Key Dates in the Investigation and Trial
A look ahead: Judge Jackson has found that Microsoft violated antitrust
laws; next he will spell out any remedies or penalties for those
violations. That decision isn't expected before May and could be
considerably longer in coming. Microsoft has said that it will appeal
after that final ruling.

Key dates in the antitrust investigation of Microsoft, the largest
maker of personal computer software:

1980: IBM selects Microsoft to create the operating system for its
first PC. The software, which runs the machine's basic functions, is
called MS-DOS.

1991: The Federal Trade Commission begins to investigate claims that
Microsoft monopolizes the market for PC operating systems.

1993: The FTC deadlocks on two votes to file a formal complaint against
Microsoft and decides to close the investigation. Justice Department
and European Commission antitrust investigators begin independent
probes.

July 1994: In a consent decree reached with the Justice Department,
Microsoft agrees to change contracts with PC makers and eliminate some
restrictions on other software makers, ending the U.S. antitrust
investigation. The Europeans also end their antitrust probe.

Feb. 15, 1995: U.S. District Judge Stanley Sporkin, in a move with few
precedents, rejects the government's controversial settlement with
Microsoft as too lenient, saying he "could not find the proposed
consent decree to be in the public interest" .

May 1995: Microsoft abandons a $1.5 billion stock deal to acquire
financial-software giant Intuit a month after the Justice Department
files suit to stop the acquisition.

June 15, 1995: An appeals court reinstates the 1994 antitrust
settlement, delivering a harsh rebuke to Judge Sporkin and granting
Microsoft's request to remove him from the case .

Aug. 22, 1995: U.S. District Judge Thomas Penfield Jackson formalizes
the 1994 consent decree, ending the antitrust case. The Windows 95
operating system is released the same month .

November 1995: Microsoft releases Internet Explorer 3.0 for Windows 95,
giving it away for free in a challenge to Netscape Communications'
rival Navigator.

December 1995: Microsoft chief Bill Gates details a shift in Microsoft
strategy in order to focus on the Internet, closely weaving PCs with
the global network.

September 1997: Microsoft launches Internet Explorer 4.0 in a
stepped-up challenge to Netscape, whose share of browser market slips
to less than two-thirds of Internet users.

October 21, 1997: The Justice Department sues Microsoft, alleging it
violated the 1994 consent decree by forcing PC makers to use its Web
browser as a condition of offering Windows .

Nov. 12, 1997: At a press conference, Microsoft executives charge
competitors with trying to use the government to hobble the software
giant and say that it is Microsoft's right alone to determine what
features are included in Windows. The company files court papers asking
a federal judge to dismiss the suit .

Dec. 11, 1997: Judge Jackson issues a preliminary injunction forcing
Microsoft to stop, at least temporarily, requiring manufacturers who
sell Windows 95 "or any successor" to install its Internet Explorer on
PCs .

Dec. 15, 1997: Microsoft appeals the court order but says it will sell
modified versions of Windows to comply with preliminary injunction (see
article). However, the company's method of compliance infuriates the
Justice Department and Judge Jackson: The software giant offers PC
makers a choice of Windows 95 with Internet Explorer or a version that
the company itself says won't run, then fights the court's request that
it allow PC makers to ship Windows 95 and simply hide the Internet
Explorer icon.

Jan. 14, 1998: Judge Jackson rejects Microsoft's effort to remove
Harvard University law professor Lawrence Lessig as a court-appointed
"special master" to review technical issues in the dispute. Microsoft
claimed the professor was biased, citing e-mail correspondence with
Netscape .

Jan. 23, 1998: Microsoft agrees to allow PC makers to ship Windows 95
without having to display the icon for Internet Explorer, avoiding a
contempt-of-court citation sought by the Justice Department. The
agreement ends the skirmish over Windows 95 and Internet Explorer, but
the company's conduct in fighting the court order is seen as having
backfired and as having helped encourage antitrust investigators to
build a wider case against Microsoft .

Feb. 3, 1998: An appeals court orders a temporary halt to the work of
Mr. Lessig .

March 3, 1998: Mr. Gates and other top technology executives testify
before the Senate Judiciary Committee, whose members ask Mr. Gates
about monopoly power and restrictive licenses with computer makers (see
article).

March 10, 1998: Microsoft, in appealing Judge Jackson's preliminary
injunction, tells an appeals court that the Justice Department is
seeking to reverse the 1994 consent decree by prescribing which
functions Microsoft may include in its operating systems .

March 17, 1998: It's reported that the Justice Department's antitrust
investigation of Microsoft has expanded to include issues related to
Sun's Java software .

April 8, 1998: Microsoft tells an appeals court that Judge Jackson's
appointment of Mr. Lessig as special master will lead to unnecessary
delay and argues that Mr. Lessig is probably less qualified to review
the case than the judge himself .

April 10, 1998: Microsoft is forced into damage-control mode by a
newspaper report of a proposal by Edelman Public Relations to generate
favorable news articles, op-ed pieces and letters to the editor in many
of the states where Microsoft is under investigation .

April 22, 1998: Judge Jackson's preliminary injunction comes under fire
at an appeals-court hearing, as the judges seem inclined to agree with
Microsoft's argument that the Dec. 11 order went beyond the lower
court's authority .

April 24, 1998: It's reported that Justice Department lawyers are
mulling bringing a broader case against Microsoft, alleging that it
violated antitrust laws by seeking to illegally maintain its dominance
in operating systems and extend that dominance to browser software (see
article).

May 1, 1998: It's reported that Microsoft is trying to rally opposition
to possible antitrust action that could delay or block the release of
Windows 98 by seeking signatories to a letter to Justice Department
antitrust chief Joel Klein expressing "our strongest possible concern
over the threat of litigation." The 26 signatories include the heads of
Intel, Compaq, Dell and Hewlett-Packard .

May 4, 1998: A letter from Microsoft to financial analysts warns that
government action that delays Windows 98 would have "broad, negative
consequences" for the entire PC industry .

May 7, 1998: Regulators urge an appeals court to reject Microsoft's
argument that Judge Jackson's Dec. 11 preliminary injunction imposing
restrictions on Windows 95 "or any successor" should not apply to
Windows 98 .

May 12, 1998: An appeals court rules that the Dec. 11 injunction
doesn't extend to Windows 98.

May 14, 1998: Federal and state regulators agree to delay filing suit
against Microsoft after the software giant indicates it's willing to
make last-minute concessions. Microsoft agrees to delay shipping
Windows 98 to personal-computer makers while talks continue (see
article).

May 16, 1998: Talks break down .

May 18, 1998: Federal and state regulators file a landmark antitrust
suit against Microsoft in U.S. District Court in Washington, accusing
the software giant of using illegal, anticompetitive practices in an
effort to destroy competition .

May 22, 1998: Judge Jackson sets Sept. 8 as a trial date for a
preliminary injunction and arguments in the antitrust case (see
article).

June 23, 1998: An appeals-court panel hands Microsoft a huge victory
when it strikes down the preliminary injunction forcing Microsoft to
stop requiring PC makers to include Internet Explorer with Windows 95.
The panel orders Judge Jackson to revoke or revise Mr. Lessig's status
as special master, and says it's inclined to consider Internet Explorer
and Windows 95 an integrated product .

June 25, 1998: Windows 98 is released in stores.

July 17, 1998: The states narrow their complaint against Microsoft,
dropping charges of unfair pricing and sales practices related to the
Office software suite. The states say they still intend to pursue the
matter separately, however .

July 23, 1998: It's reported that federal prosecutors are investigating
whether Microsoft used illegal tactics to monopolize the
multimedia-software market .

August 6, 1998: Judge Jackson orders Microsoft to make Mr. Gates
available for whatever reasonable amount of time the government needs
to interview him and orders Microsoft to turn over the source code for
its Windows software .

