 Our next panel is, I'm really happy to have here, in part because they're all former colleagues, but they're also real, very deep veterans of the Microsoft litigation itself. Sadly, they are all from the government side. We had hoped to have someone from the Microsoft side here. We had Michael Lackavara, who was a real star at Sullivan and Cromwell in the defense of Microsoft, who had to pull out at the last minute because of a family crisis, and we were hoping that we could get somebody else from Microsoft in, but the time was just too short. We appreciate you trying. It would have been nice for a little more balance, but this will still be a terrific panel. I'm going to introduce the moderator, then let him introduce everybody else as they go forward. John Cove, sitting right here, is a longtime colleague of mine in the Antitrust Division of the Justice Department. He's there every step of the way in the Microsoft trial, and then left afterward and went to Boyd Schiller and Flexner where he's now a partner and works on a wide variety of antitrust matters, both civil and criminal. John. Thank you, Phil. Let me start out by introducing the panel here. To my left is Tam Ormiston, who is the Chief Policy Deputy Attorney General for the Attorney General's Office in the state of Iowa. He's also the Deputy Director of the National State AG Program at Columbia Law School. He was involved on behalf of the states from the inception of the case until the final remedial phases. Next to him is Karma Giulianelli, who was a key member of the DOJ's trial team in the San Francisco Field Office and who is now a partner in the Bartlett Beck firm in Denver. To her left is Steve Halk, who is now of counsel at Menneker and Herman. Am I pronouncing that correctly, Steve? Narke and Herman. He led the state's trial efforts, again from the inception through the remedy phase as the Chief of the Antitrust Section of the New York AG's office. We're going to start out with Karma, and the subject of the presentation today is integrating substantive law strategy and trial tactics in a complex monopolization case. So the basic plan here will be to address some of the issues that came up in trial, how they were handled, how they may be handled today. And we want this program to be as interactive as possible. I thought the last one was great, and we had audience participation. So if you have a chance, if you have questions that are timely while the presentation is going on, please feel free to raise your hands. We're going to try to leave at least 20 minutes at the end for a separate question and answer session so you can reserve your questions until then. Since the Microsoft folks, unfortunately, were unable to be here, we're not probably going to have as much give and take as we had anticipated with the panel. So feel free for anyone who wants to chime in with opposite views. We would welcome that. So I'm going to start with Karma, who's going to start off talking about the use of intent evidence in a monopolization case. I can't help myself but start with a few other things first, prompted by some of the comments earlier that they're hard to follow, and they were a walkthrough memory lane, because of course I remember walking into Bill's beloved office in 1996, and he said, we need to get on the phone with David Heiner and Bill Newcomb and tell them we're sending a simple investigative demand in connection with the famous parenthetical, which was in the consent decree that we saw. So it's been a long process since then. And Dean Kagan opened her remarks by welcoming, I think, the way she characterized it, the winners in the case and the losers. Well, I'm not sure, in retrospect, more than a decade later, who the winners and the losers are. It's not clear to me that there are winners or that there are losers. The question of whether the computer industry would look any different if the case had not been brought is an interesting question. I happen to think that the computer industry, probably the way it came down, would not look any different if the case had not been brought. There were certainly interesting legal battles along the way. I think that Microsoft made good business decisions, if not legal decisions, because it's been very profitable and remains so, although it's ended up paying a lot of money, it finds. And I'm going to talk a little bit about the legal battles, because they do inform the trial practice and strategy that one uses in complex and unjust cases. Although there have been interesting legal battles, I'm not sure that the law is any more clear, either, on the standards for what violates the antitrust laws when we're talking about section two. Now, we certainly know from the DOJ's lack of section two cases and pronouncements this month on the way it views section two that the way the DOJ views the cases. But the jurisprudence is not any more clear in terms of section two. So the key thing, I think, when you are facing any complex case or an antitrust, complex antitrust case, is to, and how you capitalize and defend on the evidence that's necessary, actually necessary to prove in your case, is first coming up with a consistent theme. And you have to pick your battles early. You have to prepare a cohesive defense or offense based on a few simple themes. The more complex the case is, the more important this is. And this requires making difficult decisions about what not to defend since we're here or what to defend. Since we're here talking about Microsoft, one example that I know a lot of commentators have discussed and they love to hear from some representatives of Microsoft was the decision to really fight about whether they had monopoly power in the case. Now, I know that it's a very difficult decision because a company besides Microsoft having a conceiving monopoly power or having a ruling that says they have monopoly power makes life much more difficult in many respects. But it was a tactical decision that in some ways diverted a lot of attention during the trial from other counters and could be said to have damaged their economists. I remember, I believe that their lead economists actually issued a report including that if Microsoft were really a monopoly the price of the operating system would be approximately $1,800. And this was when PCs were selling for about $1,000. And that was a big question during the case that took a lot of time. And there are reasons for deciding whether to defend one area or not but one big lesson that we all learned and should remember is to decide which battles you need to fight and to pick those battles and be selective in the case. Carmen, let me interrupt you since there's no Microsoft representative. Let me play devil's advocate for a second. I believe it was Microsoft's position that while they had a large share of PC operating systems they were threatened by all sorts of different paradigms including handhelds, distributed computing, all those things that certainly have become more popular today although I don't think they've shaken the monopoly power of Microsoft. The Dr. Schmalzies conclusion that the true value of a monopoly operating system would have been $1,800. I don't think passed any kind of plausibility test but the paradigm shift... Can you follow your point, devil's advocate? Well, I got two or three sentences and I couldn't go further. But what's your response to that argument? Well, I think that that's an argument that's still being made today and perhaps we'll see being made today in many of the contexts that Ben discussed earlier involving current DOJ investigations, for example. I think that it depends on whether the company is taking actions that could defeat technology that would represent the paradigm shift. So sure markets evolve