could only have represented rational business judgments to the extent that they promised
to diminish Navigator's share of browser usage and thereby contribute significantly to eliminating a
threat to the applications barrier to entry. Id. ¶ 291. Because the full extent of Microsoft's
exclusionary initiatives in the IAP channel can only be explained by the desire to hinder competition
on the merits in the relevant market, those initiatives must be labeled anticompetitive. 

In sum, the efforts Microsoft directed at OEMs and IAPs successfully ostracized Navigator as a
practical matter from the two channels that lead most efficiently to browser usage. Even when
viewed independently, these two prongs of Microsoft's campaign threatened to "forestall the
corrective forces of competition" and thereby perpetuate Microsoft's monopoly power in the
relevant market. Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 488
(1992) (Scalia, J., dissenting). Therefore, whether they are viewed separately or together, the
OEM and IAP components of Microsoft's anticompetitive campaign merit a finding of liability
under § 2. 

iii. ICPs, ISVs and Apple 

No other distribution channels for browsing software approach the efficiency of OEM
pre-installation and IAP bundling. Findings ¶¶ 144-47. Nevertheless, protecting the applications
barrier to entry was so critical to Microsoft that the firm was willing to invest substantial resources
to enlist ICPs, ISVs, and Apple in its campaign against the browser threat. By extracting from
Apple terms that significantly diminished the usage of Navigator on the Mac OS, Microsoft helped
to ensure that developers would not view Navigator as truly cross-platform middleware. Id. ¶ 356.
By granting ICPs and ISVs free licenses to bundle Internet Explorer with their offerings, and by
exchanging other valuable inducements for their agreement to distribute, promote and rely on
Internet Explorer rather than Navigator, Microsoft directly induced developers to focus on its own
APIs rather than ones exposed by Navigator. Id. ¶¶ 334-35, 340. These measures supplemented
Microsoft's efforts in the OEM and IAP channels. 

Just as they fail to account for the measures that Microsoft took in the IAP channel, the goals of
preventing free riding and preserving brand association fail to explain the full extent of Microsoft's
actions in the ICP channel. Id. ¶¶ 329-30. With respect to the ISV agreements, Microsoft has put
forward no procompetitive business ends whatsoever to justify their exclusionary terms. See id. ¶¶
339-40. Finally, Microsoft's willingness to make the sacrifices involved in cancelling Mac Office,
and the concessions relating to browsing software that it demanded from Apple, can only be
explained by Microsoft's desire to protect the applications barrier to entry from the threat posed by
Navigator. Id. ¶ 355. Thus, once again, Microsoft is unable to justify the full extent of its restrictive
behavior. 

b. Combating the Java Threat 

As part of its grand strategy to protect the applications barrier, Microsoft employed an array of
tactics designed to maximize the difficulty with which applications written in Java could be ported
from Windows to other platforms, and vice versa. The first of these measures was the creation of a
Java implementation for Windows that undermined portability and was incompatible with other
implementations. Id. ¶¶ 387-93. Microsoft then induced developers to use its implementation of
Java rather than Sun-compliant ones. It pursued this tactic directly, by means of subterfuge and
barter, and indirectly, through its campaign to minimize Navigator's usage share. Id. ¶¶ 394,
396-97, 399-400, 401-03. In a separate effort to prevent the development of easily portable Java
applications, Microsoft used its monopoly power to prevent firms such as Intel from aiding in the
creation of cross-platform interfaces. Id. ¶¶ 404-06. 

Microsoft's tactics induced many Java developers to write their applications using Microsoft's
developer tools and to refrain from distributing Sun-compliant JVMs to Windows users. This
stratagem has effectively resulted in fewer applications that are easily portable. Id. ¶ 398. What is
more, Microsoft's actions interfered with the development of new cross-platform Java interfaces.
Id. ¶ 406. It is not clear whether, absent Microsoft's machinations, Sun's Java efforts would by
now have facilitated porting between Windows and other platforms to a degree sufficient to render
the applications barrier to entry vulnerable. It is clear, however, that Microsoft's actions markedly
impeded Java's progress to that end. Id. ¶ 407. The evidence thus compels the conclusion that
Microsoft's actions with respect to Java have restricted significantly the ability of other firms to
compete on the merits in the market for Intel-compatible PC operating systems. 

Microsoft's actions to counter the Java threat went far beyond the development of an attractive
alternative to Sun's implementation of the technology. Specifically, Microsoft successfully pressured
Intel, which was dependent in many ways on Microsoft's good graces, to abstain from aiding in
Sun's and Netscape's Java development work. Id. ¶¶ 396, 406. Microsoft also deliberately
designed its Java development tools so that developers who were opting for portability over
performance would nevertheless unwittingly write Java applications that would run only on
Windows. Id. ¶ 394. Moreover, Microsoft's means of luring developers to its Java implementation
included maximizing Internet Explorer's share of browser usage at Navigator's expense in ways the
Court has already held to be anticompetitive. See supra, § I.A.2.a. Finally, Microsoft impelled
ISVs, which are dependent upon Microsoft for technical information and certifications relating to
Windows, to use and distribute Microsoft's version of the Windows JVM rather than any
Sun-compliant version. Id. ¶¶ 401-03. 

These actions cannot be described as competition on the merits, and they did not benefit
consumers. In fact, Microsoft's actions did not even benefit Microsoft in the short run, for the firm's
efforts to create incompatibility between its JVM for Windows and others' JVMs for Windows
resulted in fewer total applications being able to run on Windows than otherwise would have been
written. Microsoft was willing nevertheless to obstruct the development of Windows-compatible
applications if they would be easy to port to other platforms and would thus diminish the
applications barrier to entry. Id. ¶ 407. 

c. Microsoft's Conduct Taken As a Whole 

As the foregoing discussion illustrates, Microsoft's campaign to protect the applications barrier
from erosion by network-centric middleware can be broken down into discrete categories of
activity, several of which on their own independently satisfy the second element of a § 2 monopoly
maintenance claim. But only when the separate categories of conduct are viewed, as they should
be, as a single, well-coordinated course of action does the full extent of the violence that Microsoft
has done to the competitive process reveal itself. See Continental Ore Co. v. Union Carbide &
Carbon Corp., 370 U.S. 690, 699 (1962) (counseling that in Sherman Act cases "plaintiffs should
be given the full benefit of their proof without tightly compartmentalizing the various factual
components and wiping the slate clean after scrutiny of each"). In essence, Microsoft mounted a
deliberate assault upon entrepreneurial efforts that, left to rise or fall on their own merits, could well
have enabled the introduction of competition into the market for Intel-compatible PC operating
systems. Id. ¶ 411. While the evidence does not prove that they would have succeeded absent
Microsoft's actions, it does reveal that Microsoft placed an oppressive thumb on the scale of
competitive fortune, thereby effectively guaranteeing its continued dominance in the relevant
market. More broadly, Microsoft's anticompetitive actions trammeled the competitive process
through which the computer software industry generally stimulates innovation and conduces to the
optimum benefit of consumers. Id. ¶ 412. 