August 11, 1998: Microsoft asks Judge Jackson to dismiss the
government's case against it .

August 12, 1998: Bowing to an 85-year-old statute, Judge Jackson rules
that the public can attend pretrial depositions of Mr. Gates and other
Microsoft executives.

August 19, 1998: An appeals court overturns Judge Jackson's ruling and
says Microsoft officials' depositions can be held privately (see
article).

August 21, 1998: Judge Jackson agrees to both sides' request that the
start of the antitrust trial be pushed back to Sept. 23.

Sept. 2, 1998: The government, in an apparent expansion of its suit,
alleges Microsoft illegally pressured Apple Computer, Intel and others
to derail new technologies and limit competition and charges that Mr.
Gates was at the center of those efforts. Microsoft asks Judge Jackson
to bar the new charges .

Sept. 4, 1998: Judge Jackson rejects Microsoft's request, ruling in
favor of a government demand for documents about the software giant's
secret talks with other companies. The judge says the trial will be
about whether Microsoft "maintained its operating-system monopoly
through exclusionary and predatory conduct" and tried to extend that
monopoly to the Internet -- a definition broad enough to let the
government seek much of the new evidence it asked for .

Sept. 10, 1998: Microsoft hits a number of key competitors with broad
subpoenas and alleges they may have colluded against the software
giant. The move seeks to turn the tables on the government by
demonstrating that high-tech companies enter pacts against each other
routinely and that the government's allegations represent "an unfair
double standard" .

Sept. 14, 1998: Judge Jackson agrees to delay the antitrust trial's
start until Oct. 15. He denies most of Microsoft's request to throw out
the case, but dismisses the states' charge that Microsoft "used its
monopoly power in the market for operating-system software to foreclose
competition in the separate market for Internet browsers" (see
article).

Sept. 17, 1998: Judge Jackson denies a request by Microsoft to limit
evidence that the government might use in its antitrust case against
it, saying he will rule on a point-by-point basis during the upcoming
trial what evidence the government can use as it attempts to prove that
Microsoft illegally bullied industry rivals .

Sept. 29, 1998: It's reported that Harvard University and the
Massachusetts Institute of Technology are fighting a demand by
Microsoft for research gathered by two professors on Netscape, with the
universities charging that the demand threatens their First Amendment
rights and their ability to conduct research .

Oct. 9, 1998: The government makes sudden changes to its witness list,
adding executives from Apple and Sun Microsystems in a move that
signals a wider legal assault. Microsoft accuses the government of
essentially mounting a new case. Separately, a federal judge in Boston
rejects a Microsoft request for evidence gathered by Harvard and MIT
professors . Judge Jackson agrees to delay the start of
the trial until Oct. 19; he also orders Microsoft to give the
government access to its key accounting databases as potential evidence
in the case .

Oct. 15, 1998: Judge Jackson refuses Microsoft's request that the start
of the trial be pushed back another two weeks, but does grant Microsoft
the right to depose the new witnesses from Sun and Apple, as well as
allowing limited additional discovery .

Oct. 19, 1998: The antitrust trial begins in Washington, D.C., as
Justice Department lead attorney David Boies offers a scathing attack
on Mr. Gates, contrasting videotaped testimony in which the Microsoft
chief denied knowing of key events in the case with internal Microsoft
memos projected on a courtroom screen that suggested he was closely
following the company's efforts . The government reserves
particular attention for a June 1995 meeting in which it charges that
Microsoft tried to persuade Netscape to divvy up the Internet-software
market.

Oct. 20, 1998: Microsoft lead attorney John Warden offers a rebuttal of
the government's charges in the software giant's opening statement,
calling the charges "long on rhetoric" and short on evidence and
accusing the government of trying to "demonize" Mr. Gates (see
article). Netscape CEO James Barksdale is the first witness called for
cross-examination.

Oct. 21, 1998: Mr. Warden, in his cross-examination of Mr. Barksdale,
touts a Dec. 1994 e-mail from Netscape chairman and co-founder Jim
Clark to Microsoft executives in which Mr. Clark suggests the two firms
work together and raises the possibility of Microsoft's taking a stake
in Netscape . The strategy seeks to undermine the
government's case by suggesting it was Netscape, not Microsoft, that
proposed an alliance. Netscape paints the e-mail as a desperate move
made secretly by Mr. Clark during a dark hour in the company's early
days, and notes that Microsoft quickly rejected the offer.

Oct. 22, 1998: In the third day of cross-examination of Mr. Barksdale,
Mr. Warden tries to show that Netscape always intended to give its
browser away. He concludes by charging that Netscape co-founder Marc
Andreessen invented or imagined Microsoft's supposed suggestion that
the two firms divide the browser market, and that Netscape then ran
with that story to help the government prosecute Microsoft (see
article). Mr. Barksdale angrily rejects the contention.

Oct. 26, 1998: Microsoft uses a pair of documents that came to light
over the weekend in an effort to show that the fateful June 1995
meeting between the firms was a setup orchestrated by Netscape's
counsel for the government's benefit . The documents in
question are a civil subpoena to Netscape from the Justice Department
dated a day after the meeting and a letter, dated a day after that,
from a Netscape outside lawyer to the department that included Mr.
Andreessen's notes from the meeting. Mr. Barksdale calls the charge of
a setup "absurd."

Oct. 27, 1998: Prosecutors introduce evidence of Microsoft's market
power, presenting handwritten notes by Apple's chief financial officer
saying the company was threatened by Microsoft. The government also
releases testimony from a senior vice president of AOL, David Colburn,
who says AOL dumped Netscape because Microsoft offered to distribute
and promote its service on Windows -- something no other company could
match .

Oct. 28, 1998: Microsoft, in its cross-examination of Mr. Colburn,
accuses America Online and Netscape of proposing an illegal deal to
divide up the online-services market in 1995, echoing a charge the
government has leveled against Microsoft . The software
giant cites talks in late 1995 between AOL and Netscape that would
include licensing Netscape's Web software to AOL, a noncompete
agreement and other provisions. Justice's Mr. Boies rejects Microsoft's
charge, saying there is no comparison between the two situations since
Netscape's percentage of the market for online services in 1995 was
trivial.

Oct. 29, 1998: Anticipation builds over Justice's plan to present Mr.
Gates's videotaped deposition, but the big event never comes off, as
Mr. Warden draws out his cross-examination of AOL's Mr. Colburn (see
article). The delay irks prosecutors, with Mr. Boies warning that next
time he won't say when Justice plans to play the tape.

Nov. 2, 1998: After a morning of wrangling, parts of Mr. Gates's
videotaped deposition are shown (see article and excerpts from the
transcript of the deposition) in court. In the tape, Mr. Gates appears
sullen and sometimes evasive as he duels with Justice's Mr. Boies and
with Stephen Houck, who is representing the states in their antitrust
case. Mr. Gates repeatedly denies knowing about key events in the case
and is then confronted with internal documents or e-mail suggesting
otherwise.

Nov. 4, 1998: Microsoft presses Apple Computer Senior Vice President
Avadis Tevanian in a hostile session, attacking his testimony that
Microsoft threatened to cancel the popular Office software suit for the
Mac unless Apple opted for Internet Explorer over Netscape Navigator
. Microsoft's Theodore Edelman introduces internal Apple
documents suggesting that instead, it was Apple trying to bludgeon
Microsoft with the threat of a $1.2 billion patent lawsuit. But
Microsoft stumbles in an attempt to show that installing Navigator on
the Mac is an easy process.

Nov. 9, 1998: Intel executive Steven McGeady charges that Intel
abandoned Internet and multimedia software projects after Microsoft's
Mr. Gates became "enraged" by the software efforts and said Microsoft
might not support Intel's next chip . The testimony marks
a turning point in the government's case, as it comes from Microsoft's
most powerful partner in the PC industry and offers evidence that
consumers have been hurt by Microsoft's alleged threat.