quickly, threats pop up, but if you have the power to squelch the threats, they might not pop up. And if we see that the iToaster, which I think made a splash for a bit during the trial, is never materialized, not that the iToaster was going to be the big threat but there were a bunch of cited threats at the time. Yes. Well, how does intent play in all this? Well, so let me get to that because sure. I think there's another point about the handhelds and the other things. And Karma was the lawyer who prepared me for my testimony so I remember everything she told me but she doesn't seem to remember everything I said. I absolutely do. The issue was not whether Microsoft had monopoly power over the PCs. It was whether monopoly power had monopoly power over the operating systems in PCs and put aside Professor Schmalenze. The charge for the operating system was a very small part of the price of the PC and the notion that Microsoft had no power over that price that if it raised the price 10% or 20% or whatever it was going to cause a great flood of people to abandon PCs and go to handhelds was just wrong. Well, Frank, how would you address the argument that Dr. Schmalenze's argument that there was a race to a monopoly and he didn't characterize it that way but each firm wants to be the leader and capture those network effects and if you do, there's a big reward for doing so and having that potential reward in front of you is what encourages investment and innovation in these areas and indeed sometime around the time that the DC circuit or around the time that the judge's decision came down the stock market, the internet bubble burst and people stopped investing in the second internet pet store online. I always felt that if the Microsoft case had something to do with bursting the internet bubble, I was just one of the pricks. I'm permitted to say that. Anyway, I think there's something in Schmalenze's argument but that's not what the case was about. The case wasn't about whether Microsoft had monopoly power. I mean, as a preface it is, the winner of that contest obtained monopoly power and that was a natural, so to speak, phenomenon the result of the network effects and if Microsoft had done nothing more I don't think there would have or should have been an antitrust case but Microsoft did quite a lot to protect the network effects or what was called in the case the applications barrier to entry that prevented others from competing in the operating systems market. Carma, you're going to go on with what some of those actions were. Professor Fisher, you've given me a great segue into the intense question. I try. Because one of the four questions in the antitrust cases is whether the conduct is actually anti-competitive and that's the hardest question. It's very murky and ambiguous and there are no clear standards. These are very fact specific cases as we all know, although possessing monopoly power is not in and of itself unlawful using it in the proper means is but what is in improper means? The Supreme Court has established specific tests for conduct in the predatory pricing area but it's never really articulated similarly explicit standards in the context of what is potentially exclusionary conduct. There was ask and scheme case where the court discussed whether conduct had a valid business reason but that of course is not so clear and a competitive and exclusionary conduct often goes alike and the same conduct can often have beneficial and exclusionary results and the same conduct can be motivated both exclusionary results and sometimes exclusionary purposes and sometimes our competitive purposes. So this makes it very hard to distinguish conduct that's lawful from conduct that's not and that's led to many different articulations of what exclusionary conduct is by courts and commentators alike. Since we're here to talk about the Microsoft case and of course the DC circuit talked about this balancing act where you look first at whether there's an anti-competitive effect and then you look at whether there is a non-pretextual pro-competitive justification for it and then you do some sort of balancing to see which outweighs which the standard in many ways makes sense. I think others will talk about the legal theory then you have other standards like this profit-sacrificing standard which looks a lot like the standards in the context of predatory pricing. You have standards that go to whether you're hurting equally efficient competitors but all of these standards and this is really where I'm going involve ultimately looking at intent although specific intent is not an actual element of a section to the monopolization case that plays a role when you're talking about attempted monopolization it very much informs I think the analysis and the conduct will turn of course on economic testimony and looking at whether firms have valid business reasons for their conduct but it's most important to look at what the firms themselves think and say because that can inform the analysis of whether they in fact did have a non-pretextual reason for their conduct. It's not determinative necessarily and that in and of itself is not clear cut. We saw a lot of emails during the Microsoft trial and a couple of emails I think from Kepin and others and Bill Gates a few minutes ago that could be equally consistent with very strong competitive conduct of the kind that we would promote and want in this economy and in this country for capitalism so even evidence of intent is worthy and that is where trial strategy especially comes into play because we have emails like let's kill the competition it's very important not to run from those emails and to the beginning of the case know exactly what is out there and have a clear and consistent story about them and face that head on and I think that's one lesson that was learned from the Microsoft case by practitioners and in preparing for depositions really having the witnesses prepare to take the emails and explain them in context in a non-defensive way. Karen? During the trial when the emails came up over and over again I talked to a couple of people who represented IBM during its long fight to the government and what they thought was that Microsoft ought to have embraced the emails that's the language embraced the emails I couldn't agree more I think that you know I'm mostly defense now this was not the same karma well I'm pretty moderate here and I think that it's critically important to at the very beginning of the case gather the evidence see what is there come up with the key themes not caught in the weeds although you need to know the weeds but really choose what your two or three court defenses are going to be and they have to be consistent with the evidence and the emails and use them to your advantage in the best way possible so I think using the emails and hiding them yourself even using your own bad documents and opening statements I don't actually remember Microsoft's opening statement they made it very long but that's not important my question is what's something new from Microsoft that maybe is already out there the notion of embracing I think that's right during the trial different witnesses had different approaches Bill Gates and his deposition provided whether he was going to say Netscape is a threat or not or whether he really understood what the meaning of competitor was or not it was some of the witnesses did a better job of others some of them did a good job of embracing their own emails that is emails that they authored but had a very difficult time dealing with emails that Bill Gates had offered because they could explain what they said yes well I was a little bit over the top there a little locker room language well we were in a competitive battle and that's