DEFENDANT. :
_____________________________________
STATE OF NEW YORK, ET AL., :
PLAINTIFFS, :
:
V. : C.A. NO. 98-1223
:
MICROSOFT CORPORATION, :
DEFENDANT. :
_____________________________________
MICROSOFT CORPORATION, :
COUNTERCLAIM-PLAINTIFF, :
:
V. :
:
DENNIS C. VACCO, ET AL., :
COUNTERCLAIM-DEFENDANTS. :
_____________________________________
WASHINGTON, D.C.
OCTOBER 20, 1998
2:01 P.M.
(P.M. SESSION)
VOLUME II
TRANSCRIPT OF TRIAL
BEFORE THE HONORABLE THOMAS P. JACKSON
UNITED STATES DISTRICT JUDGE
2 - [add a note]
FOR THE PLAINTIFFS: DAVID BOIES, ESQ.,
PHILLIP R. MALONE, ESQ.,
STEPHEN D. HOUCK, ESQ.,
RICHARD L. SCHWARTZ, ESQ.,
ALAN R. KUSINITZ, ESQ.,
MICHAEL WILSON, ESQ.,
DENISE DEMORY, ESQ.
ANTITRUST DIVISION
U.S. DEPARTMENT OF JUSTICE
P.O. BOX 36046
SAN FRANCISCO, CA 94102
FOR THE DEFENDANT: JOHN L. WARDEN, ESQ.,
STEVEN L. HOLLEY, ESQ.,
WILLIAM H. NEUKOM, ESQ.,
RICHARD J. UROWSKY, ESQ.,
MICHAEL LACOVARA, ESQ.
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NY 10004
DAVID A. HEINER, ESQ., THOMAS W. BURT, ESQ.
MICROSOFT CORPORATION
ONE MICROSOFT WAY
REDMOND, WA 98052-6399
COURT REPORTER: DAVID A. KASDAN, RPR
MILLER REPORTING CO., INC.
507 C STREET, N.E.
WASHINGTON, D.C. 20003
(202) 546-6666
3 - [add a note]
INDEX
PAGE
DIRECT EXAMINATION OF JAMES BARKSDALE 6
CROSS-EXAMINATION OF JAMES BARKSDALE 7
DEFENDANT'S EXHIBIT NO. 2 ADMITTED 27
DEFENDANT'S EXHIBIT NO. 1 ADMITTED 49
4 - [add a note]