Nov. 10, 1998: Mr. McGeady says that in a 1995 meeting with Intel, Mr.
Gates predicted that "this antitrust thing will blow over" and added
that "we haven't changed our business practices at all" .
Mr. McGeady also details Microsoft plans to blunt Sun's Java
programming language and take over public standards for the Internet so
they can be more closely tied to Windows. The session places on display
behind-the-scenes hostilities between the twin titans of the PC
industry. Microsoft says testimony by other senior Intel executives
will undermine Mr. McGeady's claims.

Nov. 12, 1998: Microsoft sharply attacks Mr. McGeady in a long day of
cross-examination, portraying him as a "lone wolf" who was biased
against the software giant and out of touch with other Intel executives
and accusing him of embellishing accounts of what happened in meetings
between Microsoft and Intel .

Nov. 16, 1998: Independent software consultant Glenn Weadock builds on
his written testimony that Microsoft deliberately wove Internet
Explorer into Windows so the two couldn't be separated, and attests
that corporations he surveyed don't want the two to be an integrated
product. Microsoft attacks Mr. Weadock's credentials and the
methodology of his survey. But the real star of the day is Mr. Gates,
who fences laboriously over definitions with the government's Mr. Boies
in another excerpt from his videotaped deposition .

Nov. 17, 1998: Operating systems move to the fore, as IBM's John
Soyring says in court that Microsoft used licensing restrictions with
independent software companies to choke off IBM's OS/2 and the
government introduces e-mail and deposition excerpts in which
Microsoft's Mr. Gates bemoans IBM's "Java religion" .
Across the country in California, meanwhile, a federal judge orders
Microsoft to rewrite parts of Windows 98 and other products to comply
with Sun's version of Java .

Nov. 19, 1998: Courtroom transcripts released show Microsoft lawyer
John Warden complained to Judge Jackson in a bench discussion about how
Mr. Gates's videotaped pretrial testimony has been played in the
courtroom, to which the judge replied, "If anything, I think your
problem is with your witness, not with the way in which his testimony
is being presented" .

Nov. 23, 1998: Word of merger talks between AOL and Netscape changes
the complexion of the trial, providing a lesson in how the warp speed
of Web business is outpacing the wheels of justice. Microsoft argues
that the proposed deal "proves indisputably that no company can control
the supply of technology," but the Justice Department retorts that the
merger wouldn't "remove any of the obstacles Microsoft has placed in
the path of competition." And when a Microsoft lawyer asks government
economist Frederick Warren-Boulton what the proposed deal says about
the nature of the software business, Mr. Warren-Boulton talks of how
Netscape was "forced to the wall" and calls that "an unfortunate
outcome of what Microsoft's been doing" . The government
also releases a series of Microsoft e-mail messages and documents
detailing efforts at the company to push its browser on computer makers
and Internet companies, including Disney Online .

Nov. 24, 1998: AOL agrees to acquire Netscape for $4.2 billion; citing
the deal, Microsoft says it will ask Judge Jackson to dismiss the case
when the government finishes presenting its evidence .

Nov. 30, 1998: Microsoft continues to hammer away at Mr.
Warren-Boulton, getting him to admit that consumers place a high value
on integrated capabilities between their Web browsers and personal
computers' operating systems. The two sides also spar over whether Mr.
Warren-Boulton misrepresented the deposition given by Brad Silverberg,
former head of Microsoft's Internet group .

Dec. 1, 1998: Mr. Warren-Boulton testifies that the software giant has
monopoly power over software prices and that its operating system's
share of a new PC's price has doubled in the past two years even as PC
prices fell sharply. A Microsoft lawyer presses him on his analysis,
noting that the cost of Intel's PC microprocessor chip has also risen
in the same time period. That prompts Mr. Warren-Boulton to respond
that "Intel is the other person in this market that might have monopoly
power" .

Dec. 2, 1998: Microsoft's public-relations woes continue as the
government presents another videotaped excerpt from Mr. Gates's
deposition -- one in which an angry and defensive Mr. Gates denies
knowing about Microsoft's work on Java, which he has described in
company documents as a dangerous threat to Microsoft's dominance in
operating-system software. Microsoft tries to turn the tables in its
cross-examination of Sun's James Gosling, introducing evidence
suggesting Sun had monopolistic aspirations of its own for Java (see
article).

Dec. 3, 1998: Microsoft charges that Java disappointed users because of
its own shortcomings and missteps by Sun, and attempts to convince the
court that its own version of Java is the fastest and best-reviewed.
Mr. Gosling says that while Java wasn't perfect in its early years, the
technology is improving. He says Java's goal is to offer "write-once,
run-anywhere" independence for software developers -- and that's why
Microsoft saw Java as a threat to its power and tried to undermine it
.

Dec. 7, 1998: In a press conference, Mr. Gates charges that the Justice
Department's Mr. Boies is "really out to destroy Microsoft" and
reiterates Microsoft's position that the proposed merger between
Netscape and AOL means the government should end its inquiry.
Separately, South Carolina's attorney general cites the Netscape/AOL
deal in announcing that his state is dropping out of the antitrust case
.

Dec. 8, 1998: Microsoft and University of Pennsylvania
telecommunications Prof. David Farber spar over the definition of
"operating system," with Mr. Farber defining an operating system as
software that simply controls program execution and provides other
"low-level services," such as allocating resources, and Microsoft
attacking that definition as extreme and out of touch with the
realities of the high-tech business world. Under cross-examination, Mr.
Farber concedes he isn't familiar enough with the source code for
Windows to be able to say which data files belong exclusively to
Microsoft's browser and which are part of Windows .

Dec. 9, 1998: Mr. Farber says Microsoft's marketing strategy for its
operating-system products limits innovation, contends that computer
makers should be able to pick and choose among available components,
and argues that Microsoft could have designed Windows 98 so that
Internet Explorer could be easily removed. Later, Microsoft attorney
Tom Burt questions Sun's Mr. Gosling -- who had stepped aside to
accommodate Mr. Farber's schedule -- about collaboration between Sun
and Netscape. Mr. Burt introduces a Nov. 1995, e-mail from Netscape's
Mr. Andreessen to Sun Chairman Scott McNealy, Netscape's Mr. Barksdale
and others in which Mr. Andreessen details Microsoft's efforts to
develop an applications programming language to compete with Java. "Now
is the time to strike together on this," he writes. "Let's nail
[Microsoft]" .

Dec. 10, 1998: Microsoft's Mr. Burt attacks the contention from Sun's
Mr. Gosling that Microsoft deliberately undermined his company's Java
software. Mr. Burt introduces internal Sun memos showing Sun was aware
of Microsoft's efforts before the companies signed a Java licensing
agreement and that Microsoft offered to work with Sun on building an
interface with Java. But Mr. Gosling shoots back that often when
Microsoft held out a hand in collaboration, "there was a knife," and
Sun was expected to grab the blade .

Dec. 14, 1998: In courtroom testimony, Princeton University professor
Edward W. Felten says he wrote a program to remove Internet software
from Windows 98 while leaving the operating system intact -- something
Microsoft has insisted couldn't be done. There is "no reason why
Microsoft was technologically compelled to design things that way,"
says Dr. Felten, an assistant professor of computer science, referring
to the integration of Windows and Internet Explorer .

Dec. 15, 1998: An executive with Walt Disney Co.'s Internet unit says
in a videotaped deposition and an e-mail message that Disney got an
online link in Windows only after agreeing to scrub a deal with
Netscape and create entertainment that couldn't be viewed by Netscape
users. The government also plays another excerpt from Mr. Gates's
videotaped testimony in which he is confronted with a memo from one of
his top executives saying that a "hit team" should be sent to IBM to
"apply some pressure" and stop it from supporting Lotus Notes. Mr.
Gates says the "hit team" simply referred to salesmen. Separately,
Microsoft loses an appeals-court ruling over its attempts to force two
professors to turn over notes from interviews with Netscape executives
.

