Microsoft Conduct Is Challenged Again

[David Farber <dave () farber net>]

Begin forwarded message:

From: Barry Ritholtz <ritholtz () optonline net>
Date: November 17, 2004 6:22:24 AM EST
To: Dave Farber <dave () farber net>
Subject: Microsoft Conduct Is Challenged Again

Hi Dave,

Big story in the WSJ this morn on the continued bad behavior of Mister 
Softee. Despite being under judicial orders to preserve documents and 
emails, it seems Microsoft's senior management created a purposeful 
email "retention" policy in opposite of the judges order (if you 
understand the word "retention" to mean automatically destroying of as 
much internal email as soon as possible).

Some things never change. Even their PR flack's comments are a repeat 
of old lines.

Since the WSJ is subscription only, I have included the full text here.

Cheers,


Barry L. Ritholtz
Chief Market Strategist
Maxim Group
britholtz () maximgrp com
(212) 895-3614
~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Big Picture:  A blog of capital markets, geopolitics, with a dash 
of film and music!
http://bigpicture.typepad.com/comments/







November 17, 2004
Microsoft Conduct Is Challenged Again

By JOHN R. WILKE
Staff Reporter of THE WALL STREET JOURNAL
http://online.wsj.com/article/0,,SB110065100041976160,00.html
November 17, 2004; Page A3

As it pushes to settle other antitrust suits, Microsoft Corp. faces 
new, potentially damaging allegations about its business conduct in a 
patent-theft and monopolization case pending in a federal court in 
Baltimore.

In a court filing unsealed late Monday, a small Silicon Valley software 
company called Burst.com Inc. alleges that Microsoft routinely 
destroyed much of its internal e-mail despite the many federal 
investigations and private suits it has faced in recent years, when it 
was often under court orders to preserve such communications.

Burst.com, whose early investors included the Irish rock band U2, filed 
its suit two years ago. It charges that Microsoft used Burst's 
digital-media technology in Windows, solving a technical problem that 
was slowing the acceptance of Internet video. Burst also claims that 
Microsoft tried to patent the technology after a technical briefing 
from Burst, and altered Windows so that Burst's product wouldn't work. 
Microsoft denies the charges.

These claims and documents unsealed in pretrial proceedings suggest 
that Microsoft continued to use some of the same bareknuckle tactics 
described in the U.S. government's 1998 antitrust case, which was 
settled by the Bush administration in 2001.

Microsoft has moved aggressively since then to settle remaining cases, 
paying a total of more than $3 billion in consumer lawsuits and to 
rivals Sun Microsystems Inc., Time Warner Inc., as well as $536 million 
to Novell Inc. last week. It also has paid a $600 million fine to 
European regulators.

"As we've said from the start of the case, Burst's claims are without 
merit, and the technology at issue is based on Microsoft's own work and 
innovation," a Microsoft spokeswoman, Stacy Drake, said yesterday. She 
said that Burst "is using the issue of e-mail to obscure the real 
points of this case."

The document-destruction allegations emerged following Burst's claim 
earlier this year that internal e-mails needed for the case were 
missing from Microsoft files. Microsoft later admitted that some 
e-mails were missing, blamed an outside contractor and subsequently 
provided more documents. U.S. District Judge Frederick Motz has ordered 
Bill Gates, Microsoft's chairman, and Jim Allchin, its top Windows 
executive, to be questioned under oath in the case.

In the newly unsealed filing, Burst outlines what it says is a 
previously undisclosed Microsoft policy of deleting most e-mails. While 
such a policy isn't illegal, companies are required to save relevant 
e-mails and documents if they face federal investigation or private 
lawsuits. In the filing, Burst alleges that Microsoft misled Justice 
Department lawyers in 2002 to conceal the e-mail-destruction practice, 
and in several instances didn't save e-mails from executives who were 
crucial to U.S. inquiries and private suits.

A senior Microsoft executive exhorted Windows developers in a January 
2000 e-mail, "I mean this -- purge every 30 days," just weeks after a 
federal judge found in the Justice Department's earlier case that 
Microsoft was a monopoly and had violated antitrust law. Amplifying the 
point, Mr. Allchin -- who had faced tough cross-examination at the 
earlier trial, based on some of his own e-mails -- followed up with an 
e-mail to the entire Windows group: "This is not something you get to 
decide. This is company policy," he wrote. "Do not archive your mail. 
Do not be foolish. 30 days."

Microsoft says that Mr. Allchin, after checking with company lawyers, 
sent a second e-mail shortly after the one cited by Burst that repeated 
the 30-day e-mail deletion policy, but added that any employee covered 
by court orders shouldn't destroy his or her documents.

"Mr. Allchin's guidance on e-mail retention was entirely consistent 
with our policy to meet all legal requirements as well as sound 
business practice providing for the efficient management of e-mail not 
covered by any legal obligations," Ms. Drake said.

Microsoft officials say they have retained and produced millions of 
e-mails and documents in scores of antitrust cases in recent years, and 
forcefully reject any claim of systematic destruction of material 
sought under court order. They defend the firm's e-mail deletion 
policy, saying it is legal and that any big company without such 
policies would drown in paper and run out of data-storage space.

In its case, Burst has said it has documents – including handwritten 
notes of a July 2000 meeting inside Microsoft – that will show that the 
senior managers in Microsoft's multimedia group secretly decided to 
adopt Burst's approach as its own, and write their own patents, one of 
which is pending before the patent office. The technology aimed to 
solve the problem of jerky, poor-quality video and audio then plaguing 
Internet-based media transmissions.

In 2000, Burst, with its own patents, was flying high. It had $19 
million in new financing, companies such as Yahoo Inc. and America 
Online were testing the technology, and the band U2 was touting its 
product as the best way to broadcast live music on the Web.

The company met with Microsoft several times that year, and while 
Microsoft initially dismissed the technology -- it conflicted with an 
alternative technical approach Microsoft was using -- it later saw 
Burst's technology as a way to fix the poor quality of "streamed" media 
on the Web, according to Burst's legal filings in the case. Burst says 
its patented approach involves sending video streams at variable 
"faster-than-real-time" speeds, responding to changes in network 
capacity and storing it briefly on users' computers, allowing smooth 
playback.

Microsoft's objection, according to Burst, was that the software ran on 
Linux, a rival operating-system software, as well as Windows, and at 
the time, Microsoft was battling to gain control of media software. 
Burst charges that Microsoft altered its new Windows media player to 
make it incompatible with Burst, killing the product and pushing the 
company near collapse. It also claims Microsoft's patent applications 
were nothing more than updates of Burst's approach. As Burst neared the 
brink, documents unsealed in the case show, Microsoft managers debated 
whether to buy the company at a "fire-sale price ... as an insurance 
policy" against a future patent suit, or just let it die, according to 
an unsealed Microsoft document.

URL for this article:
http://online.wsj.com/article/0,,SB110065100041976160,00.html


-------------------------------------
You are subscribed as interesting-people () lists elistx com
To manage your subscription, go to
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/