March 8, 2002 3:50 PM PST
Sun brings antitrust suit against Microsoft
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The suit, which had been rumored, also seeks to force Microsoft to release the underlying source code for Internet Explorer, and to release interfaces between Windows and higher-level Microsoft software. In addition, the suit seeks preliminary injunctions to require Microsoft to ship Java with Windows XP and Internet Explorer.
AOL Time Warner filed a similar lawsuit against Microsoft in January.
Sun's suit, filed in U.S. District Court in San Jose, Calif., extends beyond the federal and state antitrust cases. Those cases were chiefly concerned with the Internet Explorer and Netscape browsers but didn't address server operating-system issues such as those surrounding Microsoft's .Net Framework software for weaving the fabric of the future Internet.
Sun General Counsel Michael Morris said the company is trying to stop Microsoft from making its products a mandatory part of the Internet by using its monopoly power to create "Microsoft-controlled choke points to Internet access." Specifically, Sun wants Microsoft to decouple .Net from its Windows operating system.
"Microsoft intends to use the .Net Framework to move its current monopoly in the PC operating-system market into a more expansive and potentially more dangerous monopoly that encompasses software development on every computing device" connected to the Internet, Sun said in its suit.
Commenting on the suit, Microsoft reiterated its position that legal wrangling hurts consumers.
"It's time to move past these issues, many of which are related to the lawsuit we already settled last year," said Microsoft spokesman Jim Desler. "Sadly, the real losers in this type of litigation are software developers and consumers. The industry is at its best when we focus on innovation and developing great products."
Microsoft redirected any blame regarding Java's level of acceptance among computer users. "Millions of consumers using Windows easily access and use Java technology every day," Desler said. "Java technology is widely used, and any consumer lack of acceptance of Java is due to Sun's own failures and not actions by Microsoft."
Sun's stock rose $1.17, or 13 percent, to close at $10 Friday on the Nasdaq amid a market that saw most technology stocks rising. Microsoft stock rose $1.23, or 2 percent, to $63.95.
Sun's Java software lets programs run on many types of computers without having to be modified for each one. The promise of Java for Sun--and its threat to Microsoft--is that programmers will write software geared to run on Java rather than on Windows.
Microsoft stripped Java from Internet Explorer when it launched its Windows XP operating system last fall. Microsoft said at the time that it feared that including the software could spur Sun to try to block release of XP through legal action.
"This private antitrust lawsuit is intended to restore competition in the marketplace by removing unlawful barriers to the distribution of the Java platform and to interoperability between Microsoft software and competitive technologies," Morris said in a statement. "The achievement of these goals will allow for greater innovation and increased customer choice."
Sun is seeking damages that could top $1 billion, Morris said. Under antitrust law, plaintiffs can be awarded three times the damages found, he added, bringing the total possible cost to Microsoft to $3 billion.
Federal case an issue
Sun has been considering a private antitrust lawsuit for nearly two years. Sun Chief Executive Scott McNealy, a longtime Microsoft foe, raised the possibility again last month at an analyst conference.
McNealy has long argued that it's not Sun's job to police Microsoft, but at the same time he has said that he was dissatisfied with the settlement in the federal antitrust case, which came after proposed stronger penalties.
In an interview, Morris said the suit was triggered by a federal appeals court's June decision to uphold the finding that Microsoft had violated antitrust law and by Microsoft's decision to stop shipping Java with Windows XP.
Sun doesn't expect the suit to affect ongoing action between several states, the Justice Department and Microsoft. "That'll go down its own course," Morris said. "We don't intend this filing will have any impact."
But the earlier case could help Sun in its lawsuit. "The Court of Appeals decision is a very powerful tool for Sun in its lawsuit against Microsoft," Silicon Valley lawyer Rich Gray said. "However, that does not mean that Microsoft does not have important and real defenses."
For example, the Justice Department itself raised a point this week that Microsoft could use. "The government asserted it hasn't been proved that the illegal activity found by the Court of Appeals actually prevented Java from being a viable competitor to Microsoft," Gray said.