Dec. 16, 1998: Judge Jackson ends the year's proceedings with a bang
with his statement that AOL's planned buyout of Netscape "might be a
very significant change in the playing field." That surprises both
sides, and swiftly leads to speculation that while Judge Jackson could
still find that Microsoft violated antitrust law, any remedy imposed
could be less restrictive .

January 5, 1999: The trial resumes with Intuit chief William Harris
expanding on his direct testimony by detailing further run-ins with
Microsoft. In his direct testimony, Mr. Harris detailed an exclusionary
contract that he said Microsoft pressured Intuit into accepting two
summers ago. In court, Mr. Harris says Microsoft signed a deal with
Visa International under which Microsoft agreed not to get into the
electronic-payment business and Visa agreed not to do business with
Intuit .

January 6, 1999: The government's final witness testifies that
Microsoft is a monopolist and an economic predator that snuffs out
innovation and sacrifices short-term profit to protect the dominance of
its Windows product. MIT's Franklin Fisher says Microsoft repeatedly
used Windows to thwart rival technologies and "has engaged in
anticompetitive conduct that has no compelling economic justification
but for its effect of restricting competition." Microsoft begins a
rigorous cross-examination, questioning Dr. Fisher about his data and
suggesting that he has significantly changed his views since the 1970s,
when he served as the top economic witness for IBM during its antitrust
battle with the Justice Department .

January 7, 1999: Dr. Fisher loses his cool with Microsoft lawyer
Michael Lacovara after he is asked whether it's simply more efficient
for personal-computer makers if Microsoft provides them with most of
the software they need, because they would enjoy a reduced cost for
testing and supporting software. "We're going to live in a Microsoft
world," Dr. Fisher says. "It may be a nice world, but it is not a
competitive world ... If Henry Ford had a monopoly, we'd all be driving
black cars" .

January 11, 1999: Dr. Fisher reportedly tells a closed court session
that Microsoft uses its Windows license contracts to reward computer
makers who align themselves with its strategic interests, locking up
the most powerful distribution channel and erecting a barrier that
keeps other companies from entering the operating-system business. Dr.
Fisher reportedly tells the court that the practice is evidence of
monopoly power. Microsoft counters that variations in the royalties
paid by the largest PC makers relate to their volume of Windows
shipments and other normal business factors, not favoritism. If Windows
were truly a monopoly, the company says in a statement, "Microsoft
would set a high price and insist that everyone pay it" .

January 12, 1999: Dr. Fisher says he can't be certain that consumers
have yet been harmed by Microsoft's alleged anticompetitive tactics,
but he argues that when a dominant company launches a predatory-pricing
campaign, consumers get a better deal in the short run. "Microsoft is
not maximizing its profits in the price it sets for Windows," he tells
the court. Instead, it "takes some profit ... in a form of protection
of its monopoly" .

January 13, 1999: Judge Jackson rejects Microsoft's motion to dismiss
the antitrust case against it after the government rests its case.
Microsoft's first witness, MIT economist Richard Schmalensee, then
takes the stand and spars with Justice's Mr. Boies. Dr. Schmalensee
insists that "it just doesn't make sense" to define a separate market
for PC operating systems, but possibly gives the government ammunition
by saying Web browsers and Java should be considered threats to Windows
when defining the relevant market. In order to make its monopolization
case, the Justice Department must prove that Microsoft saw the browser
and Java as a threat to the alleged monopoly .

January 14, 1999: Microsoft faces myriad threats to Windows, from a
resurgent Apple to the PalmPilot, Dr. Schmalensee testifies, arguing
that Windows isn't a monopoly because rivals don't face a substantial
barrier to entering its market. But under cross-examination by Mr.
Boies, Dr. Schmalensee concedes that none of these competitive threats
yet amount to viable alternatives. Mr. Boies also repeatedly confronts
Dr. Schmalensee with his own writings, such as a June 1982 article in
which he wrote that "persistent excess profits provide a good
indication of long-run power." Confronted with the article, Dr.
Schmalensee tells the court: "My immediate reaction is, 'What could I
have been thinking?' "

January 19, 1999: Dr. Schmalensee sticks to his assertion that Internet
Explorer is integral to Windows and not a separate application, but
acknowledges Microsoft knew its decision to integrate the browser and
Windows would make life difficult for browser rival Netscape. Dr.
Schmalensee also agrees that the "rich set of applications" written for
Windows gives it a "substantial advantage" over most other operating
systems .

January 20, 1999: A day after Microsoft reported that its net income
soared 75% to $1.98 billion in its latest quarter, Dr. Schmalensee
argues that the software giant's huge profits don't indicate it is a
monopoly. Dr. Schmalensee calls the profit gains short-term and says
Microsoft doesn't keep track of the profitability of Windows software
-- then surprises the courtroom by saying Microsoft records
operating-system sales "by hand on sheets of paper." Mr. Boies and Dr.
Schmalensee also clash over restrictions Microsoft placed on PC makers
two years ago, with Mr. Boies citing an angry letter to Microsoft from
Hewlett-Packard saying that if H-P had a choice of another supplier of
operating-system software, it would dump Microsoft .

January 21, 1999: Judge Jackson challenges Dr. Schmalensee's claim that
competition restrains Microsoft's prices, at one point likening prices
for Windows to cigarettes priced low by a company seeking to expand its
market share. "It seems to me that you can think of reasons why the
monopolist wouldn't maximize the price in quest of a larger glory at
some later time," the judge says, echoing a key government claim that
Microsoft's alleged effort to dominate Internet software could bring
even greater profits in the future as e-commerce grows. Dr. Schmalensee
argues that if Microsoft had a Windows monopoly, it could charge $900
to as much as $2,000 per copy of Windows, instead of the $50 or so it
charges PC makers and the $89 it charges retail customers (see
article).

January 25, 1999: After a closed morning session on pricing, Microsoft
executive Paul Maritz testifies that the company's 1997 deal with Apple
was motivated by fear that Apple would hit Microsoft with a $1.2
billion patent-infringement lawsuit, not a desire to pressure Apple to
favor Internet Explorer over Netscape's browser. But Mr. Boies
confronts him with Microsoft documents stressing browser-market share
that predated the patent discussions between the firms. Mr. Boies also
presses Mr. Maritz about an Intel executive's report that Mr. Maritz
threatened to cut off Netscape's "air supply" by giving away Internet
Explorer. Mr. Maritz denies making that threat .

January 26, 1999: In a lengthy duel with the government's Mr. Boies,
Microsoft's Mr. Maritz acknowledges that Microsoft tried to limit the
promotion of Netscape's rival Web browser, but refuses to concede that
when Microsoft talked about browser-market share, it meant the share of
Internet Explorer compared with Netscape's browser share. He also says
it is technically possible to remove parts of Internet Explorer from
Windows and ship it as a separate product, but adds that he rejected a
proposal to do that because his goal was to increase use of Microsoft's
Internet technologies .

January 27, 1999: Mr. Maritz acknowledges Microsoft embarked on a
campaign to persuade PC makers not to use a newly developed piece of
Intel software, but says those efforts stemmed from the inability of
the software to work with the soon-to-be-released Windows 95, and not
from fears the software would lessen the hold Windows has on the
operating-system market. Mr. Boies also asks whether Microsoft thought
RealNetworks would get out of the market for streaming-media software
as part of an equity deal Microsoft struck with the firm. Mr. Maritz
says it was his understanding that was a possibility .