why I said let's to use a euphemism do bad things to Java for example but when they were caught with a Bill Gates email they felt the need to defend him in ways that were not credible and interpret those emails that were contrary to his understanding and it was really something that hurt several witnesses very badly at trial they were well prepared and smooth on their own writings but weren't on others there's always going to be a defense in a monopolization case that this is just locker room talk this is just firing the troops up to go out there and compete and of course that's what the antitrust laws want to encourage so you can't look at intent alone is never going to make a monopolization case obviously you have to look at the conduct and the conduct has to be any competitive and it has to have any competitive effect but those emails are clearly and those admissions are clearly relevant and I think it's also important to remember that not all of these kind of statements of intent were only statements of intent some of those statements of intent were made to third parties with the goal and purpose of cutting the legs out from competitors the evidence showed that Bill Gates in 1995 went down to Intel and we talked earlier about somebody having a Google perhaps now having a balancing effect or similar amounts of power to offset Microsoft back in 1995 Intel was certainly the firm that came the closest to having any kind of market power that could offset Netscape I mean excuse me that could offset Microsoft he went down there and he said two things one we don't want Intel writing platform level software we own software down to the silicon two we don't want you supporting Netscape as a platform it's okay to support them as an application as a value-added application but don't support their platform function their APIs and because the platform function is the function that if Netscape were successful in getting a platform off the ground would weaken they didn't go this far on what they said to Intel but obviously the reasoning is that to get the platform off the ground that's what's going to weaken Microsoft's power in the operating system monopoly and later a Microsoft executive said to Intel personnel we're going to cut off Netscape's air supply and at trial well that's just locker room talk it wasn't just locker room talk it was Intel do not support Netscape because we're going to cut off their supply any money you invest in supporting them as a platform is going down the tubes this is our plan we're going to do it get out of the way so it's not just intent it's conduct with intent and John thinking back at the time that we did this trial e-mail in many respects was in its infancy and Microsoft was using e-mail very very effectively those e-mails at 2, 3, 4 o'clock on a Sunday morning that was remarkable to see the breath and bulk of material and in a way it was kind of the first first experience for a lot of people to think about how to deal with those e-mails to bulk what was said in the way that it was said and now I think we've learned something from that in later trials on the way we manage that but that was kind of the first cut at how you start thinking about the kind of exposure that e-mails create that's right it's human nature it is human nature the e-mails are still out there I didn't tell you but how you might deal with them how you might deal with them is another question but I don't think you can give people to not write things in every case you're going to find something good or you're going to have to defend something that might take out of context or not be something I was talking about a couple points about e-mail also about bulk dates the point of the e-mail is David Boyes is one of the best cross examiners in the country for sure people who don't get enough credit are Karna and John and Phil and some of the folks from my state trial team who organized all the e-mail that David was so effectively used in cross-examining differences and then there was the mention of bulk dates and some of his e-mail I actually thought the most critical part of the trial was bulk dates' testimony which David and I took him to discovery and was played throughout the trial and Mr. Gates there was extraordinarily combative and I think that set the tone not only for his deposition which was played throughout the trial but for the other Microsoft witnesses as well I think that was some of the problem they had in dealing with the e-mail with Karna and John and Phil and so effectively Actually I have one thing to add about the Gates deposition I think that it was used in a very clever and perhaps unfair way I'm surprised that we got away with it because if you take the whole deposition in context he was not certainly he was combative in areas but it was a couple of days I think two or three were playing deposition and what happened was at the beginning of each particular topic in the trial when we were going to talk about Apple we were able to say okay where is Bill Gates the best clips on Apple and play those clips and the judge let us play the best clips on Apple and normally in trials you have depositions where you do designations and it all comes out in order and it's in one day and the plane of designates some and the defendant does and it's played in sequence so I think that the government did get lucky in the way it was able to use the Bill Gates deposition in all fairness and I think deposition preparation plays a long goes along I think the way this happened was we did intend to play in our entirety Microsoft kept dragging the cities out each day I think it was David's brilliant idea to do it the way we did and of course the judge did it allowed a great focus you know of Bill Gates was the little five minute clip at the beginning of each day it never took the focus off of it so that doesn't happen in many trials I think if there's one way that this trial has changed litigation it's in the preparation of witnesses this is conceitedly anecdotal but in my experience before that trial depositions were being videotaped before that time but it was not uncommon for senior executives to decide to not be knowledgeable or to if they just wanted to stay out of the case to not remember things to not remember documents stonewalling I think was much more common how effectively those depositions were used coupled perhaps with Mr. Clinton's testimony about what depending on what the meaning of is is being played over and over again on TV has sort of brought home to lawyers who in the past were tempted to stonewall that if these kind of tapes are played in court your client is not going to look good and it's going to redound to your detriment and again my point of view is anecdotal the sense certainly is you run into a lot less stonewalling witnesses may not always answer your question but at least they'll they'll say something in response and be more prepared to articulate their themes and to me I think it's a noticeable change others may have thoughts on that from your experience I think I think that that's absolutely right but I also and I think that a lot of how a deposition turns out depends on how the personalities of the deposition interact and how the deposing lawyer acts and whether the deposing lawyer is getting under the witness's skin or not and again having been an abiliate deposition David is a brilliant lawyer he has a great job there and he really did not stop pressing Mr. Gates on many of the same questions over and over and over and when you do that for two or three days you can get some pretty good testimony in these places and then when the judge lets you play it and bits and pieces like that it's helpful so when you're talking about that deposition you did a masterful job but