Sun will rely on the appeals court decision and the findings of fact that underlie that decision, Morris said. "We believe those findings are binding on Microsoft in this matter and that we do not have to re-prove them," Morris said.
Analysts see a long struggle ahead. "We did expect there could be private suits, but whenever you enter a protracted legal action, it's like going to war," said Mike Gilpin of Giga Information Group. "And when you come out the other end, the question is, would you regret you did that?"
However, Gilpin doesn't expect the lawsuit to have any major effect on the thriving Java community. Oracle, BEA Systems, IBM and hundreds of other companies all support software written in the Java language.
In January 2001, Sun and Microsoft settled a 1997 lawsuit over Microsoft's use of Java. Under the settlement, Microsoft agreed to pay Sun $20 million and was permanently prohibited from using "Java compatible" trademarks on its products.
In settlement discussions, Sun encouraged Microsoft to ship a modern version of Java, but Microsoft refused, Morris said in a conference call with reporters. Sun also negotiated a right to file an antitrust suit, Morris said in an interview.
In the 1997 case, Sun argued that Microsoft breached its contract by trying to extend Java so it would work differently on Windows computers. Consequently, one of Sun's main arguments in the case was that Microsoft wrongfully advertised that its products were Java-compatible because, in Sun's eyes, they were not. Those changes broke the universality of Java, Sun argued.
The .Net threat
Regarding the private antitrust suit filed Friday, Morris said Sun will grant Microsoft a license to ship the modern version of Java--royalty-free at least for the course of the lawsuit--but only for the binary version of Java, which can't be changed.
Specifically, the suit claims Microsoft engaged in "illegal monopolization and/or monopoly maintenance" of the Intel-compatible PC operating-system market, the browser market and the Office productivity suite.
It also claims Microsoft broke antitrust law by tying several products to its various operating systems: the Internet Explorer browser to Windows OS; the Windows workgroup server operating systems (Windows 2000 Professional and Windows XP Professional) to its PC operating systems; its IIS Web server to its server operating systems (Windows NT 4.0 and Windows 2000 Server); and the .Net Framework to its PC and workgroup server operating systems.
Sun wants a preliminary injunction requiring Microsoft to include the most current Java plug-in with Windows XP and Internet Explorer. Additionally, Sun is asking the court to require Microsoft to "disclose and license proprietary interfaces, protocols and formats," and to "unbundle" products such as Internet Explorer, IIS and .Net Framework.
Some are skeptical that the case will be worthwhile. "These cases go on forever...Why not just beat them in the marketplace? You'll never see the money," Bear Stearns analyst Andrew Neff said in a conference call with Morris.
"The litigation will not go on forever, and we will see the money," Morris responded. Sun hopes for a preliminary injunction within a year or sooner, he said.
Sun did not make the decision lightly, Morris said. And the stakes are indeed high.
"Microsoft's movement into .Net would allow it to carve further into Sun's space. It would allow Microsoft to continue to damage Java and by extension continue to damage Sun," said Cal Braunstein, CEO of the Robert Frances Group.
The .Net Framework is a crucial piece of Microsoft's overarching .Net strategy. Currently a part of the Visual Studio.Net tools, the .Net Framework is the software fabric that automates many development tasks and helps software run reliably and securely across multiple servers and computers.
The software is available for free download from Microsoft's Web site.
Because the .Net Framework includes prewritten code, it can save developers time, simplify a confusing array of programming interfaces, and eliminate common bugs, analysts said. It also includes the Common Language Runtime, which is a universal engine that will allow software developers to use many types of programming languages to write Windows applications.
The Common Language Runtime is a competitor to the Java Virtual Machine, essentially a computer that runs Java programs. Microsoft plans to build the .Net Framework into the company's forthcoming .Net Server, Microsoft's next Windows operating system for servers.
News.com's Scott Ard and Wylie Wong contributed to this report.