IP: Chinese Wall? What Chinese Wall?!?

[Dave Farber <farber () cis upenn edu>]

[ For those of you who don't know John, he is an old (not age) and 
experienced professional in our field djf]


> Date: Sun, 14 May 2000 19:04:21 -0700 (PDT)
> From: John Wharton <jwharton () netcom com>
> To: farber () cis upenn edu
> Subject: Chinese Wall?  What Chinese Wall?!?
>
> Dave--
>
> I had to chuckle at Microsoft's response to the DoJ's proposed antitrust
> remedies; I wonder if anyone else noticed one delicious irony?
>
> For years Microsoft has claimed there's a "Chinese Wall" separating
> the operating-systems division from the applications-software division.
> This is an intellectual-property firewall that supposedly makes sure
> different groups within Microsoft don't have an unfair advantage over
> outside competition by having access to unpublished interfaces or
> unannounced product plans.  It also means different divisions can't
> collude in developing new products, Microsoft has said, and reassures
> other software companies they can share confidential information with
> one branch of the company without worrying that their trade secrets
> might be learned by a competing branch.
>
> It doesn't always work that way.  In his book "Startup", Jerry Kaplan
> tells how GO Corp. fell victim to the Chinese Wall gambit in 1989:
> Microsoft had approached GO, saying it wanted to develop apps to run
> under GO's new PenPoint operating system, but needed to know more about
> how PenPoint worked.  GO agreed to share the requested information with
> Microsoft's applications group only after it signed an NDA assuring
> Kaplan that he "needn't worry about GO's confidential information
> jumping from the applications group to the operating systems group"
> [Kaplan's words].
>
> Some months later Kaplan was shocked to discover that the very people
> he'd been dealing with actually worked on the development team for
> PenWindows, Microsoft's competing OS, and had used GO's proprietary
> information to clone the GO prototype.  The apps-development story had
> been a ruse, Kaplan concluded, to let Microsoft "rip off" the GO design.
>
> (See pp. 63-67, 101-102, 105-106, and 174-178 in the hard-bound edition
> of "Startup" for Kaplan's account of these dealings and excerpts from
> the non-disclosure agreements Microsoft violated.)
>
> (Sound familiar?  In 1980, Digital Research engineers shared design
> details of its CP/M-86 OS with Microsoft after MS said it was porting
> its compilers and applications suites to run on CP/M-86.  In truth, the
> MS engineers Digital Research worked with were using the information to
> make sure MS-DOS capabilities would more closely match CP/M-86.)
>
> ====
>
> So now the DoJ has proposed that Microsoft be split in two to make sure
> future apps products will not in fact be able to take unfair advantage
> of knowledge of OS products and vice versa.  In effect, the DoJ asked
> Judge Jackson to plug the holes and make the Chinese Wall more solid.
>
> And how does Microsoft react to enforcing a policy the company says had
> been in effect all along?  It screams bloody murder, claims there's no
> way the company can survive, much less continue to 'innovate', unless
> communications channels between the divisions remain wide open!
>
> "These proposals would block us from doing new product work," Gates has
> said.  "Microsoft could never have developed Windows under these rules.
> We couldn't have developed Windows because without the great work of the
> Office team and the Windows team, it never would have come together."
> (see the NYT, 4/29, pp.B1 & B5)
>
> So much for the Chinese Wall theory!
>
> And so much for any claims that Microsoft's control of the OS market
> played no role in advancing its interests in the applications arena.
>
> (I laughed out loud to read that.  Perhaps the brightest moment to come
> of this case since Microsoft attorneys tried to discredit an Intel VP
> during cross-examination and managed only to embarrass themselves!  :-)
>
>   --john wharton