March 24, 2004 4:00 AM PST

Coming back to haunt them

Every executive knows the risk of having old e-mails surface as trial evidence--but perhaps none so well as Microsoft Chairman Bill Gates.

"Do we have a clear plan on what we want Apple to do to undermine Sun?" Gates once queried Paul Maritz and other Microsoft subordinates in an e-mail exchange later recited during the long-running U.S. antitrust trial.

E-mails cited in a number of other Microsoft court proceedings have revealed the company's aggressive corporate culture as well as its disdain for legal authorities. A reputation for arrogance hasn't helped the company in dealing with organizations such as the European Commission.

With new e-mail embarrassments unearthed last week in Microsoft's Minnesota antitrust trial, the company has revived its reputation as a virtual poster child for the legal hazards of indelicate corporate e-mail musings.

In Minnesota, prosecutors provided the court with e-mail sent in 1997 by Microsoft executive Jeff Raikes to investor Warren Buffett, in which Raikes tried to persuade Buffett to invest in Microsoft. Some have compared Microsoft's lucrative operating system dominance to a "toll bridge," Raikes wrote, adding that with a worldwide sales force of just 100 to 150 people, "this is a 90%+ margin business."

Buffett, back in 1997, wasn't convinced to invest. But in the hands of prosecutors in 2004, the e-mail might well convince a judge that Microsoft has been less than forthright about the alleged abuses of its Windows monopoly.

"What these e-mails do is they puncture Microsoft's credibility," said Robert Lande, an antitrust professor with the University of Baltimore School of Law.

Lande noted that in the U.S. Department of Justice's antitrust case, Microsoft was blessed by a judge appointed by Ronald Reagan and widely expected to be sympathetic to corporate prerogatives. "But by the end of the DOJ trial, the judge hardly believed a word Microsoft said," he said.



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Microsoft said the discussion of credibility and old e-mails was secondary to the question before the Minnesota court.

"These tired and old allegations are used for the sole purpose of obscuring the real issues at hand," a Microsoft representative said. "The issue in Minnesota is whether Microsoft overcharged for certain products."

Fortunately for Microsoft, should a judge decide that its credibility is relevant to the case, the company gets to start over with a relatively clean slate every time it enters a new courtroom. Judges aren't typically well versed in the particulars of a defendant's prior courtroom battles, lawyers say.

But for prosecutors, there's always more e-mail to comb through.

"I can live with this, if we have the positioning clearly in our favor," Gates once wrote in an e-mail to top company executives about a new Web services standards organization. "In particular, Sun not being one of the movers/announcers/founding members."

That e-mail came in handy, as lawyers representing nine states and the District of Columbia were trying to prove in an antitrust action against Microsoft that the company deliberately sidelined Sun Microsystems in the standards-setting process.

Sometimes, more traditional methods of communication--like face-to-face conversations--can be just as damaging as e-mail, if they're made public in a trial.

Such exchanges were the source of evidence introduced in the Justice Department trial, claiming that Microsoft had pressured Apple Computer to kill its QuickTime multimedia software, a discussion immortalized by the colorful expression "knifing the baby."

Some legal experts stress that Microsoft is not alone in producing incriminating e-mails, despite being famous for it.

"I don't think they're unique--they happen to have been involved in lots of high-visibility litigation," said Emmett Stanton, an attorney with Fenwick & West in Palo Alto, Calif. "But those of us in the legal trenches every day see that our clients and our adversaries have lots of evidence in e-mail. It's now the most valuable source of evidence in most cases."

Airing its attitude?
But others--particularly those who have gone up against Microsoft in court--argue that when it comes to embarrassing e-mail resurrections, Microsoft is special.

One veteran Microsoft antagonist, recalling CEO Steve Ballmer's 1997 exclamation, "To heck with Janet Reno," and Maritz's alleged promise to "cut off Netscape's air supply," said Microsoft's problem was as much attitude as e-mail.

"Going back to the first consent decree (with the Justice Department), the allegation has always been that (Microsoft) operates with total disregard for the law," said Gary Reback, a Silicon Valley attorney who played a key role in spearheading the antitrust battle against Microsoft in the mid-1990s. "And you could certainly prove that by their own internal e-mail traffic," he added.

"In the early generation, the e-mail traffic was wholly representative of what they thought and did," Reback added. "Microsoft appeared to take no counsel and cede nothing to the legal system."

Whether that holds true of today's Microsoft is another story. Reback speculated that the software giant may have learned from the comparison often made between Microsoft and Intel, which weathered its own antitrust investigation by the Federal Trade Commission, much more smoothly than did Microsoft.

"People asked, 'Why is it that Intel doesn't have all these terrible documents that keep surfacing?'" Reback recalled. "Here the DOJ kept finding, with great frequency, these inflammatory statements by Microsoft of illegal intention."

Reback credited Intel's success in evading the antitrust rap to two factors: One was the comparative maturity of its executives. The second was the company's focus on policing its own systems so it didn't preserve damning documents.

Fenwick & West attorney Stanton said it's hard to break a client's e-mail habits, whether at Microsoft or any other company.

The trick is convincing people that the seemingly ephemeral and casual e-mail format can actually be devastatingly permanent and as legally formal as a proofread, approved memorandum on company letterhead.

Sometimes the aura of impulse and offhandedness can actually increase e-mail's weight before a judge or jury, Stanton said.

"E-mail messages tend to reflect immediate statements from the heart," Stanton noted. "So judges and juries give them a lot of credibility."

 

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