Viewing Microsoft's conduct as a whole also reinforces the conviction that it was predacious.
Microsoft paid vast sums of money, and renounced many millions more in lost revenue every year,
in order to induce firms to take actions that would help enhance Internet Explorer's share of
browser usage at Navigator's expense. Id. ¶ 139. These outlays cannot be explained as
subventions to maximize return from Internet Explorer. Microsoft has no intention of ever charging
for licenses to use or distribute its browser. Id. ¶¶ 137-38. Moreover, neither the desire to bolster
demand for Windows nor the prospect of ancillary revenues from Internet Explorer can explain the
lengths to which Microsoft has gone. In fact, Microsoft has expended wealth and foresworn
opportunities to realize more in a manner and to an extent that can only represent a rational
investment if its purpose was to perpetuate the applications barrier to entry. Id. ¶¶ 136, 139-42.
Because Microsoft's business practices "would not be considered profit maximizing except for the
expectation that . . . the entry of potential rivals" into the market for Intel-compatible PC operating
systems will be "blocked or delayed," Neumann v. Reinforced Earth Co., 786 F.2d 424, 427
(D.C. Cir. 1986), Microsoft's campaign must be termed predatory. Since the Court has already
found that Microsoft possesses monopoly power, see supra, § I.A.1, the predatory nature of the
firm's conduct compels the Court to hold Microsoft liable under § 2 of the Sherman Act. 

B. Attempting to Obtain Monopoly Power in a Second Market by Anticompetitive Means



In addition to condemning actual monopolization, § 2 of the Sherman Act declares that it is
unlawful for a person or firm to "attempt to monopolize . . . any part of the trade or commerce
among the several States, or with foreign nations . . . ." 15 U.S.C. § 2. Relying on this language, the
plaintiffs assert that Microsoft's anticompetitive efforts to maintain its monopoly power in the
market for Intel-compatible PC operating systems warrant additional liability as an illegal attempt to
amass monopoly power in "the browser market." The Court agrees. 

In order for liability to attach for attempted monopolization, a plaintiff generally must prove "(1) that
the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to
monopolize," and (3) that there is a "dangerous probability" that the defendant will succeed in
achieving monopoly power. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993).
Microsoft's June 1995 proposal that Netscape abandon the field to Microsoft in the market for
browsing technology for Windows, and its subsequent, well-documented efforts to overwhelm
Navigator's browser usage share with a proliferation of Internet Explorer browsers inextricably
attached to Windows, clearly meet the first element of the offense. 

The evidence in this record also satisfies the requirement of specific intent. Microsoft's effort to
convince Netscape to stop developing platform-level browsing software for the 32-bit versions of
Windows was made with full knowledge that Netscape's acquiescence in this market allocation
scheme would, without more, have left Internet Explorer with such a large share of browser usage
as to endow Microsoft with de facto monopoly power in the browser market. Findings ¶¶ 79-89. 

When Netscape refused to abandon the development of browsing software for 32-bit versions of
Windows, Microsoft's strategy for protecting the applications barrier became one of expanding
Internet Explorer's share of browser usage - and simultaneously depressing Navigator's share - to
an extent sufficient to demonstrate to developers that Navigator would never emerge as the
standard software employed to browse the Web. Id. ¶ 133. While Microsoft's top executives
never expressly declared acquisition of monopoly power in the browser market to be the objective,
they knew, or should have known, that the tactics they actually employed were likely to push
Internet Explorer's share to those extreme heights. Navigator's slow demise would leave a
competitive vacuum for only Internet Explorer to fill. Yet, there is no evidence that Microsoft tried -
or even considered trying - to prevent its anticompetitive campaign from achieving overkill. Under
these circumstances, it is fair to presume that the wrongdoer intended "the probable consequences
of its acts." IIIA Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 805b, at 324 (1996);
see also Spectrum Sports, 506 U.S. at 459 (proof of "'predatory' tactics . . . may be sufficient to
prove the necessary intent to monopolize, which is something more than an intent to compete
vigorously"). Therefore, the facts of this case suffice to prove the element of specific intent. 

Even if the first two elements of the offense are met, however, a defendant may not be held liable
for attempted monopolization absent proof that its anticompetitive conduct created a dangerous
probability of achieving the objective of monopoly power in a relevant market. Id. The evidence
supports the conclusion that Microsoft's actions did pose such a danger. 

At the time Microsoft presented its market allocation proposal to Netscape, Navigator's share of
browser usage stood well above seventy percent, and no other browser enjoyed more than a
fraction of the remainder. Findings ¶¶ 89, 372. Had Netscape accepted Microsoft's offer, nearly all
of its share would have devolved upon Microsoft, because at that point, no potential third-party
competitor could either claim to rival Netscape's stature as a browser company or match
Microsoft's ability to leverage monopoly power in the market for Intel-compatible PC operating
systems. In the time it would have taken an aspiring entrant to launch a serious effort to compete
against Internet Explorer, Microsoft could have erected the same type of barrier that protects its
existing monopoly power by adding proprietary extensions to the browsing software under its
control and by extracting commitments from OEMs, IAPs and others similar to the ones discussed
in § I.A.2, supra. In short, Netscape's assent to Microsoft's market division proposal would have,
instanter, resulted in Microsoft's attainment of monopoly power in a second market. It follows that
the proposal itself created a dangerous probability of that result. See United States v. American
Airlines, Inc., 743 F.2d 1114, 1118-19 (5th Cir. 1984) (fact that two executives "arguably" could
have implemented market-allocation scheme that would have engendered monopoly power was
sufficient for finding of dangerous probability). Although the dangerous probability was no longer
imminent with Netscape's rejection of Microsoft's proposal, "the probability of success at the time
the acts occur" is the measure by which liability is determined. Id. at 1118. 

This conclusion alone is sufficient to support a finding of liability for attempted monopolization. The
Court is nonetheless compelled to express its further conclusion that the predatory course of
conduct Microsoft has pursued since June of 1995 has revived the dangerous probability that
Microsoft will attain monopoly power in a second market. Internet Explorer's share of browser
usage has already risen above fifty percent, will exceed sixty percent by January 2001, and the
trend continues unabated. Findings ¶¶ 372-73; see M&M Medical Supplies & Serv., Inc. v.
Pleasant Valley Hosp., Inc., 981 F.2d 160, 168 (4th Cir. 1992) (en banc) ("A rising share may
show more probability of success than a falling share. . . . [C]laims involving greater than 50%
share should be treated as attempts at monopolization when the other elements for attempted
monopolization are also satisfied.") (citations omitted); see also IIIA Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law ¶ 807d, at 354-55 (1996) (acknowledging the significance of a large,
rising market share to the dangerous probability element). 