when you're talking about deposition preparation and how it's changed one key thing to remember is a trial strategy is just that you have to tell your witnesses you could be there for two or three days and exhausted and your demeanor must never change and you can answer the question in the same way because you don't know what part because I do think actually the experts gave a fair representation of what happened Bill Gates's defense I took the first day of the deposition and I attended his deposition he did a terrific job so he learned his lesson and he approved and obviously was a good lawyer and involved as well he did a very fun job sometime around I would actually not imply that it was a fair representation but I think when you have multiple days of questioning it's easy and you try to condense that into an hour or more it's easy why don't we move along to Steve's presentation Phil mentioned earlier the DOJ report on section 2 conduct which was issued this week and the FTC's commissioners had an unprecedented reaction to it I think they accurately characterized it as radical and I'm sure that the speakers tomorrow will talk about some of the particulars of that but one thing that brought home was that in addition to having competition among firms in the economy it's sometimes good to have competition among enforcement authorities there's three major centers of enforcement authority in the United States the DOJ and the trust division the FTC and the state attorney general's offices and Steve as I and Tam as I said before were there from the beginning and to the end a lot longer than Karma and I were there and I want to turn it over to Steve now to talk about the competition this good among enforcement agencies I was going to talk about the case from the state's perspective but since Microsoft isn't here I thought you were talking about it from Microsoft instead that's okay with you Brad is that okay? I'll go back to my original play so what I wanted to do was to give a brief overview of the state's involvement in the case particularly the trial and I present articles in your materials Kevin O'Connor just to correct the not correct but to supplement the record of Judge Cadengate and Dean Cadengate of the hardest part of the loss of alumni involved in the trial Kevin O'Connor who succeeded me as lead counsel for the states and he was the teacher of the University of Wisconsin he's also a Harvard Law School graduate so you can get a fuller view there so what I wanted to do is briefly cover the trial of the case perhaps and also talk a little bit about how the court of appeals did impacted the trial and Tam is going to talk more from a higher level about some of the public policy issues involved in the state's participation in the case and explain why the state's got involved but from my perspective as chief of the antitrust group of the New York state the reason the state's got involved is pretty simple to respect to Gary Greenback's white papers in my Harvard Law School education I was looking at the emails that Professor Zinter had on the board here and it seemed pretty clear to me that there might be a problem in Microsoft's conduct furthermore from the state's perspective what's very important to them is the impact of anti-competitive or potentially anti-competitive conduct on the consumers it seemed to us that there might be a very significant impact on consumers particularly because this case focused on the on-ramp to the internet and also it seemed to us that there was a potentially significant impact on innovation and there was a period where Microsoft was doing skewing innovation so the states were very interested it was by no means clear to the states that if we did do something the DOJ would fill mentioned that earlier the case of DOJ had brought it was settled and it seemed to us that the settlement agreement didn't really resolve much change and I'm not sure anybody really would argue with that and moreover in New York we had just taken a look at the development of my next merger and urged the DOJ to get involved in that and they declined to do that so we felt that if we weren't prepared to do something might not be done and finally we wanted to be obviously to have an impact on the remedies decision which is recently that's shown turned out to be a very wise decision indeed there's various levels of coordination I would say prior to the filing of the complaints I would describe the investigation we did at DOJ as running on parallel tracks there was actually very little interchange of views I would say among the states in the DOJ we eventually states that decided to file a lawsuit we actually made that decision before DOJ did and so we were ready going and able to go to trial whether DOJ joined us or not we called DOJ and we were going to sue them we hoped certainly that they came to a like decision which of course they did and we were very happy to have them with us indeed once the complaints were filed Judge Jackson consolidated them and he was very mindful of the problem of moving the complex antitrust case like this quickly enough so that any relief entered would be effective he set a very tight trial schedule and I think the coordination was really very extensive throughout the trial sometimes one might look at the states and say well there's 20 of them in the District of Columbia it's probably much more difficult for them to coordinate amongst themselves even the DOJ and Microsoft but I actually thought that wasn't true because of the work with TAM and General Tom Heldin behind the scenes I really had a lot of discretion there was a tri-partite say monster but not monster creature I heard this clearly there was Joel Klein and Doug Melvin in DC who had the alphabets of David these guys here, John and Harman and Phil I'm sure they did much more about the case that was the DOJ trial from Mount San Francisco and they had their own piece about the case which clearly influenced DOJ and then of course once David was already was a very powerful figure in his own right so there were really sort of three competing senators there and on the Microsoft side they were still in their prime while there was the first one team of in-house lawyers and I know that often times we had these pre-trial telephone conferences among the three parties to talk about what we were going to do and I was always able to commit for the states Phil had to go talk to David and Joel first David Joel first and John Warden for the Solver Chromology where I can check with Dave Klein and some of these colleagues at Microsoft so really the states had a pretty unified effort and I always felt that my views were very carefully listened to and respected by Phil and David who were clearly the junior partner of the trial and maybe Phil and David were just good actors Phil were you acting when you became interested in what I had to say or not I didn't have any concern with my views that I weren't being listened to and I know that K.O.J. did give us some definite certainly one of the unique features of the trial was that there were just 12 witnesses allowed beside and they were directors of the trial and they were just 12 witnesses allowed beside and they were direct witnesses and they went in in written form and of the 12 witnesses one of the very important slaps was ceded to us one of the unusual features of the trial was that there were actually two economists who testified, Professor Fisher but K.O.J. gave up one of their slots so that our economist Rick Orton could testify you know they were appreciative of our support I think both materially and symbolically because we represented a large cross-section of states large small my AG was a very conservative republican there were other very conservative republican