Cusumano v. Microsoft Corp.

• Decision Date: 05 November 1998
• Docket Number: No. 98-2133,98-2133
• Citation: 162 F.3d 708,1998 WL 852858
• Parties: 1998-2 Trade Cases P 72,373, 131 Ed. Law Rep. 360, 50 Fed. R. Evid. Serv. 707 In re: Michael A. CUSUMANO and David B. Yoffie v. MICROSOFT CORPORATION, Petitioner, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 708

162 F.3d 708

1998-2 Trade Cases P 72,373, 131 Ed. Law Rep. 360,

50 Fed. R. Evid. Serv. 707

In re: Michael A. CUSUMANO and David B. Yoffie v. MICROSOFT CORPORATION, Petitioner, Appellant.

No. 98-2133.

United States Court of Appeals First Circuit.

Heard Nov. 5, 1998.

Decided Dec. 15, 1998.

D. Stuart Meiklejohn, with whom John L. Warden, Richard J. Urowsky, Steven J. Holley, Michael E. Swartz, Hilary M. Williams, Sullivan & Cromwell, Thomas J. Sartory, Lynne Alix Morrison, and Goulston & Storrs, P.C. were on brief, for petitioner.

Jeffrey Swope, with whom Palmer & Dodge LLP was on brief, for respondents Michael A. Cusumano and Massachusetts Institute of Technology.

Jonathan M. Albano, with whom Shaun B. Spencer, Bingham Dana LLP, and Kimberly S. Budd, Office of the General Counsel, Harvard University, were on brief, for respondents David B. Yoffie and Harvard University.

Before SELYA, Circuit Judge, COFFIN and BOWNES, Senior Circuit Judges.

SELYA, Circuit Judge.

In this appeal, petitioner-appellant Microsoft Corporation (Microsoft) invites us to reverse the district court's denial of its motion to compel production of research materials compiled by two academic investigators. Microsoft wants to use the subpoenaed materials in defending a civil antitrust case, United States v. Microsoft Corp., presently being tried in the United States District Court for the District of Columbia. Mindful that important First Amendment values are at stake, we decline Microsoft's invitation.

I. THE ANTITRUST CASE

We draw our description of the antitrust litigation in large part from the court in which that litigation pends. See United States v. Microsoft Corp., 1998 WL 614485 (D.D.C.1998).

Microsoft is one of the most profitable companies in the computer industry. It first attained a significant foothold in the production of operating systems for the personal computer (PC) market when a leading computer manufacturer, International Business Machines Corporation, chose Microsoft's "MS-DOS" operating system for its PCs in the early 1980s. An operating system is the "command center" of a PC. Microsoft, 1998 WL 614485 at * 2. It facilitates the integrated use of hardware and software by controlling the interaction between a PC's processor, its memory, and devices like keyboards and disk drives. In relatively short order, Microsoft's operating systems achieved a preeminent market position. Microsoft continued to introduce new operating systems, including its phenomenally successful "Windows" systems, which allow a user to control a PC's operations by manipulating images on the computer screen with a mouse, rather than by typing commands.

The dominance of Microsoft's operating systems has been maintained, in part, because of the symbiotic relationship that exists between software and operating systems. Software programs utilize certain general functions of operating systems and are written to work with particular systems. Since more PCs depend on Windows than on any rival, software creators tend to write products for use on that system. In turn, most PC users want this operating system for their PCs, so that they can access the widest possible range of software programs. To keep this lucrative circle spinning, Microsoft licenses its operating system to PC manufacturers for pre-installation on new computers.

Microsoft's achievements in the operating systems market have encouraged it to spread its corporate wings. It now produces an internet browser product known as "Internet Explorer." Browsers are software programs that allow computer users to access, manipulate, and display portions of the world-wide web (the Web). The Web is a set of sites that employ graphics, text, and other media to provide information to viewers. Among other things, browsers can be used to translate these sites from the language of their creation into a format intelligible to a user's particular PC. A browser can be purchased individually, acquired as an accessory to a newly purchased PC, or downloaded from internet access providers or other Web sites.