II. SECTION ONE OF THE SHERMAN ACT 

Section 1 of the Sherman Act prohibits "every contract, combination . . . , or conspiracy, in
restraint of trade or commerce . . . ." 15 U.S.C. § 1. Pursuant to this statute, courts have
condemned commercial stratagems that constitute unreasonable restraints on competition. See
Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977); Chicago Board of Trade v.
United States, 246 U.S. 231, 238-39 (1918), among them "tying arrangements" and "exclusive
dealing" contracts. Tying arrangements have been found unlawful where sellers exploit their market
power over one product to force unwilling buyers into acquiring another. See Jefferson Parish
Hospital District No. 2 v. Hyde, 466 U.S. 2, 12 (1984); Northern Pac. Ry. Co. v. United States,
356 U.S. 1, 6 (1958); Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 605 (1953).
Where agreements have been challenged as unlawful exclusive dealing, the courts have condemned
only those contractual arrangements that substantially foreclose competition in a relevant market by
significantly reducing the number of outlets available to a competitor to reach prospective
consumers of the competitor's product. See Tampa Electric Co. v. Nashville Coal Co., 365 U.S.
320, 327 (1961); Roland Machinery Co. v. Dresser Industries, Inc., 749 F.2d 380, 393 (7th Cir.
1984). 

A. Tying 

Liability for tying under § 1 exists where (1) two separate "products" are involved; (2) the
defendant affords its customers no choice but to take the tied product in order to obtain the tying
product; (3) the arrangement affects a substantial volume of interstate commerce; and (4) the
defendant has "market power" in the tying product market. Jefferson Parish, 466 U.S. at 12-18.
The Supreme Court has since reaffirmed this test in Eastman Kodak Co. v. Image Technical
Services, Inc., 504 U.S. 451, 461-62 (1992). All four elements are required, whether the
arrangement is subjected to a per se or Rule of Reason analysis. 

The plaintiffs allege that Microsoft's combination of Windows and Internet Explorer by contractual
and technological artifices constitute unlawful tying to the extent that those actions forced
Microsoft's customers and consumers to take Internet Explorer as a condition of obtaining
Windows. While the Court agrees with plaintiffs, and thus holds that Microsoft is liable for illegal
tying under § 1, this conclusion is arguably at variance with a decision of the U.S. Court of Appeals
for the D.C. Circuit in a closely related case, and must therefore be explained in some detail.
Whether the decisions are indeed inconsistent is not for this Court to say. 

The decision of the D.C. Circuit in question is United States v. Microsoft Corp., 147 F.3d 935
(D.C. Cir. 1998) ("Microsoft II") which is itself related to an earlier decision of the same Circuit,
United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir. 1995) ("Microsoft I"). The history of
the controversy is sufficiently set forth in the appellate opinions and need not be recapitulated here,
except to state that those decisions anticipated the instant case, and that Microsoft II sought to
guide this Court, insofar as practicable, in the further proceedings it fully expected to ensue on the
tying issue. Nevertheless, upon reflection this Court does not believe the D.C. Circuit intended
Microsoft II to state a controlling rule of law for purposes of this case. As the Microsoft II court
itself acknowledged, the issue before it was the construction to be placed upon a single provision of
a consent decree that, although animated by antitrust considerations, was nevertheless still primarily
a matter of determining contractual intent. The court of appeals' observations on the extent to which
software product design decisions may be subject to judicial scrutiny in the course of § 1 tying
cases are in the strictest sense obiter dicta, and are thus not formally binding. Nevertheless, both
prudence and the deference this Court owes to pronouncements of its own Circuit oblige that it
follow in the direction it is pointed until the trail falters. 

The majority opinion in Microsoft II evinces both an extraordinary degree of respect for changes
(including "integration") instigated by designers of technological products, such as software, in the
name of product "improvement," and a corresponding lack of confidence in the ability of the courts
to distinguish between improvements in fact and improvements in name only, made for
anticompetitive purposes. Read literally, the D.C. Circuit's opinion appears to immunize any
product design (or, at least, software product design) from antitrust scrutiny, irrespective of its
effect upon competition, if the software developer can postulate any "plausible claim" of advantage
to its arrangement of code. 147 F.3d at 950. 

This undemanding test appears to this Court to be inconsistent with the pertinent Supreme Court
precedents in at least three respects. First, it views the market from the defendant's perspective, or,
more precisely, as the defendant would like to have the market viewed. Second, it ignores reality:
The claim of advantage need only be plausible; it need not be proved. Third, it dispenses with any
balancing of the hypothetical advantages against any anticompetitive effects. 

The two most recent Supreme Court cases to have addressed the issue of product and market
definition in the context of Sherman Act tying claims are Jefferson Parish, supra, and Eastman
Kodak, supra. In Jefferson Parish, the Supreme Court held that a hospital offering hospital services
and anesthesiology services as a package could not be found to have violated the anti-tying rules
unless the evidence established that patients, i.e. consumers, perceived the services as separate
products for which they desired a choice, and that the package had the effect of forcing the patients
to purchase an unwanted product. 466 U.S. at 21-24, 28-29. In Eastman Kodak the Supreme
Court held that a manufacturer of photocopying and micrographic equipment, in agreeing to sell
replacement parts for its machines only to those customers who also agreed to purchase repair
services from it as well, would be guilty of tying if the evidence at trial established the existence of
consumer demand for parts and services separately. 504 U.S. at 463. 

Both defendants asserted, as Microsoft does here, that the tied and tying products were in reality
only a single product, or that every item was traded in a single market.(3) In Jefferson Parish, the
defendant contended that it offered a "functionally integrated package of services" - a single
product - but the Supreme Court concluded that the "character of the demand" for the constituent
components, not their functional relationship, determined whether separate "products" were actually
involved. 466 U.S. at 19. In Eastman Kodak, the defendant postulated that effective competition in
the equipment market precluded the possibility of the use of market power anticompetitively in any
after-markets for parts or services: Sales of machines, parts, and services were all responsive to
the discipline of the larger equipment market. The Supreme Court declined to accept this premise
in the absence of evidence of "actual market realities," 504 U.S. at 466-67, ultimately holding that
"the proper market definition in this case can be determined only after a factual inquiry into the
'commercial realities' faced by consumers." Id. at 482 (quoting United States v. Grinnell Corp.,
384 U.S. 563, 572 (1966)).(4) 

In both Jefferson Parish and Eastman Kodak, the Supreme Court also gave consideration to
certain theoretical "valid business reasons" proffered by the defendants as to why the arrangements
should be deemed benign. In Jefferson Parish, the hospital asserted that the combination of hospital
and anesthesia services eliminated multiple problems of scheduling, supply, performance standards,
and equipment maintenance. 466 U.S. at 43-44. The manufacturer in Eastman Kodak contended
that quality control, inventory management, and the prevention of free riding justified its decision to
sell parts only in conjunction with service. 504 U.S. at 483. In neither case did the Supreme Court
find those justifications sufficient if anticompetitive effects were proved. Id. at 483-86; Jefferson
Parish, 466 U.S. at 25 n.42. Thus, at a minimum, the admonition of the D.C. Circuit in Microsoft II
to refrain from any product design assessment as to whether the "integration" of Windows and
Internet Explorer is a "net plus," deferring to Microsoft's "plausible claim" that it is of "some
advantage" to consumers, is at odds with the Supreme Court's own approach. 