January 28, 1999: Judge Jackson orders Microsoft to surrender documents
that government attorneys hope could undermine one of the company's
legal defenses in its antitrust case. At issue: An October 1998
spreadsheet from a Microsoft software engineer that analyzed government
efforts to remove Internet Explorer from Windows. The spreadsheet
appears to show which pieces of a particular Windows 98 software file,
perform browsing functions and which don't. The government says the
spreadsheet supports its claim that Microsoft can easily identify which
parts of shared computer code relate to Windows and which parts relate
to its browser, suggesting that Microsoft could be ordered to separate
the products. But the spreadsheet and an accompanying e-mail also
provides some support for Microsoft's side of the story. The e-mail
notes that more than half the shared code in that single file performs
functions for both Windows and the browser. Separately, Mr. Maritz says
Microsoft faces competition on a number of fronts, from open-source
computing to portal sites, set-top boxes and hand-held devices (see
article).

January 29, 1999: A federal appeals court agrees to make public the
full three days of videotaped interviews of Mr. Gates being questioned
by government lawyers .

February 1, 1999: Microsoft argues that the integration of Internet
Explorer and Windows brings advantages to consumers and software
developers. Using a videotape running more than an hour and displaying
several computer demonstrations, Microsoft seeks to show how software
developers -- such as Intuit and IBM's Lotus unit -- have come to rely
on Windows 98's close relationship with browsing. The government's Mr.
Boies counters that the government has no intention of preventing
consumers or developers from accessing browsing technologies from
Windows, saying that the question is whether Microsoft needed to make
the two products inseparable to achieve the advantages associated with
closely linking browsing and the operating system .

February 2, 1999: In cross-examination, Microsoft Senior Vice President
James Allchin is forced into the embarrassing admission that key
videotaped evidence Microsoft introduced in its defense had
misrepresented facts to the court. At issue, a two-hour videotape that
purported to show that Windows doesn't perform as well if its browser
functions are removed by a program prepared by Princeton's Edward
Felten. After Mr. Boies charges that a key part of the videotape shown
in court wasn't running the Felten program, Mr. Allchin concedes that
"they filmed the wrong system." Later, a Microsoft executive says the
right system was, in fact, filmed, but an unknown change in the Windows
code made it appear that the Felten program wasn't running, when in
fact it was. "The point is the evidence he came into court with simply
wasn't reliable," Mr. Boies says .

February 3, 1999: Microsoft's videotaped demonstration proves a
disaster for a second straight day. Mr. Allchin says the removal of
software from the Prodigy online service caused a glitch that made it
appear as if a PC in the demonstration wasn't running a program by
Princeton's Dr. Felten. But after Mr. Boies repeatedly plays a
four-minute sequence to demonstrate that different software appeared on
the screen at different points, Mr. Allchin (who wasn't present at the
filming) says the demonstration used more than one PC. "How can I rely
on it if you can't tell me it's the same machine?" asks Judge Jackson.
"It's very troubling, Mr. Allchin." At the judge's suggestion,
Microsoft makes plans to rerun the test shown in the sequence, with Mr.
Allchin at the computer and government lawyers present .

February 4, 1999: Microsoft shows a new 70-minute video demonstration
recorded under the scrutiny of government lawyers and computer experts.
Using six IBM laptops bought the previous night, Mr. Allchin
demonstrates for the court the process of booting the machine,
installing Dr. Felten's browser-removal program and connecting to the
Internet. After running the Felten program, Mr. Allchin demonstrates
that he can browse the Web and that a Windows update Web site has been
disabled by the program. He also demonstrates two Microsoft
applications that now fail to work properly, and recreates the Prodigy
glitch. But he is unable to substantiate the claim that the Felten
program slows performance, explaining that the test wouldn't be fair
outside the lab because different laptops connect to the Internet at
different speeds. The recreation overshadows testimony from Rational
Software President Michael Devlin, who says his company relies on
browsing technologies in Windows 98. Mr. Devlin is cross-examined by
the government for less than an hour .

February 8, 1999: Microsoft's William Poole argues that the company's
Internet software-distribution agreements didn't hamper Netscape's
ability to distribute its browser and says exclusive cross-promotion
agreements are common in all industries -- though he then concedes that
he can't name any among independent software companies. Mr. Boies, for
his part, focuses on a 1996 e-mail from Mr. Gates describing talks with
Intuit's then-CEO: "I was quite frank with him that if he had a favor
we could do for him that would cost us something like $1 million, to do
that in return for switching browsers in the next few months, I would
be open to doing that." Mr. Boies calls that a bribe; a Microsoft
spokesman counters that Intuit simply needed payment for the cost of
switching .

February 9, 1999: Mr. Poole and Mr. Boies continue dueling over
Microsoft's Internet software-distribution agreements, with Mr. Boies
charging that the contracts show "substantial intent" by Microsoft to
elbow Netscape out of the market. Microsoft counters that the contracts
did little to limit Navigator's distribution. That isn't important, Mr.
Boies counters -- what is important is that Microsoft believed when it
struck the deals that their effect would be large . Later,
Mr. Boies questions a Microsoft-produced videotape demonstration
presented as part of the testimony of Microsoft's Cameron Myhrvold. The
demonstration compares the steps for accessing the Internet from
Windows 98 with those needed with Windows 3.1. Using Windows 3.1 and a
separately installed copy of Microsoft's Web browser is complicated and
slower, the demonstration shows. Mr. Boies tries to establish that the
modem used in the Windows 98 demonstration was twice as fast as the one
used with Windows 3.1, but Microsoft counters that the Windows 98 PC
only used a 33-kbps modem, instead of a 28.8-kbps modem. Meanwhile,
it's reported that Judge Jackson wants most of the trial wrapped up by
the end of the month, with closing arguments likely in April (see
article).

February 10, 1999: In a significant concession, Microsoft's Mr.
Myhrvold says the software giant put restrictions on its contracts with
Internet-service providers to inhibit consumer choice of Web browsers.
"You were concerned that if you presented consumers with a choice, they
would pick Netscape and not Internet Explorer?" asks Mr. Boies, to
which Mr. Myhrvold replies: "Yes, that's right." Microsoft says that
such exclusive deals are common in many industries, and don't violate
the law, but the government argues that they are illegal when imposed
by a monopolist. Mr. Myhrvold also says Internet Explorer distribution
quotas in the contracts were never enforced, and that some service
providers never met the quotas. But on cross-examination, he proves
unable to name a service provider of which that proved true (see
article).

February 11, 1999: Microsoft marketing chief Brad Chase flatly denies
one of the most incendiary pieces of evidence in the trial: a memo
describing an overture by Mr. Gates urging senior executives at AOL to
dump Netscape's software in favor of Microsoft's. He also insists that
AOL customers could readily obtain Netscape software from AOL, even
after AOL dumped Netscape for Microsoft. Earlier in the day, Mr. Boies
and Mr. Chase battle over how easy it is to download a Web browser. Mr.
Chase says millions of consumers do so, but Mr. Boies argues that many
downloads fail and contends it is doubtful that downloading provides
real competition to Microsoft. The issue is important in the trial, as
the government charges Microsoft's exclusive distribution contracts
with Internet companies and restrictions on PC makers cut off Netscape
from the most lucrative browser sales channels .

February 16, 1999: Mr. Boies works to poke holes in another videotaped
demonstration from Microsoft, this one showing that AOL members can
download Netscape Navigator instead of Internet Explorer. The
demonstration suggests the download is relatively easy for novice
computer users, but it leaves out a lengthy series of steps that users
must go through. Mr. Chase argues that because all AOL downloads go to
the same download folder and users are used to retrieving them there,
the process isn't as confusing as the government claims. Mr. Chase also
holds his ground on other points as Mr. Boies tries to chip away at his
testimony .

