Bristol Technology, Inc. v. Microsoft Corp., Civ.A. 3-98-CV-1657.
| Decision Date | 30 December 1998 |
| Docket Number | No. Civ.A. 3-98-CV-1657.,Civ.A. 3-98-CV-1657. |
| Citation | 42 F.Supp.2d 153 |
| Court | U.S. District Court — District of Connecticut |
| Parties | BRISTOL TECHNOLOGY, INC., Plaintiff, v. MICROSOFT CORPORATION, Defendant. |
Patrick Lynch, O'Melveny & Myers, Los Angeles, CA, Annette Poblete, Achilles M. Perry, O'Melveny & Myers, New York City, John L. Altieri, Jr., Bristol Technology, Inc., Danbury, CT, for Bristol Tech., Inc., plaintiff.
David B. Tulchin, Michael T. Tomaino, Jr., Marc De Leeuw, Elizabeth P. Martin, Sullivan & Cromwell, New York City, Stefan Richard Underhill, Day, Berry & Howard, Stamford, CT, Steven J. Aeschbacher, Microsoft Corporation, Redmond, WA, for Microsoft Corp., defendant.
The plaintiff, Bristol Technology, Inc. ("Bristol"), commenced this action on August 18, 1998. Its fourteen claim Complaint alleges federal and state antitrust claims and other state statutory and common law claims. Bristol also filed a Motion for Expedited Discovery and a Motion for a Preliminary Injunction. The court granted the former Motion and, after several scheduling conferences and issuance of a preliminary discovery schedule, held a hearing on the latter motion.1 For the reasons set forth below, the court DENIES the Motion for Preliminary Injunction [Dkt. # 3] and sets the case down for trial commencing June 1, 1999.
The defendant, Microsoft Corporation ("Microsoft"), is the owner and distributor of computer operating systems, including Windows, Windows 95, Windows 98, Windows for Workgroups, and Windows NT. A computer operating system controls the basic functions of the computer hardware. It also facilitates interaction between the hardware and application programs. Application programs, such as word processing and spread sheet programs, give the computer its functionality by providing the computer with instructions for the performance of a task. To run, an application program must be able to present commands and respond to the operating system in precisely the format and according to the precise protocols used by that operating system. Therefore, independent software vendors ("ISVs") must write application programs that are compatible with the operating system's application programming interfaces ("APIs"). Because different operating systems have different protocols and APIs, application programs written for one operating system usually must be translated or rewritten to work on another operating system.2
Microsoft has developed operating systems for personal computers, technical workstations and departmental servers. A technical workstation is a microprocessor-based machine typically used for highly computational, technical applications. A departmental server is a microprocessor-based machine that is used to provide or manage common services and functions for other computers that are linked together in a small to medium-sized network.
Beginning in the 1980s with the development of MS/DOS,3 Microsoft has produced operating systems that now comprise more than 90% of the personal computer operating system market. In 1993, Microsoft entered the departmental server and technical workstation operating systems markets with the introduction of Windows NT. In each of those markets, Microsoft's share has grown from a fraction of 1 percent in 1993 to 44% and 28%, respectively, by the end of 1997.
Bristol was formed in 1991 by several members of the Blackwell family. Its business plan was to develop a cross-platform product which, when installed on a UNIX-based operating system,4 would run application programs written for the Windows operating system.5 Bristol eventually developed such a program, called "Wind/U," by reverse engineering the Windows operating systems to obtain the necessary source code.6
After it began marketing Wind/U, Bristol was contacted by Microsoft, which offered to help improve the product by providing Bristol with access to source code for the current and soon-to-be-released product versions of Windows operating systems. Microsoft and Bristol eventually entered into a contract dated September 21, 1994. This contract was part of what Microsoft called the "WISE Program,"7 a licensing program from Microsoft designed to enable ISVs to translate or run Windows applications on UNIX and Macintosh systems.