The significance of those cases, for this Court's purposes, is to teach that resolution of product and
market definitional problems must depend upon proof of commercial reality, as opposed to what
might appear to be reasonable. In both cases the Supreme Court instructed that product and
market definitions were to be ascertained by reference to evidence of consumers' perception of the
nature of the products and the markets for them, rather than to abstract or metaphysical
assumptions as to the configuration of the "product" and the "market." Jefferson Parish, 466 U.S. at
18; Eastman Kodak, 504 U.S. at 481-82. In the instant case, the commercial reality is that
consumers today perceive operating systems and browsers as separate "products," for which there
is separate demand. Findings ¶¶ 149-54. This is true notwithstanding the fact that the software
code supplying their discrete functionalities can be commingled in virtually infinite combinations,
rendering each indistinguishable from the whole in terms of files of code or any other taxonomy. Id.
¶¶ 149-50, 162-63, 187-91. 

Proceeding in line with the Supreme Court cases, which are indisputably controlling, this Court first
concludes that Microsoft possessed "appreciable economic power in the tying market," Eastman
Kodak, 504 U.S. at 464, which in this case is the market for Intel-compatible PC operating
systems. See Jefferson Parish, 466 U.S. at 14 (defining market power as ability to force purchaser
to do something that he would not do in competitive market); see also Fortner Enterprises, Inc. v.
United States Steel Corp., 394 U.S. 495, 504 (1969) (ability to raise prices or to impose tie-ins
on any appreciable number of buyers within the tying product market is sufficient). While courts
typically have not specified a percentage of the market that creates the presumption of "market
power," no court has ever found that the requisite degree of power exceeds the amount necessary
for a finding of monopoly power. See Eastman Kodak, 504 U.S. at 481. Because this Court has
already found that Microsoft possesses monopoly power in the worldwide market for
Intel-compatible PC operating systems (i.e., the tying product market), Findings ¶¶ 18-67, the
threshold element of "appreciable economic power" is a fortiori met. 

Similarly, the Court's Findings strongly support a conclusion that a "not insubstantial" amount of
commerce was foreclosed to competitors as a result of Microsoft's decision to bundle Internet
Explorer with Windows. The controlling consideration under this element is "simply whether a total
amount of business" that is "substantial enough in terms of dollar-volume so as not to be merely de
minimis" is foreclosed. Fortner, 394 U.S. at 501; cf. International Salt Co. v. United States, 332
U.S. 392, 396 (1947) (unreasonable per se to foreclose competitors from any substantial market
by a tying arrangement). 

Although the Court's Findings do not specify a dollar amount of business that has been foreclosed
to any particular present or potential competitor of Microsoft in the relevant market,(5) including
Netscape, the Court did find that Microsoft's bundling practices caused Navigator's usage share to
drop substantially from 1995 to 1998, and that as a direct result Netscape suffered a severe drop
in revenues from lost advertisers, Web traffic and purchases of server products. It is thus obvious
that the foreclosure achieved by Microsoft's refusal to offer Internet Explorer separately from
Windows exceeds the Supreme Court's de minimis threshold. See Digidyne Corp. v. Data General
Corp., 734 F.2d 1336, 1341 (9th Cir. 1984) (citing Fortner). 

The facts of this case also prove the elements of the forced bundling requirement. Indeed, the Supreme Court
has stated that the "essential characteristic" of an illegal tying arrangement is a seller's decision to exploit its
market power over the tying product "to force the buyer into the purchase of a tied product that the buyer
either did not want at all, or might have preferred to purchase elsewhere on different terms." Jefferson Parish,
466 U.S. at 12. In that regard, the Court has found that, beginning with the early agreements for Windows 95,
Microsoft has conditioned the provision of a license to distribute Windows on the OEMs' purchase of Internet
Explorer. Findings ¶¶ 158-65. The agreements prohibited the licensees from ever modifying or deleting any part
of Windows, despite the OEMs' expressed desire to be allowed to do so. Id. ¶¶ 158, 164. As a result, OEMs were
generally not permitted, with only one brief exception, to satisfy consumer demand for a browserless version of
Windows 95 without Internet Explorer. Id. ¶¶ 158, 202. Similarly, Microsoft refused to license Windows 98 to
OEMs unless they also agreed to abstain from removing the icons for Internet Explorer from the desktop. Id. ¶
213. Consumers were also effectively compelled to purchase Internet Explorer along with Windows 98 by
Microsoft's decision to stop including Internet Explorer on the list of programs subject to the Add/Remove
function and by its decision not to respect their selection of another browser as their default. Id. ¶¶ 170-72. 

The fact that Microsoft ostensibly priced Internet Explorer at zero does not detract from the conclusion that
consumers were forced to pay, one way or another, for the browser along with Windows. Despite Microsoft's
assertion that the Internet Explorer technologies are not "purchased" since they are included in a single royalty
price paid by OEMs for Windows 98, see Microsoft's Proposed Conclusions of Law at 12-13, it is nevertheless
clear that licensees, including consumers, are forced to take, and pay for, the entire package of software and
that any value to be ascribed to Internet Explorer is built into this single price. See United States v. Microsoft
Corp., Nos. CIV. A. 98-1232, 98-1233, 1998 WL 614485, *12 (D.D.C., Sept. 14, 1998); IIIA Philip E. Areeda &
Herbert Hovenkamp, Antitrust Law ¶ 760b6, at 51 (1996) ("[T]he tie may be obvious, as in the classic form, or
somewhat more subtle, as when a machine is sold or leased at a price that covers 'free' servicing."). Moreover,
the purpose of the Supreme Court's "forcing" inquiry is to expose those product bundles that raise the cost or
difficulty of doing business for would-be competitors to prohibitively high levels, thereby depriving consumers
of the opportunity to evaluate a competing product on its relative merits. It is not, as Microsoft suggests,
simply to punish firms on the basis of an increment in price attributable to the tied product. See Fortner, 394 U.S.
at 512-14 (1969); Jefferson Parish, 466 U.S. at 12-13. 