February 17, 1999: Compaq executive John Rose, testifying in defense of
Microsoft, appears to bolster the government's antitrust argument by
conceding his company has no viable alternative to Windows. Mr. Rose
says Compaq will continue to use Windows until a new product comes
along that better fits that strategy, prompting Judge Jackson to ask
Mr. Rose if "until that materializes, there is no commercially viable
alternative to Windows?" Mr. Rose says that's correct .
Earlier, Microsoft's Mr. Chase says he thinks it is inevitable that AOL
will drop Internet Explorer in favor of a Netscape browser, and charges
that AOL agreed in December to keep using Internet Explorer in hopes of
bolstering the government's case .

February 18, 1999: Internal Compaq documents disclosed at the trial
show Compaq executives feared Microsoft would retaliate if they used
products from other software makers. The government also introduces two
licensing and marketing agreements between Microsoft and Compaq dated
the same day with different terms, and a memo in which a Compaq
executive says the company proposed an "alternative structure" with
side agreements that reflected Microsoft's concern that the agreement
be "defendable" to the Justice Department. Mr. Boies also alleges that
Compaq gave Microsoft information about an operating system from Be
Inc. in violation of a nondisclosure agreement -- a charge Compaq
angrily denies. In one bright spot for Microsoft, Compaq's Mr. Rose
notes that Netscape's browser is available on every PC Compaq ships
.

February 19, 1999: In a Friday session, Mr. Rose defends Compaq's close
relationship with Microsoft and insists Microsoft never prevented
Compaq's use of Netscape's browser. But a far different picture emerges
from depositions and e-mail messages from two more junior Compaq
officials. Mr. Rose again insists that pressure from AOL led Compaq
product managers to remove icons for Internet Explorer browser and MSN
from the opening screens of its Presario computers in 1995 and 1996.
When Microsoft learned its icons had been pulled, the company rushed
off a letter also threatening to terminate Compaq's Windows license,
Mr. Rose says. The icons were restored and AOL agreement was
renegotiated. Mr. Rose says he first learned of the Microsoft icon
restrictions during an August 1995 conference call, and that Compaq
personnel, who negotiated the AOL agreement, hadn't been on the call
and didn't know of them. But in Ms. Dunn's October 1998 deposition, she
said Microsoft was informed that its icons were to be removed before
Compaq took them off its Presario and months before the termination
letter .

February 22, 1999: In a day of startling testimony, Microsoft General
Manager Daniel Rosen says he was told numerous times by Netscape's Mr.
Barksdale that Netscape didn't want to compete with Microsoft, and adds
that Mr. Gates was "probably wrong" in his May 1995 "Tidal Wave" memo
identifying the Internet as Microsoft's main source of competition. But
Mr. Rosen is pressed about internal e-mail he wrote in 1995 that
included his statement that "we should try to strike a close
relationship with Netscape. In this relationship, our goal should be to
wrest leadership of the client evolution from them." Mr. Rosen first
claims the e-mail was never sent, then that it was merely a draft of
some thoughts that he, as a new employee, was trying to flesh out to
see if he had a good understanding of Microsoft's competitive position,
and then admits that at the time he wrote the e-mail, he had worked at
Microsoft for eight months. Under cross-examination, Mr. Rosen says
that by "wrest" he merely meant "take," and that at Microsoft,
"ownership" means that the company is going to deliver on something and
that it is akin to the word "responsibilities." His testimony elicits
gasps and chuckles in the courtroom and causes Mr. Boies to curt short
his cross-examination. Outside of the courtroom, Mr. Boies said that he
ended questioning where he did because he thought "the points on the
witness' credibility had been made" .

February 23, 1999: Mr. Rosen admits under cross-examination that
Microsoft tried to influence Netscape at a June 1995 meeting by
offering it "inducements" not to compete with it in the
Internet-software market. His credibility is also further damaged by an
exchange in which Mr. Boies asks him when he first saw a copy of
Netscape's browser for Windows 95 discussed at the meeting. Mr. Rosen
says he first saw the browser in July, after which Mr. Boies introduces
a May 11, 1995, e-mail from Mr. Rosen asking another Microsoft employee
to lend him a copy of the browser. Mr. Rosen insists the software Mr.
Boies referred to was an experimental version that was received in May
and wouldn't load, after which Mr. Boies introduces a second e-mail
message from Mr. Rosen to another Microsoft colleague dated April 27 in
which Mr. Rosen asks, "do you remember who took the Netscape Win95
browser that they gave us during our last meeting?" "I stand
corrected," Mr. Rosen says as a chuckling Judge Jackson shakes his head
.

February 24, 1999: Microsoft's Joachim Kempin clashes with Mr. Boies
after Microsoft's lawyers offer a video intended to show how PC makers
are free to place other software icons on their start-up screens. Mr.
Boies notes that PC makers can insert an Internet sign-up screen into
Windows, but can't include Netscape's Web-browser icon, and adds that
Microsoft wouldn't allow Gateway to uninstall Internet Explorer.
Earlier in the day, Microsoft's Eric Engstrom says the company didn't
"sabotage" Apple's QuickTime software, as Apple's Avie Tevanian had
charged. He says "extensive research" at Microsoft and reviews by
independent laboratories concluded that most of QuickTime's flaws were
because of Apple programming errors .

February 25, 1999: Mr. Kempin repeatedly denies that Microsoft
pressured PC makers to keep them from using rivals' software and
defends restrictions Microsoft placed on PC makers to prevent them from
removing Microsoft's Web browser or giving competitors' greater
prominence. PC makers' efforts to change the Windows start-up sequence
were seen as an attempt to "butcher the Windows operating system," he
says. But Mr. Boies sees other motives for the restrictions, citing a
1996 memo from Mr. Gates in which he noted that PC makers were
displaying competing Internet software "in a FAR more prominent way"
than Microsoft's products .

February 26, 1999: Microsoft presents Robert Muglia as its final
witness -- but suffers another embarrassment as Judge Jackson erupts at
Mr. Muglia over semantics. Mr. Boies asks Mr. Muglia about an e-mail in
which Mr. Gates wrote that "I am hardcore about NOT supporting" the
latest version of Sun's Java developers' kit. Mr. Muglia tries to
quibble over the e-mail's thrust, but Judge Jackson steps in and says
that "I read it as he doesn't like the idea of supporting it. I don't
think you can read it any other way." Mr. Muglia also testifies that
when Microsoft officials talked about fragmenting Java, they meant
creating more choices for developers -- an interpretation Mr. Boies
counters with an internal Microsoft document listing a Microsoft
strategic objective to "kill cross-platform Java by growing the
polluted Java market." Outside the courtroom, Microsoft officials and
government attorneys hold dueling press conferences in which both claim
to have the upper hand in the case. The two sides are expected to
return to court in mid-April .

March 4, 1999: It's reported that most of the nation's software and
information companies recommended in a confidential report that
Microsoft be restructured if it loses in court. The group, the Software
and Information Industries Association, represents 1,300 software and
computer makers and publishers, including Microsoft and most of its
rivals. In its report, the group's board called -- over Microsoft's
strong objections -- for the court to consider a broad restructuring in
order to prevent the need for continuing oversight of Microsoft by the
Justice Department or the courts. The report says two forms of
divestiture are possible: "horizontal separation" into
operating-system, application and e-commerce companies, or
reorganization into multiple, competing, vertically integrated firms
.

March 17, 1999: Mr. Gates, writing in a yet-to-be-published book about
the benefits of technology tools for business, says he can quickly
analyze Microsoft's sales records because they're tracked
electronically. That appears to contradict testimony from MIT's Dr.
Schmalensee, who had raised eyebrows with testimony that the company's
accounting records were kept "by hand on sheets of paper" (see
article).

March 26, 1999: Judge Jackson permits Microsoft to depose AOL Chief
Executive Steve Case and three executives from AOL, Netscape and Sun.
Microsoft's lawyers hope the depositions and company documents will
support their argument that the recent merger of AOL and Netscape
proves industry competition is alive and well.

