Bill Gates on Regulatory Environment

The road to the antitrust trial ran through a decade of escalating scrutiny. The Federal Trade Commission opened an inquiry in 1990 into whether Microsoft was abusing its PC operating-system monopoly, deadlocked two-to-two in 1993, and closed the file; the Department of Justice under Janet Reno then opened its own investigation, producing a July 15, 1994 consent decree in which Microsoft agreed not to tie other products to Windows sales but remained free to integrate additional features into the operating system. That distinction became the battlefield: Microsoft insisted Internet Explorer was not a product but a feature it was allowed to add, while the government disagreed. With more than ninety percent of workplace PCs running its systems, Microsoft's licensing restrictions on manufacturers, its treatment of rival browsers, and its manipulation of application programming interfaces drew the government's case that bundling had unlawfully foreclosed competitors.

Apple's 1988 copyright suit against Microsoft and Hewlett-Packard sought to block GUI elements resembling the Lisa and Macintosh systems, and its collapse cleared Windows' path. Apple argued that the look and feel of the Macintosh interface, taken as a whole, was protected, and it listed 189 interface elements it claimed were infringed; the court found that 179 of those had already been licensed to Microsoft in the Windows 1.0 agreement, and that most of the rest were either unoriginal to Apple or the only possible expression of an underlying idea. The district court set a standard of virtual identity for infringement, which the Ninth Circuit almost entirely affirmed in 1994, holding that the similarities sprang from the license or from basic ideas and their obvious expression, and the Supreme Court declined to hear Apple's appeal. Apple's only win covered the trash can and folder icons in Hewlett-Packard's NewWave; a parallel Xerox suit against Apple was dismissed.

The Department of Justice, joined by twenty state attorneys general and the District of Columbia, filed suit on May 18, 1998, before Judge Thomas Penfield Jackson of the United States District Court for the District of Columbia, focusing on predatory strategies and barriers to entry. Gates himself never testified at trial; instead his pretrial videotaped deposition became infamous, with a source present calling him evasive and nonresponsive as he sparred with examiner David Boies over the contextual meaning of words like compete, concerned, and we. When excerpts played in court, the judge was seen laughing and shaking his head, and reporting noted that many denials were directly refuted by prosecutors with snippets of emails Gates had sent and received. An Intel vice president quoted a senior Microsoft executive's stated intention to smother Netscape and cut off its air supply by giving away a clone of its flagship browser for free.

On April 3, 2000, the district court ruled Microsoft an abusive monopoly that had committed monopolization, tying, and blocking of competition in violation of the Sherman Act, and on June 7, 2000, it ordered the company split in two. The victory dissolved on appeal: on June 28, 2001, the D.C. Circuit overturned Judge Jackson's rulings, adopting a drastically altered scope of liability because of the judge's own misconduct, including secret press contacts during the trial, and it vacated the breakup. Microsoft then settled with the Justice Department on November 1, 2001, agreeing to let PC manufacturers adopt non-Microsoft software, and the district court accepted most of the settlement in 2002, with obligations expiring November 12, 2007. Critics on the other side called the result a special antitrust immunity; Gates later said the litigation years contributed to Microsoft losing the mobile operating system race to Android, which he called his biggest mistake.