AGs who were liberal democrats so I think K.O.J. public relations wise felt that felt that was useful it was been some mention of the press and perhaps one of the most unique phenomena of the case was really the press coverage and just to give an anecdote my first intersection with the press came one spring afternoon in 1998 when I was sitting in my office in New York picked up a phone and it's Joel Twine it is distinctive not in the little one Bronx Twine and he says Steve I have a very confidential tell you you can't tell anyone you promise not to tell anyone I said sure I think I should tell you because you're a lead counsel for the states I'm just hired David Boyce to lead the trapping for DOJ I didn't send anybody I wake up until next morning to ban our headlongers and walk in turn on New York Times indicating David has been hired by DOJ so you know it was always pretty clear to me there wasn't a lot of coordination on remedy it was always pretty clear to me that while we might not agree on remedy it really behoved us to cooperate with DOJ we both wanted to win the trial and probably most difficult decision tactical decision the states had to make was exceeding David Boyce's wish to do all the cross examination himself which clearly lowered our something that was intensely debated and discussed among our staff and the reason even by the attorney's general and in the interest of the interest of the case overall and certainly mindful of David's terrific skills across the family we exceeded his wish to do all the cross examination our career trial staff did the same thing just emphasize again I'm told you must say something I'll tell you we're in this academic setting and a tendency often is in academic settings to focus on sort of interesting legal and intellectual issues but really the key thing in the trial is with discreditability and I thought that was a huge impact on Judge Dachshund's in the case of the valuation of the Whitney's case which as I said before it was a result of a lot of work that Phil and John Carter and other folks did well I said a little bit about remedies there's one entire academic canard I thought I read most recently a paper written by Harry first I usually agree with almost everything Harry says and I did in this paper as well but the point academics make sometimes is that the government prosecutors don't pay about the vision to remedy it early on in the case and I think that's absolutely untrue of this case at least from the state's perspective I know there was a team of lawyers almost from the beginning that heavily researched and thought about the remedies issues and clearly the remedies was a problem in the case but it wasn't because we didn't think about it soon enough it's just because it's a big problem I should say that I left around the time the DC circuit case came opinion came down so I wasn't involved in the final remedies but I certainly was involved in the outset and the idea that we were not thinking about remedies is absolutely incorrect the idea that we did not reach a firm conclusion on remedies was correct it is obviously a tremendously difficult problem one that you know may or may not have been solved adequately to everyone's satisfaction but the idea that we had not determined a remedy beforehand and had not thought about it is I mean we felt the best thing to do was go forward with the case establish liability in part it depended on how the case turned out to get to determine what the appropriate remedy was one issue in determining a remedy is this was a very difficult case for to convince witnesses to come forward and testify Microsoft had and still has an enormous amount of power over software developers OEMs basically the entire ecosystem in the PC community to come out publicly and for us to go forward for them to step up and take that risk of testifying and putting themselves out publicly they had to be convinced that the department was going to seek a serious meaningful remedy and I think they were convinced no promises were made but they understood that there was going to be that the department was going to look hard and attempt to accomplish a very serious remedy now you know what ultimately happened I wasn't there maybe Phil wants to talk a little bit more about it but this DOJ report that was issued this week seems to take up the same theme and in some ways suggest that if you haven't figured out your remedy in advance you might as well not bring the case and I disagree most strongly with that I'm sure when they brought USB AT&T they did not have a clear idea of how the consent decree would be structured nevertheless it was a case worth bringing this case was worth bringing I tend to disagree with Karma that things would be exactly the same had we lost the case or not brought the case I think things there's a question as to whether the remedies have had an immediate effect to offset the illegal conduct that occurred but had we not brought the case or had we lost the case my view is very strong that things would be worse well that's what I was referencing actually was the remedy when I made that comment and I agree with John absolutely we were discussing remedies from the beginning and I have a lead to making that because that is not an easy question I wasn't there I left after the liability trial as John did but I wanted to hear from Phil it strikes me and ironically enough my partner Phil Beckbent was brought into the outside council for the remedies portion when I was at part of the vet and I wanted to hear from Phil but my impression is that there simply wasn't enough time on the hearing side and the way that the whole procedure worked out to have a thorough vetting in court of the potential remedies was that how much did that mean? Well let me dodge the question for now by saying I'm not going to dodge it and we should certainly ask Phil Beck as well but I did want to go before we lose track of it too much I wanted to jump back to the beginning of your talk Steve to something that's important and that's the idea as John mentioned about the transition between enforcement agencies and sometimes one whether it's the states or DOJ or maybe the Europeans will have a different view and come out more aggressively than another and there are ways to see that as good but if you're sitting in Brad Smith's chair or another big company's chair maybe Google's that's got to be a pretty terrifying prospect that you not only have to sort of deal with one enforcer and have one process you may sort of get thrown off and you may end up having to do something fairly different with a different enforcer with the states or with Europeans certainly I believe that the remedy should have been more stringent but you raised the question that we just discussed have remedies had an effect on Microsoft and I think one thing that shouldn't be overlooked is just the impact of having a enforcement official looking over Microsoft's shoulder and I wanted just to read an excerpt from what Mary Jo Foley wrote and she is a very close observer of Microsoft and she recently wrote a book on the subject of Microsoft and she said more than the exponential growth of processor speeds the rising popularity of open source software with a skyrocketing market cap of Google the external event that had the biggest impact on Microsoft in the past 30 years has been the ongoing and trustworthy to which the company has been subject and I think there is some truth to that the contracts I look at today are actually looking at back in 1998 and I think somebody Brad Smith and his team of lawyers deserves some credit for that so I want to give that credit on the subject of why the just Jackson just entered the remedy I think you know I was going to say a little about the