March 30, 1999: Representatives of Microsoft and the government meet to
discuss a possible settlement of the antitrust suit against the
software giant, but come to no agreement. The two sides meet for two
hours in Washington, marking the first talks since just before the
lawsuit was filed in May 1998.

May 4, 1999: In filings, Microsoft says it will call AOL's David
Colburn as a hostile witness, an indication that the software giant
plans to make AOL's acquisition of Netscape a centerpiece of its
rebuttal. The company says it will also call Gordon Eubanks, the former
chairman of Symantec Corp., and economist Richard Schmalensee. The
Justice Department indicates it will call Garry Norris, an IBM manager
who had direct knowledge of IBM's dealings with Microsoft, and
returning witnesses Edward Felten and Franklin Fisher .

May 6, 1999: AOL official Barry Schuler says under questioning in a
deposition that AOL gave the Justice Department early warning about
"very preliminary discussions" with Netscape in the fall that led to
the companies' merger. Mr. Schuler says that AOL told the government
that AOL and Netscape were discussing an unspecified business
relationship, but didn't characterize the talks as merger negotiations
.

May 17, 1999: It's reported that on March 31, Judge Jackson called
eight lawyers in the antitrust trials into his chambers and suggested
that the two sides consider letting PC makers and consumers pick the
software they want on new machines. Insiders say that suggested two
things: that the judge was leaning in favor of the government's claim
that Microsoft had unfairly bundled Internet Explorer with Windows, but
that he also wasn't inclined to consider severe remedies, such as
breaking up the company .

May 18, 1999: U.S. District Court Judge Janet Hall denies Microsoft's
motion to postpone an antitrust trial -- separate from that brought by
the Justice Department and the states -- involving tiny software maker
Bristol Technology. Judge Hall announces a June 2 start date for the
trial and rules that privately held Bristol can share information from
lawyers for other antitrust cases .

June 1, 1999: The trial resumes as MIT's Dr. Fisher takes the stand and
reiterates his contention that Microsoft has a monopoly in the market
for operating-system software. Its tactic of giving away Internet
Explorer "makes no economic sense" except as a way to protect Windows,
he says. Dr. Fisher adds that Netscape was forced to sell out to AOL --
and rather cheaply, at that -- after its browser business was trampled
by Microsoft's illegal tactics .

June 2, 1999: Microsoft offers evidence that in planning its
acquisition of Netscape, AOL considered a more direct challenge to
Microsoft than it has previously acknowledged. An analysis of the
AOL/Netscape deal prepared by Goldman Sachs & Co. for AOL in November
includes a passage suggesting that AOL should "extend browser to be a
more comprehensive desktop application," supplanting Windows as the PC
user's primary online "environment." Another confidential document
refers to an "AOL PC" that could avoid using Microsoft software
entirely, and other development efforts aimed at producing
non-Microsoft software. Microsoft lawyer Michael Lacovara cites the
documents to bolster the company's claim that the combination of AOL
and Netscape, and their alliance with Sun, presents a real competitive
threat to Microsoft. But Judge Jackson notes that the documents "are
all dated at the latest last fall, and I don't know whether that
represents current thinking or whether that's now just wishful
thinking" .

June 3, 1999: Microsoft says merger documents prepared for AOL's buyout
of Netscape contradict claims made last fall by Netscape's Jim
Barksdale. Mr. Lacovara charges that just after Mr. Barksdale
complained on the witness stand of being shut out of distribution by PC
makers and by Internet-service providers, Goldman Sachs found
Netscape's browser was being carried on 22% of PC shipments and being
offered online by 24% of the largest Internet-service providers. At the
end of the day, Judge Jackson calls the evidence "very interesting" and
asks Mr. Boies to address Microsoft's points the next day (see
article). Separately, opening statements are heard in Bristol's civil
suit in U.S. District Court in Bridgeport, Conn. .

June 4, 1999: Dr. Fisher says a review of internal AOL messages shows
AOL had little interest in Netscape's browser business and a lot of
interest in its Web portal. The documents, submitted under seal to
Judge Jackson, aren't released. The Justice Department's Mr. Boies also
plays about 10 minutes of a videotaped deposition of Steve Case in
which the AOL chief says that "we did not buy Netscape because of the
browser business. In some sense, we bought Netscape despite the browser
business" .

June 7, 1999: IBM's Garry Norris testifies that Microsoft asked IBM to
opt for Windows over competing software, and after it refused, the
price IBM paid for Windows soared. Mr. Norris says payments by IBM for
Windows jumped to $440 million last year from $220 million in 1996 and
$40 million in 1995 and testifies that top Microsoft executives
repeatedly told IBM that its terms would improve if IBM accepted their
demands. Mr. Norris' testimony sharply raises the stakes in the trial
for Microsoft, as no PC maker had come forward to testify against
Microsoft, in some cases saying they feared retaliation .

June 8, 1999: Microsoft lawyer Richard Pepperman offers drafts of a
partnership agreement that Microsoft and IBM discussed in 1994 that
made no demands that IBM stop selling competing software. He also
introduces evidence showing that Compaq got better Windows prices than
IBM because of joint software-development work with Microsoft, not
because it didn't compete with the software giant. But most of Mr.
Pepperman's points are about events that took place before Mr. Norris
became negotiator for licensing Windows software for IBM. Mr. Norris,
for his part, details a March 1997 meeting in which he says Microsoft
demanded that IBM not put Netscape's Web browser on its PCs, warning of
"repercussions" that would lead to higher prices for Windows (see
article).

June 9, 1999: Microsoft's Mr. Pepperman argues that the software
giant's relationship with IBM grew strained because IBM didn't pay
Microsoft money it was owed and not because Big Blue sold competing
software. Mr. Norris concedes that Microsoft never cut off access to
Windows even though IBM continued to sell software that competed with
Microsoft, and Mr. Pepperman brandishes an IBM executive's memo citing
the payment squabble and noting that "Microsoft is extremely upset with
us, and in my judgment with good reason". But Judge Jackson scolds Mr.
Pepperman more than once and appears skeptical about the evidence (see
article).

June 10, 1999: Princeton computer expert Edward Felten demonstrates an
update of his "prototype removal program" to disengage Internet
Explorer from Windows and repeats his earlier testimony that there was
no technical reason to inextricably weave its Web browser into Windows.
He cites Microsoft's own release of a standalone version of Internet
Explorer 5.0 in March as proof that Microsoft's browser isn't
inseparable from its operating systems. Microsoft's Steven Holley asks
Dr. Felten to install his updated program on a laptop provided by Mr.
Holley, then leads Dr. Felten through a demonstration that appears to
show his update hadn't removed the browser from the operating system.
The two argue over what that means until Judge Jackson cuts them off,
saying they have reached a state of "semantic nonreconciliation" (see
article).

June 14, 1999: Microsoft doesn't make much headway in its
cross-examination of AOL's David Colburn. But his appearance as a
hostile witness allows Microsoft to enter internal documents suggesting
AOL pondered taking on Microsoft, contrary to its public statements. In
internal AOL e-mail messages, AOL executives mull whether to use
Microsoft's browser or Netscape's, and note that they could shift
Netscape's market share overnight if forced. The e-mail messages
suggest AOL chose Microsoft's browser on its own, but Mr. Boies presses
to have a subsequent message from AOL's Robert Pittman submitted into
evidence as well. In that message, Mr. Pittman writes that Microsoft
"is too strong to throw ... out of the tent -- they can hurt us if they
think they have no other option. I think we need to stay in business
with them." Mr. Colburn also says that while AOL mulled working on a
non-Windows machine called an "AOL PC," the concept never got anywhere.
The government doesn't even bother with its own cross-examination (see
article).