As for the crucial requirement that Windows and Internet Explorer be deemed "separate products" for a finding
of technological tying liability, this Court's Findings mandate such a conclusion. Considering the "character of
demand" for the two products, as opposed to their "functional relation," id. at 19, Web browsers and operating
systems are "distinguishable in the eyes of buyers." Id.; Findings ¶¶ 149-54. Consumers often base their choice
of which browser should reside on their operating system on their individual demand for the specific
functionalities or characteristics of a particular browser, separate and apart from the functionalities afforded by
the operating system itself. Id. ¶¶ 149-51. Moreover, the behavior of other, lesser software vendors confirms
that it is certainly efficient to provide an operating system and a browser separately, or at least in separable
form. Id. ¶ 153. Microsoft is the only firm to refuse to license its operating system without a browser. Id.;
seeBerkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 287 (2d Cir. 1979). This Court concludes that
Microsoft's decision to offer only the bundled - "integrated" - version of Windows and Internet Explorer
derived not from technical necessity or business efficiencies; rather, it was the result of a deliberate and
purposeful choice to quell incipient competition before it reached truly minatory proportions. 

The Court is fully mindful of the reasons for the admonition of the D.C. Circuit in Microsoft II of the perils
associated with a rigid application of the traditional "separate products" test to computer software design.
Given the virtually infinite malleability of software code, software upgrades and new application features, such
as Web browsers, could virtually always be configured so as to be capable of separate and subsequent
installation by an immediate licensee or end user. A court mechanically applying a strict "separate demand" test
could improvidently wind up condemning "integrations" that represent genuine improvements to software that
are benign from the standpoint of consumer welfare and a competitive market. Clearly, this is not a desirable
outcome. Similar concerns have motivated other courts, as well as the D.C. Circuit, to resist a strict application
of the "separate products" tests to similar questions of "technological tying." See, e.g., Foremost Pro Color, Inc.
v. Eastman Kodak Co., 703 F.2d 534, 542-43 (9th Cir. 1983); Response of Carolina, Inc. v. Leasco Response, Inc.,
537 F.2d 1307, 1330 (5th Cir. 1976); Telex Corp. v. IBM Corp., 367 F. Supp. 258, 347 (N.D. Okla. 1973). 

To the extent that the Supreme Court has spoken authoritatively on these issues, however, this Court is bound
to follow its guidance and is not at liberty to extrapolate a new rule governing the tying of software products.
Nevertheless, the Court is confident that its conclusion, limited by the unique circumstances of this case, is
consistent with the Supreme Court's teaching to date.(6) 

B. Exclusive Dealing Arrangements 

Microsoft's various contractual agreements with some OLSs, ICPs, ISVs, Compaq and Apple are
also called into question by plaintiffs as exclusive dealing arrangements under the language in § 1
prohibiting "contract[s] . . . in restraint of trade or commerce . . . ." 15 U.S.C. § 1. As detailed in
§I.A.2, supra, each of these agreements with Microsoft required the other party to promote and
distribute Internet Explorer to the partial or complete exclusion of Navigator. In exchange,
Microsoft offered, to some or all of these parties, promotional patronage, substantial financial
subsidies, technical support, and other valuable consideration. Under the clear standards
established by the Supreme Court, these types of "vertical restrictions" are subject to a Rule of
Reason analysis. See Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49 (1977);
Jefferson Parish, 466 U.S. at 44-45 (O'Connor, J., concurring); cf. Business Elecs. Corp. v. Sharp
Elecs. Corp., 485 U.S. 717, 724-26 (1988) (holding that Rule of Reason analysis presumptively
applies to cases brought under § 1 of the Sherman Act). 

Acknowledging that some exclusive dealing arrangements may have benign objectives and may
create significant economic benefits, see Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320,
333-35 (1961), courts have tended to condemn under the § 1 Rule of Reason test only those
agreements that have the effect of foreclosing a competing manufacturer's brands from the relevant
market. More specifically, courts are concerned with those exclusive dealing arrangements that
work to place so much of a market's available distribution outlets in the hands of a single firm as to
make it difficult for other firms to continue to compete effectively, or even to exist, in the relevant
market. See U.S. Healthcare Inc. v. Healthsource, Inc., 986 F.2d 589, 595 (1st Cir. 1993);
Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d 9, 11 (1st Cir. 1987) (relying
upon III Phillip E. Areeda & Donald F. Turner, Antitrust Law ¶ 732 (1978), Tampa Electric, 365
U.S. at 327-29, and Standard Oil Co. v. United States, 337 U.S. 293 (1949)). 

To evaluate an agreement's likely anticompetitive effects, courts have consistently looked at a
variety of factors, including: (1) the degree of exclusivity and the relevant line of commerce
implicated by the agreements' terms; (2) whether the percentage of the market foreclosed by the
contracts is substantial enough to import that rivals will be largely excluded from competition; (3)
the agreements' actual anticompetitive effect in the relevant line of commerce; (4) the existence of
any legitimate, procompetitive business justifications offered by the defendant; (5) the length and
irrevocability of the agreements; and (6) the availability of any less restrictive means for achieving
the same benefits. See, e.g., Tampa Electric, 365 U.S. at 326-35; Roland Machinery Co. v.
Dresser Industries, Inc., 749 F.2d 380, 392-95 (7th Cir. 1984); see also XI Herbert Hovenkamp,
Antitrust Law ¶ 1820 (1998). 

Where courts have found that the agreements in question failed to foreclose absolutely outlets that
together accounted for a substantial percentage of the total distribution of the relevant products,
they have consistently declined to assign liability. See, e.g., id. ¶ 1821; U.S. Healthcare, 986 F.2d
at 596-97; Roland Mach. Co., 749 F.2d at 394 (failure of plaintiff to meet threshold burden of
proving that exclusive dealing arrangement is likely to keep at least one significant competitor from
doing business in relevant market dictates no liability under § 1). This Court has previously
observed that the case law suggests that, unless the evidence demonstrates that Microsoft's
agreements excluded Netscape altogether from access to roughly forty percent of the browser
market, the Court should decline to find such agreements in violation of § 1. See United States v.
Microsoft Corp., Nos. CIV. A. 98-1232, 98-1233, 1998 WL 614485, at *19 (D.D.C. Sept. 14,
1998) (citing cases that tended to converge upon forty percent foreclosure rate for finding of § 1
liability). 