Court of Appeals but I think the very important part of just Jackson's thinking was the time when I was so unsettled about the Court of Appeals which you said that he really wasn't confident that his liability decisions are going to stand up and rightfully so I think he just wanted to get a valid ruler and I think in the future one way these cases can be approved is through the law for the energy to appeal to the complex government and across the fourth connection so that the law is clear before you have a very long remedy so I want to get Dan at the time to talk about running behind time just to emphasize how important I do think the state's involvement has been over time is still alluded to most recently my group of clients in California who are joined by New York and Louisiana moved to extend the initial five-year term of the final judgment as it was about to expire and it was proposed not only by Microsoft but by DOJ so not to put too fine a point on it DOJ sided with its long-term adversary and probably one of the most important section 2 cases that it ever prosecuted and unfortunately from my perspective the judge agreed with us so today what we have is the final judgment that is largely enforced by the states alone because DOJ allowed its final judgment to lapse so I think it's perfectly clear that over time the states have been my view the most vigorous and consistent and addressed enforcers we had a major complaint not too long ago from Google about the way desktop search was treated in VISTA and the states were in the forefront of that and got to the Microsoft agreed to make some changes as a result of our discussion with Microsoft so I think the states have played an important constructive role throughout the case so let me follow right up on what Steve was saying when Phil began with his notion well what are the questions we should be asking ourselves and one of the original questions was well what happened if DOJ didn't bring this case and in a way that sort of makes an important point here it eludes the part of this case that was fundamental to I think its success and that is to take roles to take nothing away at all from the federal initiative but I think you and I and Tom Mark-Toby and others had the very first meeting in San Francisco thinking about this question and the states were involved from the get go and let me tell you why I think this works I sit back and I think about the way systems work and how they ought to work to serve the public is very very fundamental on this question and the vitality of federalism the joint responsibility of enforcing the antitrust law by the states and the states together and I think what that has done has generated what we've already mentioned the competition even among law enforcement agencies of the marketplace of ideas this is serious stuff Microsoft was a huge American icon none of this was taken lightly it was the American success story and having a lot of very able people the federal level, state level and even outside the spirit thinking about this and helping shape this case and its significance was fundamental to the success we wrestled with views perspectives, theories what do we include what do we not include the resources that most efficiently respond to a very highly respected company that had loads of resources and even DOJ alone would have difficulty combating that and it's not only I think the question of resources this question of appearance the public have faith that this wasn't an anti-business administration going after Bill Gates and Microsoft which would have been enforcement indeed what we had is 20 states representing nearly 60% of the American population representing conservative Democrats or conservative Republicans Democrats we had Judge Robert Pork and we represented a broad array of interests that combined to focus upon this very serious issue tackling the anti-trust on a high tech environment and so the states played a role and this is the question of thinking out of the box this is a question of considering very carefully what our joint responsibilities are and how we could work together and I think we went out of the way not to make it hard on Microsoft to burden and we combined everything we did all the depositions we had the two track investigations which ensured I think that as we move forward separately when we sat down and we looked at the collective information that there was some confidence that the issues were real from a legal perspective let me just talk about these institutions and I think in metaphors so let me just talk about the USDA enormous talent internal resources great power huge operation but it's very much like if you will an aircraft carrier a battleship it really takes a while for that system to gear up and be able to move effectively and concentrate those resources effectively the states on the other hand smaller sovereign we can move a little more quickly we can scramble and start addressing things individually in combination that also is constructive and taking together this complementarity that I think needs to be recognized that those two abilities reinforce one another and taking together were the responsible way to approach this issue when we go back and we look at this how did this case really evolve we had a guy in Texas named Mark Topey and we had other attorneys at the staff level that were looking at this and very troubled by what they were reading and hearing there was a lot of talk and state attorney general were in a big lobby and looking for the line life but the facts of the case and this one looks at fairly the history the state AGs and AGs were really doing this independently it was staff driven I think largely at the federal level and largely at the state level there are serious resources among the states New York brought a lot California and other states our small state of Iowa happened to be heavily involved and the governor was chairing the antitrust committee for the national association attorney general so we had really this incredibly broad range of people with their eyeballs, their ideas and in a vigorous debate on where we should be going and how we should proceed there's a certain sense of reality that comes out of that competition that's been mentioned several times with this case it's been the same about the states I don't think it would have and that's not to diminish the great effort that was made but this competition the cooperation looking at, I think it yielded better decisions, more effective strategies we had complex facts that we wrestled with comparatively thin resources despite federal and state capacity we were accused of manipulating the system for political reasons that went by the wayside because of the cooperation so I think we play the role and that means us to look at as quickly as I can the individual junctures where states made a contribution not sitting back not being chassed, not threatening just doing what we regarded as our job our responsibility in this legal enforcement system in antitrust that we have in this country at the investigation level we did the loans, Steve said we put our case together and we were aware that because of the complexities that DOJ had faced in the 95 decision that it was entirely possible that they would be gunshot that was not a fun experience for them and even though the staff might be excited but I don't believe that that was the case you know there are political realities to bring in these cases and with the administration that Joel agreed with the fact that we were proceeding ahead but we were kind of doing it with what we had we felt that it was that important we were committed to it and then when Joel said we're all in this together I think it served the interest of all the parties for all