June 16, 1999: Former Symantec Chief Executive Gordon Eubanks testifies
that software developers are now more focused on writing programs for
the Internet than for Windows, suggesting its dominance of the industry
is fading. He also cites the Linux operating system and handheld
wireless units as some of the myriad threats Microsoft faces. But in
saying that the "platform of choice" for developers is shifting to Web
browsers, he supplies ammunition for the government, which has
contended that Microsoft used its Windows dominance to try and get
control of Web software as well. Documents also come to light showing
that Microsoft drew up an "enemies list" of small software makers and
that Mr. Gates discussed the best way to leak one of his e-mail message
to the press -- an e-mail message Microsoft lawyers had tried to
introduce as evidence the previous week, saying it had just been found
in America Online's files and was marked "highly confidential" (see
article).

June 21, 1999: MIT's Richard Schmalensee, Microsoft's final rebuttal
witness, says that Microsoft's business practices delivered lower
prices and higher software quality to consumers, who also benefited
from the uniform software standards Microsoft set over the years. Dr.
Schmalensee also declares that the "browser war" is still raging and
argues that the combination of the merged AOL-Netscape and Sun
Microsystems offers a competitive counterweight to Microsoft (see
article).

June 22, 1999: Dr. Schmalensee says Microsoft's bundling of Internet
Explorer with Windows was an attempt to improve the quality of Windows
in a normal response to "actual and potential competition," adding that
distributing Internet Explorer free can't be seen as predatory because
doing so enhanced Windows' value. In discussing rival operating
systems, he draws a comparison to competing grocery stores, saying the
presence of one store doesn't stop another store from opening. But
Judge Jackson says he has trouble with that analogy and asks whether a
corner grocery store could compete with a "megamart" in the same town
.

June 23, 1999: Mr. Boies questions Dr. Schmalensee's data and
positions, getting him to admit there are inaccuracies in a chart
describing Netscape Navigator's market share and that Linux doesn't
have much presence yet on desktop PCs. Dr. Schmalensee also makes a new
anti-piracy argument: that penalties imposed by Microsoft on PC makers
for shipping some systems without Windows software installed are simply
aimed at discouraging proliferation of bootleg copies of Windows, and
aren't aimed at preventing firms from loading rival software on the
machines .

June 24, 1999: Handwritten notes taken by a Microsoft executive quote
Mr. Gates at a December 1998 meeting as questioning whether AOL has it
"in their genes" to compete against Windows. That appears to contradict
Microsoft's in-court claims that AOL's merger with Netscape changes the
high-tech landscape. But Mr. Gates is also quoted as suggesting that
"if you want to lose sleep tonight, worry about Sun," a reference to
AOL-Netscape's partner in an e-commerce alliance. Dr. Schmalensee
quibbles with Mr. Gates's assessment, saying it appears outweighed by
other internal AOL discussions. The end of the cross-examination of Dr.
Schmalensee also marks the end of the trial's rebuttal phase.

Aug. 10, 1999: Microsoft and the Justice Department file "findings of
fact" in the case. The government's 776 pages portray Microsoft as a
predatory monopolist that has used bullying tactics to preserve the
Windows operating-system monopoly -- a "desktop paradise," in the
government's brief -- and slow innovation that would benefit consumers.
Microsoft, in its 453-page submission, ridicules the idea that any
company could have a monopoly in the fast-moving, intensely competitive
PC and Internet businesses, and argued that it has benefited consumers
with new products at low prices .

Sept. 10, 1999: Both sides turn in their revised "findings of fact."
The government says Microsoft's explanations of its alleged attack on
Netscape have changed repeatedly over the course of the trial and
attacks Mr. Gates's testimony as "bizarre" and "simply not credible."
Microsoft counters by saying the government's claims rely broadly on
hearsay: "Despite their bluster, plaintiffs have failed to prove their
case" .

Sept. 21, 1999: Attorneys for Microsoft and the Justice Department make
closing arguments in a one-day session before Judge Jackson, clearing
the way for the judge to issue his own findings of fact in the case
.

Nov. 5, 1999: Judge Jackson issues his findings of fact, determining
that Microsoft has monopoly power in the market for PC operating
systems and used that power to stifle innovation in the high-tech arena
and hurt its competitors. Those actions were harmful to consumers, the
judge finds. The 207-page filing is a significant blow to Microsoft, as
it essentially backs the government's allegations .

Nov. 10, 1999: At Microsoft's annual shareholders meeting, Mr. Gates
says he is "pragmatic" and willing to compromise to settle the case.
But he deals any Microsoft doves a blow by saying the company isn't
willing to give up its control over the way PC makers display Windows
.

Nov. 22, 1999: In a bid to force a settlement, Judge Jackson names
Richard Posner, the outspoken and conservative chief judge of the U.S.
Court of Appeals in Chicago, to mediate talks aimed at resolving the
case .

Nov. 30, 1999: Attorneys from Microsoft, the Justice Department and
state attorneys-general offices meet for nearly two hours over lunch at
Chicago's Standard Club, marking first meeting convened by Judge
Posner. The two sides are tight-lipped about any progress in settling
the antitrust case, however .

Dec. 2, 1999: The Justice Department says it retained Greenhill & Co.,
a prestigious investment-banking boutique, "to assist in analyzing
financial aspects of the full range of potential remedies in U.S. vs.
Microsoft, including conduct and structural relief." The move signals
that Justice could seek a sweeping restructuring of Microsoft if it
prevails in the antitrust battle .

Dec. 6, 1999: In their proposed findings of law, the Justice Department
and states ask Judge Jackson to find broad violations of federal law in
a five-year campaign by Microsoft to protect the dominance of Windows
and to monopolize the Web-browser market by imposing illegal and
exclusionary contracts on partners and distributors. On the same day,
the two sides meet again in a closed session in Chicago to discuss a
settlement .

Dec. 13, 1999: Representatives for Microsoft, the Justice Department
and the states meet for a third time in a closed session in Chicago to
discuss a settlement.

Jan. 13, 2000: Mr. Gates steps down as Microsoft's chief executive
officer, handing the day-to-day reins to the company's president, Steve
Ballmer. He remains chairman and takes on the new title of chief
software architect .

Jan. 18, 2000: Microsoft files its proposed findings of law, arguing
that the government's arguments and its evidence against Microsoft
shouldn't be considered strong enough to merit a ruling that the
company broke the law .

Jan. 25, 2000: The Justice Department files its proposed findings of
law, arguing that Microsoft's own court filing on that subject "treats
as nearly an afterthought both the court's core finding that Microsoft
has monopoly power and the unifying theme of the court's numerous
findings on Microsoft's conduct" .

Feb. 22, 2000: Judge Jackson hears final arguments in court on proposed
findings of law. He presses Microsoft's Mr. Warden about his claim that
Windows is protected by copyright and those rights can trump antitrust
law. But he also quizzes Mr. Boies about his contention that
Microsoft's "bolted" Internet Explorer to Windows only to crush a
rival, noting that under an appeals-court ruling, Microsoft needs to
show only "one plausible benefit" of tying the two together to be
allowed to do so .

March 25, 2000: Microsoft faxes a settlement proposal to the Justice
Department that is said to include pledges to let PC makers offer
Windows without Internet Explorer; end the practice of charging
different PC makers different terms for licensing Windows; and give
software makers greater access to Windows source code. The proposal
keeps settlement talks alive, but government lawyers are reportedly
disappointed by the lateness and vagueness of the offer .

March 28, 2000: Judge Jackson delays issuing "findings of law" to give
the two sides more time to negotiate.

April 1, 2000: Judge Posner says he is ending his mediation efforts,
saying that the government and Microsoft are still too far apart .

April 3, 2000: Judge Jackson issues his "findings of law" in the case,
ruling that Microsoft maintained its monopoly in operating-system
software by anticompetitive means and attempted to monopolize the
Web-browser market by unlawfully "tying" Internet Explorer with
Windows. In all, the judge accepts 23 of 26 arguments brought by the
government. Microsoft says it will appeal .