Microsoft created the WISE Program at a time when makers of UNIX-based operating systems had sizeable shares of the server and workstation markets and Microsoft had nearly none.8 Microsoft contracted with Bristol and others through the WISE Program in order to encourage ISVs to write cross-platform applications on Windows NT 3. The message that Microsoft conveyed publicly was that, through the WISE Program, applications written for Windows could be easily made available to UNIX users by translating, or porting, those applications using a WISE product, such as Bristol's Wind/U. This meant that a developer who chose to write Windows applications would be able to take advantage of the emerging Windows market while maintaining its position as an application developer for UNIX systems.
Under the terms of the 1994 WISE contract with Bristol, Microsoft agreed to, and did, provide all source code for all version releases and update releases of Microsoft Windows 3.1, Windows for Workgroups 3.1, Windows NT 3.5 and its yet to-be-released "Chicago" software product (later known as Windows 95).9 The WISE contract did not give Bristol access to the source code for product releases of the named operating systems.10
Well in advance of the expiration of the 1994 contract, Bristol undertook efforts to negotiate a new contract that would cover new product releases such as NT 4 and NT 5, the latest product versions of Microsoft's operating system for servers and workstations.11 This effort continued for approximately two years, up to the filing of this lawsuit. During the negotiations, Microsoft informed Bristol that it would not, in any renewed agreement, give all the source code for new product releases to Bristol as it had under the 1994 WISE contract. Rather, Microsoft insisted that it would agree to provide only a selected portion, or "apple core," of the source code. Further, Microsoft's final proposal called for a 400% increase in royalties on Wind/U sales to original equipment manufacturers ("OEMs") for packaging as part of a UNIX operating system.12
Bristol asserts that Microsoft, with its dramatic market share growth and the significant increase in the number of applications for Windows NT, no longer believes it is necessary to provide a "bridge" back to UNIX for ISVs. Because the cross-platform tools developed by Bristol and the other WISE partners rely on Windows source code, Microsoft is able to control what functions can be ported between the systems by limiting access to the relevant source code for new product releases of Windows operating systems. Bristol claims that it is now in Microsoft's interest, and that it is Microsoft's plan, to restrict portability by strategically weakening the functionality of cross-platform products, such as the one offered by Bristol. In essence, Bristol claims that Microsoft has engaged in anticompetitive conduct (1) by offering only an "apple core" of source code; (2) by proposing prohibitively high royalty fees;13 and (3) in its discretionary use of royalty waivers. Bristol argues that Microsoft's proposed terms are motivated by its desire to destroy competition from UNIX-based systems, and thereby to achieve a monopoly, in the markets for both technical workstation and server operating systems.
Bristol seeks entry of an Order that would preliminarily enjoin Microsoft from denying Bristol access to all source code for Microsoft's operating systems, including any new product releases.14 In particular, Bristol seeks access to the source code for Windows NT 5, which is to be released in late 1999.15 Bristol claims that, unless it obtains the source code for that product release immediately, it will be irreparably harmed.
The fundamental purpose in granting preliminary injunctive relief has always been to preserve the court's ability to later render a meaningful final decision on the merits by preventing irreparable harm in the interim. See United States v. Adler's Creamery, 107 F.2d 987, 990 (2d Cir.1939); 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure, § 2947, at 121 (2d Ed.1995). The issuance of a preliminary injunction rests in the sound discretion of the trial court. Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975); American Express Fin. Advisors, Inc. v. Thorley, 147 F.3d 229, 232 (2d Cir.1998).
In the often-cited language of Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., the Second Circuit set forth the standard that normally must be met to warrant issuance of a preliminary injunction:
The standard in the Second Circuit for injunctive relief clearly calls for a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief.
596 F.2d 70, 72 (2d Cir.1979). Under the first prong of this standard, the movant Abdul Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985).
However, when the preliminary injunctive relief granted is deemed mandatory, rather than prohibitory, the Second Circuit has prescribed a higher standard.16 Tom Doherty Assoc., Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 33-34 (2d Cir. 1995). In both Abdul Wali and Tom Doherty, the Second...
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