the right reasons so we combined these when the cases were filed they were done jointly there was a lot of discussion we did in concert as you recall all those initial rulings basically trying to consolidate this and make it something that was fair for the defendant in this case something that was coherent for a very very complex case so that it became manageable that the state federal joint initiative was effective and didn't serve unfairly the interest of Microsoft the other thing that I think it did was some assurance to the business community and the public at large that this was an issue that deserved consideration this wasn't grandstanding this wasn't line lighting this wasn't somebody who came in and lobbied 20 odd states in the federal parliament there was an effort to persuade to be sure by competitors and by Microsoft itself but when this decision was made I think it had to give some confidence that it was a serious legal matter that was under consideration one of the characteristics that I really value throughout this process was the level of trust between Phil and Steve and David and karma and others who were fighting this fight putting our experts together creating a combination that built on the strengths that we had as Steve said we received in our presence in this case you just don't get much better than David he'll be here tomorrow we all benefited from that but we all took our parts we played them out and did them the best way we could to fill the mission that we felt we had this is if you look at this this really is by any standard a model for cooperation in this case went for years it was complicated we fought it through and I like looking back at this and believing that we really made some inroads I'm looking forward to tomorrow to deciding did it make a difference I think in many respects it might have let's break through the trial we worked together successful model the states did document review we did the whole thing with Karma and Phil and others so that's not to be lost our experts as Steve said played a role in fashioning the resolution to this when we went on the appeal when we went through the mediation you recall and Judge Poser is a very very fine judge a highly respected judge his great strength I must say was not mediation and the states were effectively left out of that process which I think was unfortunate for the process itself when we did get a mediator after that Judge Posner it was critical of the states were disrupting this thing we went on ahead and we did reach a settlement with a more professional mediator and we appreciated Judge Posner's effort but it just did not heal on the appeal and this is a personal standpoint but I was sitting there and I was on pins and needles as we watched that appeal occur and we had some great people from the solicitors General's office we had enormous talent the states brought a guy and we looked all over the place and we got a guy named John Roberts we thought John was the right guy he's gone on you probably heard of him since and I defied I think John's argument to the court may have been one of those consolidating moments that retained the integrity and kept that decision march on attack I defied and you would say it's not true but John was an important part of that and the way he reached out to the court was critical in combination it made a huge difference the remedy Steve has talked about we've stayed in the game and this is a point that I'm really I'm curious about Brad and I talk and many of us continue to talk trying to find the right answer with the state still in this and with the judge's most recent ruling but there's something about having the cop on the beat when we got the remedies decision from Judge Cohen to tell you I think we were clearly disappointed we thought we might get more we fought for more and because we got that ability to control a little bit we had engagement we had much closer contact with Microsoft and with DOJ we did the joint status reports all of that was an important way of saying there's still cops on the beat so in summary if we lose that there's an effort to pre-empt to simplify the world and run everything from Washington but I think the flexibility that was part of this case really makes a very strong argument for this kind of an effort in this kind of a situation so that's my quick overview Thanks, Tam I think tomorrow a lot of the speakers are going to deal with some of the specific conduct tying and so forth and I'm sure that they're going to address the department's new reports in part so I'm going to in the interest of time dispense with applying how some of the department's latest pronouncements would have affected the Microsoft case in the interest of taking questions from the audience and getting some discussion going so sir I I agree that it's human nature to write this stuff down it is not human nature to get it into the record in the anti-trust case if I were writing a historical novel about the Microsoft case I would have a conversation something like this Papa Gates Bill you've got to get an anti-trust compliance program he explains what it is Bill and I don't want to subject my staff to all that crap so Microsoft and the anti-trust compliance program of any weight and as a result you've got all these emails coming into the record now let's take the other big gorilla on the information technology street Intel I spent the better part of a month reading Intel's email and it's decision making documents for the FTC's case against Intel in the late 1990's I can tell you that documentation was squeaky clean nothing got through the screen not only were people very careful well who knows what they wrote but got spoiled immediately but there just wasn't anything incriminating and not only that the key strategic decisions the corporate council was always there and the documentation on those decisions was protected by attorney client privilege my guess is that AMD is going to have one hell of a time proving its case against Intel you're absolutely right that the case certainly raised awareness and people got more careful about what they write I still submit that there's always a nugget to be found there's a war story on that FTC case if I could follow it up in Intel headquarters there are all these physical exercise machines these torture machines that you run on to be healthy and there are TV screens overhead and it's like in every gym in America and most TV screens you're watching CNN or something but I had an eyewitness account that will not be disclosed tell me that at Intel headquarters up on the screen in the physical fitness thing was the Bill Gates deposition that they were all forced to watch thanks Jim I remember when there were legal paths one of my clients said don't say it write it I think one favorable thing for us is maintaining evidence in the Microsoft case is not many emails came from Bill Gates's box but we got his emails because his subordinates had held on to them because they're the director's directions from the CEO of the company and they wanted to make sure that they had them and they wanted to make sure they had a record of the long emails that they spent till 3 o'clock in the morning on Sunday before sending off to them but I think it's I would raise the question as to whether it was so good there whether it has raised expectations in other antitrust cases that there will be that kind of evidence when I think people are being more careful yes Karen in the absence of a Microsoft person on the panel that was that big question because the trial and you obviously have a spectacular ruling from Judge Jackson but if you look at the original court of appeals decision and we all talked about this case as a tying case and as I recall and I didn't