Microsoft's success has not gone unremarked. On May 18, 1998, the United States Department of Justice (DOJ) and several state attorneys general brought suit in the United States District Court for the District of Columbia, charging Microsoft with various antitrust violations. The complaint's main allegations center around Microsoft's accretion of market share for its Internet Explorer product. DOJ asserts that Microsoft, mindful that browsers potentially can be used as platforms on which to run software and thus replace, or at least compete with, operating systems, set out to increase its share of the browser market in a no-holds-barred campaign to safeguard its hegemony in the operating systems market.

In January 1997, Navigator, a competing browser produced by Netscape Communications Corporation (Netscape), boasted an 80% share of the browser market. Explorer enjoyed less than 20%. DOJ charges that Microsoft first essayed to increase its market share by colluding with Netscape. When Netscape rebuffed Microsoft's overtures, DOJ alleges, Microsoft illegally "tied" Explorer to its Windows operating system-- refusing to grant computer manufacturers licenses to pre-install Windows for their customers unless the manufacturers agreed to pre-install Explorer and no other browser--and thereby increased its share of the browser market to approximately 50% by May of 1998. Microsoft denies the government's accusations. It avers that it never tried to split the browser market between itself and its competitors or to use monopoly power in the operating systems market to capture a lion's share of the browser market in an illegal fashion. Instead, it attributes its increased share of the browser market to Explorer's superiority.

The district court placed the antitrust litigation on a fast track. Among other things, the court established a tightly compressed schedule for pretrial discovery; shortened the usual time within which parties and non-parties alike might respond to discovery requests; directed that witness lists (to include no more than twelve trial witnesses per side, absent special permission) be submitted no later than August 24, 1998 (just over three months after the government sued); and closed discovery as of October 9, 1998 (save for discovery already underway). After that date, new discovery could be initiated only with leave of court. A bench trial commenced on October 19, 1998. That trial is ongoing.

II. THE RULE 45 PROCEEDINGS

In the course of pretrial discovery in the antitrust case, Microsoft learned about a forthcoming book entitled Competing on Internet Time: Lessons from Netscape and the Battle with Microsoft (Lessons ) and obtained a copy of the manuscript. As its title implies, Lessons deals extensively with the "browser war" waged between Microsoft and Netscape. Its authors (respondentsappellees here) are distinguished academicians: Michael A. Cusumano, a tenured full professor at Massachusetts Institute of Technology's Sloan School of Management, and David B. Yoffie, a tenured full professor at Harvard Business School.

As part of their research for Lessons, the respondents interviewed over 40 current and former Netscape employees. Their interview protocol dealt with confidentiality on two levels. First, the respondents signed a nondisclosure agreement with Netscape, in which they agreed not to disclose proprietary information conveyed to them in the course of their investigation except upon court order, and then only after giving Netscape notice and an opportunity to oppose disclosure. Second, the respondents requested and received permission from interview subjects to record their discussions, and, in return, promised that each interviewee would be shown any quotes attributed to him upon completion of the manuscript, so that he would have a chance to correct any errors or to object to quotations selected by the authors for publication.

On September 18, 1998, believing that certain statements from Netscape employees reported in Lessons offered succor for its defense, Microsoft subpoenaed the professors' notes, tape recordings and transcripts of interviews, and correspondence with interview subjects. See Fed.R.Civ.P. 45. The respondents produced some correspondence, but declined to surrender the notes, tapes, or transcripts. Microsoft moved to compel the production of these items on October 1, 1998. Because the documents, if produced at all, would be produced in Cambridge, the subpoenas issued from the United States District Court for the District of Massachusetts and the motion to compel was docketed there as an independent proceeding. See id. (requiring a subpoena commanding only document production to "issue from the court for the district in which the production ... is to be made" and allowing enforcement "pursuant to an order of th[at] court"). On October 7, the respondents filed their oppositions. ¹

Following a hearing held the next day, the district court denied the motion to compel ore tenus. The court performed a case-specific balancing analysis, taking into account a myriad of factors. On one hand, it found that Microsoft's need for the information sought by the subpoenas, though real, was not great. Microsoft could have obtained that information directly from the sources revealed by the manuscript, and, in all events, its main thrust likely would be for purposes akin to impeachment. On the other hand, the court found that the respondents had a substantial interest in keeping the subpoenaed information confidential and that significant First Amendment values favored its protection. Balancing these and other elements, the court declined to compel production of the notes, tapes, and transcripts. Withal, the court retained jurisdiction in order to review individual items in camera for materiality on Microsoft's later motion and proclaimed its readiness to order...