The only agreements revealed by the evidence which could be termed so "exclusive" as to merit
scrutiny under the § 1 Rule of Reason test are the agreements Microsoft signed with Compaq,
AOL and several other OLSs, the top ICPs, the leading ISVs, and Apple. The Findings of Fact
also establish that, among the OEMs discussed supra, Compaq was the only one to fully commit
itself to Microsoft's terms for distributing and promoting Internet Explorer to the exclusion of
Navigator. Beginning with its decisions in 1996 and 1997 to promote Internet Explorer exclusively
for its PC products, Compaq essentially ceased to distribute or pre-install Navigator at all in
exchange for significant financial remuneration from Microsoft. Findings ¶¶ 230-34. AOL's March
12 and October 28, 1996 agreements with Microsoft also guaranteed that, for all practical
purposes, Internet Explorer would be AOL's browser of choice, to be distributed and promoted
through AOL's dominant, flagship online service, thus leaving Navigator to fend for itself. Id. ¶¶
287-90, 293-97. In light of the severe shipment quotas and promotional restrictions for third-party
browsers imposed by the agreements, the fact that Microsoft still permitted AOL to offer
Navigator through a few subsidiary channels does not negate this conclusion. The same conclusion
as to exclusionary effect can be drawn with respect to Microsoft's agreements with AT&T
WorldNet, Prodigy and CompuServe, since those contract terms were almost identical to the ones
contained in AOL's March 1996 agreement. Id. ¶¶ 305-06. 

Microsoft also successfully induced some of the most popular ICPs and ISVs to commit to
promote, distribute and utilize Internet Explorer technologies exclusively in their Web content in
exchange for valuable placement on the Windows desktop and technical support. Specifically, the
"Top Tier" and "Platinum" agreements that Microsoft formed with thirty-four of the most popular
ICPs on the Web ensured that Navigator was effectively shut out of these distribution outlets for a
significant period of time. Id. ¶¶ 317-22, 325-26, 332. In the same way, Microsoft's "First Wave"
contracts provided crucial technical information to dozens of leading ISVs that agreed to make
their Web-centric applications completely reliant on technology specific to Internet Explorer. Id. ¶¶
337, 339-40. Finally, Apple's 1997 Technology Agreement with Microsoft prohibited Apple from
actively promoting any non-Microsoft browsing software in any way or from pre-installing a
browser other than Internet Explorer. Id. ¶¶ 350-52. This arrangement eliminated all meaningful
avenues of distribution of Navigator through Apple. Id. 

Notwithstanding the extent to which these "exclusive" distribution agreements preempted the most
efficient channels for Navigator to achieve browser usage share, however, the Court concludes that
Microsoft's multiple agreements with distributors did not ultimately deprive Netscape of the ability
to have access to every PC user worldwide to offer an opportunity to install Navigator. Navigator
can be downloaded from the Internet. It is available through myriad retail channels. It can (and has
been) mailed directly to an unlimited number of households. How precisely it managed to do so is
not shown by the evidence, but in 1998 alone, for example, Netscape was able to distribute 160
million copies of Navigator, contributing to an increase in its installed base from 15 million in 1996
to 33 million in December 1998. Id. ¶ 378. As such, the evidence does not support a finding that
these agreements completely excluded Netscape from any constituent portion of the worldwide
browser market, the relevant line of commerce. 

The fact that Microsoft's arrangements with various firms did not foreclose enough of the relevant
market to constitute a § 1 violation in no way detracts from the Court's assignment of liability for
the same arrangements under § 2. As noted above, all of Microsoft's agreements, including the
non-exclusive ones, severely restricted Netscape's access to those distribution channels leading
most efficiently to the acquisition of browser usage share. They thus rendered Netscape harmless
as a platform threat and preserved Microsoft's operating system monopoly, in violation of § 2. But
virtually all the leading case authority dictates that liability under § 1 must hinge upon whether
Netscape was actually shut out of the Web browser market, or at least whether it was forced to
reduce output below a subsistence level. The fact that Netscape was not allowed access to the
most direct, efficient ways to cause the greatest number of consumers to use Navigator is legally
irrelevant to a final determination of plaintiffs' § 1 claims. 

Other courts in similar contexts have declined to find liability where alternative channels of
distribution are available to the competitor, even if those channels are not as efficient or reliable as
the channels foreclosed by the defendant. In Omega Environmental, Inc. v. Gilbarco, Inc., 127
F.3d 1157 (9th Cir. 1997), for example, the Ninth Circuit found that a manufacturer of petroleum
dispensing equipment "foreclosed roughly 38% of the relevant market for sales." 127 F.3d at 1162.
Nonetheless, the Court refused to find the defendant liable for exclusive dealing because "potential
alternative sources of distribution" existed for its competitors. Id. at 1163. Rejecting plaintiff's
argument (similar to the one made in this case) that these alternatives were "inadequate substitutes
for the existing distributors," the Court stated that "[c]ompetitors are free to sell directly, to develop
alternative distributors, or to compete for the services of existing distributors. Antitrust laws require
no more." Id.; accord Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d 1555, 1572-73 (11th Cir.
1991). 

III. THE STATE LAW CLAIMS 

In their amended complaint, the plaintiff states assert that the same facts establishing liability under
§§ 1 and 2 of the Sherman Act mandate a finding of liability under analogous provisions in their
own laws. The Court agrees. The facts proving that Microsoft unlawfully maintained its monopoly
power in violation of § 2 of the Sherman Act are sufficient to meet analogous elements of causes of
action arising under the laws of each plaintiff state.(7) The Court reaches the same conclusion with
respect to the facts establishing that Microsoft attempted to monopolize the browser market in
violation of § 2,(8) and with respect to those facts establishing that Microsoft instituted an improper
tying arrangement in violation of § 1.(9) 

The plaintiff states concede that their laws do not condemn any act proved in this case that fails to
warrant liability under the Sherman Act. States' Reply in Support of their Proposed Conclusions of
Law at 1. Accordingly, the Court concludes that, for reasons identical to those stated in § II.B,
supra, the evidence in this record does not warrant finding Microsoft liable for exclusive dealing
under the laws of any of the plaintiff states. 

Microsoft contends that a plaintiff cannot succeed in an antitrust claim under the laws of California,
Louisiana, Maryland, New York, Ohio, or Wisconsin without proving an element that is not
required under the Sherman Act, namely, intrastate impact. Assuming that each of those states has,
indeed, expressly limited the application of its antitrust laws to activity that has a significant, adverse
effect on competition within the state or is otherwise contrary to state interests, that element is
manifestly proven by the facts presented here. The Court has found that Microsoft is the leading
supplier of operating systems for PCs and that it transacts business in all fifty of the United States.
Findings ¶ 9.(10) It is common and universal knowledge that millions of citizens of, and hundreds, if
not thousands, of enterprises in each of the United States and the District of Columbia utilize PCs
running on Microsoft software. It is equally clear that certain companies that have been adversely
affected by Microsoft's anticompetitive campaign - a list that includes IBM, Hewlett-Packard,
Intel, Netscape, Sun, and many others - transact business in, and employ citizens of, each of the
plaintiff states. These facts compel the conclusion that, in each of the plaintiff states, Microsoft's
anticompetitive conduct has significantly hampered competition. 