need this before I came here but I read at the time in 2001 the appeals court judges said that you sort of had gotten it all wrong on time and it was in fact an affirming part and a reversing part situation and I just wanted to see if you could learn any lessons from that are you referring to I do okay my perception is that case was not about tying and the tying claim was simply misplaced you're talking about the consent decree case Karen no no we're talking about the big case Microsoft 3 I knew Professor Fischer it was an affirmation the conduct that was also found in the section 2 exactly I think there's been some questions I would go back and make a point I made before the reason that Judge Jackson just entered the remedy the government wanted was concerned about the unsettlement of time look at what the Court of Appeals did I think he was absolutely correct because it was totally unforeseeable it was a case called Jefferson Parish which says the time is per se on the market screen the Court of Appeals did something completely unpredictable created a separate role of reason and test for tying which limited only the platform software you know I don't think anybody could have foreseen that and that's why recently I suggested it would be a good thing the future, especially with laws on several you could get a ruling from the developed court I think my view is that the Court of Appeals decision while it took issue with a few things that Judge Jackson did including throwing at the attempted monopolization of the browser market point was was a a solid affirmance of the basic theory of the case that they had monopolized the operating system market which was the fundamental core of the case and unfortunately I think there are those Microsoft quite understandably that seized on the aspects of the case that the Court of Appeals did not find convincing to justify that to take what they could at a decision unfortunately I'm afraid to speak quite frankly I'm afraid that when the Department of Justice started receiving criticisms about the remedy that there were certain high level people at the division who mischaracterized the decision post-hoc as a justification and in my view intellectually dishonest and not appropriate for a law enforcement official but that's just my point of view yes sir I'm pleased to hear that there was a lot of attention paid to the remedy going in but one of the things that I've explored as a counterfactual is the use of IP misuse remedies in cases like this because going in anybody on the prosecution side had to believe that a simple fine wouldn't affect sorts of changes you were looking at and you had to know that any type of structural remedy would raise complicated implementation and enforcement issues and one of the things that I've looked at and really have explored in several places is what would have happened had you gone in seeking a remedy along IP misuse because Windows was of course this complex bundle of copyrights and patents and trade secrets and various other things and simply ask the Court to refuse to enforce any of the IP rights in Windows until Microsoft had corrected the damage that had done to the market which effectively would have meant forever for the lifetime of the software off the top of my head that remedy would present a number of problems first it would be a massive taking and perhaps disproportionate to the offense second if unless you unless there was a license for all time I think it would be very difficult for any business to take that intellectual property and run with it it's one that wouldn't necessarily create more I mean Windows is an evolving platform you could probably buy Windows 95 pretty cheap right now to just license Windows or make them give up the license to Windows as it stood now or at that time really wouldn't be an effective remedy wouldn't take into account the dynamic nature of the market again that's my personal opinion there is actually a 1973 Supreme Court case against Glaxo that as a shepherd eyes that had rarely been cited that says explicitly that the courts can refuse to enforce IP rights as a remedy in an antitrust case if you can show that it's proportionate which of course would have been I would hardly think that Microsoft would have rolled over had anybody proposed that that remedy and simply said oh gee I guess we lost so I think it is safe to say that it would have been contested yes Doug I mean you gotta ask yourself what wrong by any remedy the state of Microsoft critically enforces intellectual property by the way it's useful even if you were to be an appropriate remedy for antitrust violation if he alleged or proved that Microsoft's monopoly was illegal the allegation of the proof is that Microsoft raised entry barriers but they didn't say that you ought to look for a remedy if you're going to try to undo that situation a lower entry barrier is not the one that destroys the legal monopoly so it wouldn't have been a remedy because conceptually you'll assume it's going to be a wrong point yes sir first of all there's a huge body of antitrust law involving compulsory licensing as the solution of high-tech case problems more than a hundred cases probably as of 1958 there were more than a hundred cases but second one could have implemented selected more narrow not blunderbuss intellectual property remedies so my colleagues Robert Leithand Bill Nordhaus and Roger Knoll laid out a set of possible intellectual property remedies that I suspect would have been quite effective suggesting it was not taken up but it would be effective to do what to do what to do what mandatory disclosure of source code and what violate what wrong caused by the violation and what what the AT&T was required to license its 9,000 patents in the 1956 consent settlement how had it violated anything with respect to patents but that was an effective remedy to well it wasn't very effective that was a relevant remedy actually the IBM case which was handed down the same the same month was quite effective in opening up parts of the computer industry and if you look at the Xerox settlement in 1975 and read Peter McCulloch's retrospective on it you will see that compulsory licensing of intellectual property had major impacts of a pro-consumer sort opening up the copying machine in the street to new competition forcing Xerox to get off its lodges design more reliable machines and get them out there well I think that again here I'll be speaking on behalf of the department after I left so in that sense we'll be speaking as the devil's advocate advocate what Microsoft did in increasing the barriers to entry by eliminating the browser as a platform threat was to eliminate the browser as a platform threat you could not made it more difficult for firms to use interfaces other than the Windows interface to write applications or to interface with the web and I believe that the licensing the mandatory licensing provisions that are in the consent decree were designed to address that situation but again I feel may want to expand on that but that is how they attempted to tailor the remedy which to me seems a lot more to the offense than blanket licensing of the whole operating system so all good topics to continue although maybe more fun to do it over drinks and a little bit of food we just say part of what makes the remedy question so tricky here is exactly that the conduct was alleged to have excluded a nascent technology which might and we can't know because it was killed but might have ultimately created a threat that would undermine the monopoly itself and as the DC circuit recognized you can't just let that go because it happens so early but it makes it really hard to tailor the remedy to put things back how they might have been without doing more