Microsoft once again invokes the federal Copyright Act in defending against state claims seeking to
vindicate the rights of OEMs and others to make certain modifications to Windows 95 and
Windows 98. The Court concludes that these claims do not encroach on Microsoft's federally
protected copyrights and, thus, that they are not pre-empted under the Supremacy Clause. The
Court already concluded in § I.A.2.a.i, supra, that Microsoft's decision to bundle its browser and
impose first-boot and start-up screen restrictions constitute independent violations of § 2 of the
Sherman Act. It follows as a matter of course that the same actions merit liability under the plaintiff
states' antitrust and unfair competition laws. Indeed, the parties agree that the standards for liability
under the several plaintiff states' antitrust and unfair competition laws are, for the purposes of this
case, identical to those expressed in the federal statute. States' Reply in Support of their Proposed
Conclusions of Law at 1; Microsoft's Sur-Reply in Response to the States' Reply at 2 n.1. Thus,
these state laws cannot "stand[] as an obstacle to" the goals of the federal copyright law to any
greater extent than do the federal antitrust laws, for they target exactly the same type of
anticompetitive behavior. Hines v. Davidowitz, 312 U.S. 52, 67 (1941). The Copyright Act's own
preemption clause provides that "[n]othing in this title annuls or limits any rights or remedies under
the common law or statutes of any State with respect to . . . activities violating legal or equitable
rights that are not equivalent to any of the exclusive rights within the general scope of copyright as
specified by section 106 . . . ." 17 U.S.C. § 301(b)(3). Moreover, the Supreme Court has
recognized that there is "nothing either in the language of the copyright laws or in the history of their
enactment to indicate any congressional purpose to deprive the states, either in whole or in part, of
their long-recognized power to regulate combinations in restraint of trade." Watson v. Buck, 313
U.S. 387, 404 (1941). See also Allied Artists Pictures Corp. v. Rhodes, 496 F. Supp. 408, 445
(S.D. Ohio 1980), aff'd in relevant part, 679 F.2d 656 (6th Cir. 1982) (drawing upon similarities
between federal and state antitrust laws in support of notion that authority of states to regulate
market practices dealing with copyrighted subject matter is well-established); cf. Hines, 312 U.S.
at 67 (holding state laws preempted when they "stand[] as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress"). 

The Court turns finally to the counterclaim that Microsoft brings against the attorneys general of the
plaintiff states under 42 U.S.C. § 1983. In support of its claim, Microsoft argues that the attorneys
general are seeking relief on the basis of state laws, repeats its assertion that the imposition of this
relief would deprive it of rights granted to it by the Copyright Act, and concludes with the
contention that the attorneys general are, "under color of" state law, seeking to deprive Microsoft
of rights secured by federal law - a classic violation of 42 U.S.C. § 1983. 

Having already addressed the issue of whether granting the relief sought by the attorneys general
would entail conflict with the Copyright Act, the Court rejects Microsoft's counterclaim on yet
more fundamental grounds as well: It is inconceivable that their resort to this Court could represent
an effort on the part of the attorneys general to deprive Microsoft of rights guaranteed it under
federal law, because this Court does not possess the power to act in contravention of federal law.
Therefore, since the conduct it complains of is the pursuit of relief in federal court, Microsoft fails to
state a claim under 42 U.S.C. § 1983. Consequently, Microsoft's request for a declaratory
judgment against the states under 28 U.S.C. §§ 2201 and 2202 is denied, and the counterclaim is
dismissed. 


Thomas Penfield Jackson 
U.S. District Judge 
Date: 



UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF COLUMBIA

____________________________________ 
) 
UNITED STATES OF AMERICA, ) 
) 
Plaintiff, ) 
) 
v. ) Civil Action No. 98-1232 (TPJ) 
) 
MICROSOFT CORPORATION, ) 
) 
Defendant. ) 
____________________________________) 
) 
STATE OF NEW YORK, et al., ) 
) 
Plaintiffs, ) 
) 
v. ) 
) 
MICROSOFT CORPORATION, ) 
) 
Defendant. ) 
____________________________________) Civil Action No. 98-1233 (TPJ) 
) 
MICROSOFT CORPORATION, ) 
) 
Counterclaim-Plaintiff, ) 
) 
) 
ELIOT SPITZER, attorney general of the ) 
State of New York, in his official ) 
capacity, et al., ) 
) 
Counterclaim-Defendants. ) 
____________________________________) 





ORDER


In accordance with the Conclusions of Law filed herein this date, it is, this ______ day of April,
2000, 

ORDERED, ADJUDGED, and DECLARED, that Microsoft has violated §§ 1 and 2 of the
Sherman Act, 15 U.S.C. §§ 1, 2, as well as the following state law provisions: Cal Bus. & Prof.
Code §§ 16720, 16726, 17200; Conn. Gen. Stat. §§ 35-26, 35-27, 35-29; D.C. Code §§
28-4502, 28-4503; Fla. Stat. chs. 501.204(1), 542.18, 542.19; 740 Ill. Comp. Stat. ch. 10/3;
Iowa Code §§ 553.4, 553.5; Kan. Stat. §§ 50-101 et seq.; Ky. Rev. Stat. §§ 367.170, 367.175;
La. Rev. Stat. §§ 51:122, 51:123, 51:1405; Md. Com. Law II Code Ann. § 11-204; Mass. Gen.
Laws ch. 93A, § 2; Mich. Comp. Laws §§ 445.772, 445.773; Minn. Stat. § 325D.52; N.M.
Stat. §§ 57-1-1, 57-1-2; N.Y. Gen. Bus. Law § 340; N.C. Gen. Stat. §§ 75-1.1, 75-2.1; Ohio
Rev. Code §§ 1331.01, 1331.02; Utah Code § 76-10-914; W.Va. Code §§ 47-18-3, 47-18-4;
Wis. Stat. § 133.03(1)-(2); and it is 

FURTHER ORDERED, that judgment is entered for the United States on its second, third, and
fourth claims for relief in Civil Action No. 98-1232; and it is 

FURTHER ORDERED, that the first claim for relief in Civil Action No. 98-1232 is dismissed with
prejudice; and it is 

FURTHER ORDERED, that judgment is entered for the plaintiff states on their first, second,
fourth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, fifteenth, sixteenth,
seventeenth, eighteenth, nineteenth, twentieth, twenty-first, twenty-second, twenty-fourth,
twenty-fifth, and twenty-sixth claims for relief in Civil Action No. 98-1233; and it is 

FURTHER ORDERED, that the fifth claim for relief in Civil Action No. 98-1233 is dismissed with
prejudice; and it is 

FURTHER ORDERED, that Microsoft's first and second claims for relief in Civil Action No.
98-1233 are dismissed with prejudice; and it is 

FURTHER ORDERED, that the Court shall, in accordance with the Conclusions of Law filed
herein, enter an Order with respect to appropriate relief, including an award of costs and fees,
following proceedings to be established by further Order of the Court. 



Thomas Penfield Jackson 
U.S. District Judge 





1. Proof that the defendant's conduct was motivated by a desire to prevent other firms from competing on the
merits can contribute to a finding that the conduct has had, or will have, the intended, exclusionary effect. See
United States v. United States Gypsum Co., 438 U.S. 422, 436 n.13 (1978) ("consideration of intent may play an
important role in divining the actual nature and effect of the alleged anticompetitive conduct"). 

2. While Microsoft is correct that some courts have also recognized the right of a copyright holder to preserve
the "integrity" of artistic works in addition to those rights enumerated in the Copyright Act, the Court
nevertheless concludes that those cases, being actions for infringement without antitrust implications, are
inapposite to the one currently before it. See, e.g., WGN Continental Broadcasting Co. v. United Video, Inc., 693
F.2d 622 (7th Cir. 1982); Gilliam v. ABC, Inc., 538 F.2d 14 (2d Cir. 1976). 

3. Microsoft contends that Windows and Internet Explorer represent a single "integrated product," and that the
relevant market is a unitary market of "platforms for software applications." Microsoft's Proposed Conclusions
of Law at 49 n.28. 

4. In Microsoft II the D.C. Circuit acknowledged it was without benefit of a complete factual record which might
alter its conclusion that the "Windows 95/IE package is a genuine integration." 147 F.3d at 952. 

5. Most of the quantitative evidence was presented in units other than monetary, but numbered the units in
millions, whatever their nature. 

6. Amicus curiae Lawrence Lessig has suggested that a corollary concept relating to the bundling of "partial
substitutes" in the context of software design may be apposite as a limiting principle for courts called upon to
assess the compliance of these products with antitrust law. This Court has been at pains to point out that the
true source of the threat posed to the competitive process by Microsoft's bundling decisions stems from the
fact that a competitor to the tied product bore the potential, but had not yet matured sufficiently, to open up the
tying product market to competition. Under these conditions, the anticompetitive harm from a software bundle
is much more substantial and pernicious than the typical tie. See X Phillip E. Areeda, Einer Elhauge & Herbert
Hovenkamp, Antitrust Law ¶1747 (1996). A company able to leverage its substantial power in the tying product
market in order to force consumers to accept a tie of partial substitutes is thus able to spread inefficiency from
one market to the next, id. at 232, and thereby "sabotage a nascent technology that might compete with the
tying product but for its foreclosure from the market." III Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law
¶ 1746.1d at 495 (Supp. 1999). 

7. See Cal. Bus. & Prof. Code §§ 16720, 16726, 17200 (West 1999); Conn. Gen. Stat. § 35-27 (1999); D.C. Code §
28-4503 (1996); Fla. Stat. chs. 501.204(1), 542.19 (1999); 740 Ill. Comp. Stat. 10/3 (West 1999); Iowa Code § 553.5
(1997); Kan. Stat. §§ 50-101 et seq. (1994); Ky. Rev. Stat. §§ 367.170, 367.175 (Michie 1996); La. Rev. Stat. §§
51:123, 51:1405 (West 1986); Md. Com. Law II Code Ann. § 11-204 (1990); Mass. Gen. Laws ch. 93A, § 2; Mich.
Comp. Laws § 445.773 (1989); Minn. Stat. § 325D.52 (1998); N.M. Stat. § 57-1-2 (Michie 1995); N.Y. Gen. Bus.
Law § 340 (McKinney 1998); N.C. Gen. Stat. §§ 75-1.1, 75-2.1 (1999); Ohio Rev. Code §§ 1331.01, 1331.02
(Anderson 1993); Utah Code § 76-10-914 (1999); W.Va. Code § 47-18-4 (1999); Wis. Stat. § 133.03(2) (West 1989
& Supp. 1998). 

8. See Cal. Bus. & Prof. Code § 17200 (West 1999); Conn. Gen. Stat. § 35-27 (1999); D.C. Code § 28-4503 (1996);
Fla. Stat. chs. 501.204(1), 542.19 (1999); 740 Ill. Comp. Stat. 10/3(3) (West 1999); Iowa Code § 553.5 (1997); Kan.
Stat. §§ 50-101 et seq. (1994); Ky. Rev. Stat. §§ 367.170, 367.175 (Michie 1996); La. Rev. Stat. §§ 51:123, 51:1405
(West 1986); Md. Com. Law II Code Ann. § 11-204(a)(2) (1990); Mass. Gen. Laws ch. 93A, § 2; Mich. Comp.
Laws § 445.773 (1989); Minn. Stat. § 325D.52 (1998); N.M. Stat. § 57-1-2 (Michie 1995); N.Y. Gen. Bus. Law § 340
(McKinney 1988); N.C. Gen. Stat. §§ 75-1.1, 75-2.1 (1999); Ohio Rev. Code §§ 1331.01, 1331.02 (Anderson 1993);
Utah Code § 76-10-914 (1999); W.Va. Code § 47-18-4 (1999); Wis. Stat. § 133.03(2) (West 1989 & Supp. 1998). 

9. See Cal. Bus. & Prof. Code §§ 16727, 17200 (West 1999); Conn. Gen. Stat. §§ 35-26, 35-29 (1999); D.C. Code §
28-4502 (1996); Fla. Stat. chs. 501.204(1), 542.18 (1999); 740 Ill. Comp. Stat. 10/3(4) (West 1999); Iowa Code §
553.4 (1997); Kan. Stat. §§ 50-101 et seq. (1994); Ky. Rev. Stat. §§ 367.170, 367.175 (Michie 1996); La. Rev. Stat.
§§ 51:122, 51:1405 (West 1986); Md. Com. Law II Code Ann. § 11-204(a)(1) (1990); Mass. Gen. Laws ch. 93A, §
2; Mich. Comp. Laws § 445.772 (1989); Minn. Stat. § 325D.52 (1998); N.M. Stat. § 57-1-1 (Michie 1995); N.Y. Gen.
Bus. Law § 340 (McKinney 1988); N.C. Gen. Stat. §§ 75-1.1, 75-2.1 (1999); Ohio Rev. Code §§ 1331.01, 1331.02
(Anderson 1993); Utah Code § 76-10-914 (1999); W.Va. Code § 47-18-3 (1999); Wis. Stat. § 133.03(1) (West 1989
& Supp. 1998). 

10. The omission of the District of Columbia from this finding was an oversight on the part of the Court;
Microsoft obviously conducts business in the District of Columbia as well.

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