1 P R O C E E D I N G S
2 THE COURT: I SUPPOSE, AS A PRELIMINARY MATTER,
3 WHAT WE OUGHT TO DO IS TO RESOLVE THE DEFENDANT'S MOTION
4 IN LIMINE WITH RESPECT TO MR. BARKSDALE'S TESTIMONY.
5 MR. WARDEN: I GAVE MR. WEST AND ASKED HIM TO
6 GIVE YOU, AND I HAVE GIVEN TO MR. BOIES AND MR. HOUCK,
7 THAT'S A BLACK BRACKETED COPY OF THE DIRECT THAT SHOWS THE
8 PIECES WE ARE OBJECTING TO. AND THOSE ARE THE PARTICULAR
9 DOCUMENTS WE ARE OBJECTING TO, IN WHOLE OR IN PART, THAT
10 ARE ATTACHED.
11 THE COURT: WHAT ARE YOU OBJECTING TO ABOUT THE
12 DOCUMENTS?
13 MR. WARDEN: THEY CONTAIN MULTIPLE LAYERS OF
14 HEARSAY. EVEN IF THEY ARE QUALIFIED FOR ADMISSION AS
15 BUSINESS RECORDS, THAT WHEN THEY SAY MR. SMITH TOLD ME
16 SOMETHING, THAT THAT'S A SECOND LAYER OF HEARSAY, AND THEY
17 ARE NOT ADMISSIBLE FOR WHAT MR. SMITH TOLD THEM. IF THEY
18 SAY, "I'M GOING TO MAKE THE FOLLOWING OFFER" OR "I MADE
19 THE FOLLOWING OFFER," THEN THEY MAY BE ADMISSIBLE BUSINESS
20 RECORDS.
21 THE COURT: WELL, IF THIS WAS A JURY CASE IT
22 MIGHT BE DEAL WITH SOMEWHAT DIFFERENTLY, BUT I'M GOING TO
23 OVERRULE THE MOTION IN LIMINE AND ADMIT THE TESTIMONY IN
24 TOTO, TOGETHER WITH THE DOCUMENTS, UNDER RULES 803-1 AND
25 803-24, AND PERHAPS ANY OTHER APPLICABLE EXCEPTION WHICH
5 - [add a note]
1 OCCURS TO ME BEFORE THE CASE IS OVER. AND I WILL
2 DETERMINE WHAT WEIGHT, IF ANY, IS TO BE GIVEN ANY OF THAT
3 EVIDENCE IF IT'S HEARSAY.
4 MR. WARDEN: SOME OF US BELIEVE THAT IT'S
5 FOURTH-HAND HEARSAY, SO I TRUST YOUR HONOR WILL ACCORD
6 THAT THE WEIGHT IT IS DUE.
7 THE COURT: I WILL ALSO TELL YOU, MR. WARDEN,
8 THAT TO THE EXTENT THAT ANY OF THE EVIDENCE, ANY OF THE
9 ASSERTIONS THAT ARE IN THE RECORD WHICH WENT INTO THE
10 RECORD BY WAY OF HEARSAY WHICH YOU DEEM CRITICAL TO HAVE
11 AN OPPORTUNITY TO CONTROVERT, I'M NOT AVERSE TO GIVING YOU
12 THAT OPPORTUNITY. IF, INDEED, IT EVEN REQUIRES ADDING TO
13 YOUR WITNESS LIST, SO WE WILL SEE.
14 MR. WARDEN: OKAY. THANK YOU, YOUR HONOR.
15 I WANT TO MAKE ONE THING CLEAR WHICH I THINK WAS
16 CLEAR IN THE WRITTEN MOTION, THAT WE DIDN'T ATTEMPT TO
17 CHALLENGE IN THE WRITTEN MOTION ANYTHING THAT WASN'T
18 MULTIPLE HEARSAY OR OTHERWISE EXCLUDABLE ON ITS FACE.
19 THE COURT: I APPRECIATE YOUR DISCRETION.
20 MR. WARDEN: THERE IS A LACK OF FOUNDATION, AND I
21 WOULD MOVE TO STRIKE.
22 THE COURT: THERE IS NO QUESTION THAT SOME OF IT
23 IS ARGUABLY HEARSAY AND MULTIPLE HEARSAY, BUT AS I SAY,
24 I'M ADMITTING IT UNDER--
25 MR. WARDEN: I HEARD THAT, BUT THERE ARE OTHER
6 - [add a note]
1 THINGS THAT I THINK MAY LACK FOUNDATION WHEN YOU COULDN'T
2 TELL ON THE FACE OF THE DOCUMENT WHETHER THEY LACK
3 FOUNDATION OR NOT. THOSE THINGS I MAY MOVE TO STRIKE.
4 THE COURT: ALL RIGHT.
5 MR. WARDEN: THANK YOU, YOUR HONOR.
6 THE COURT: THAT'S YOUR PRIVILEGE.
7 MR. BOIES?
8 MR. BOIES: YOUR HONOR, THE PLAINTIFFS CALL THE
9 FIRST WITNESS, MR. BARKSDALE.
10 JAMES BARKSDALE, GOVERNMENT'S WITNESS, SWORN
11 MR. BOIES: MAY I HAND HIM A COPY OF HIS
12 STATEMENT?
13 THE COURT: INDEED.
14 (DOCUMENT HANDED TO THE WITNESS.)
15 DIRECT EXAMINATION
16 BY MR. BOIES:
17 Q. MR. BARKSDALE, I HAVE HANDED YOU A COPY OF YOUR
18 DIRECT WRITTEN TESTIMONY IN THIS CASE, WHICH HAS
19 PREVIOUSLY BEEN FILED WITH THE COURT AND WITH COUNSEL,
20 PROVIDED TO--AND COPIES PROVIDED TO COUNSEL FOR THE
21 DEFENDANT.
22 DO YOU, AS YOU SIT HERE NOW, AFFIRM UNDER OATH
23 THE TRUTH OF WHAT YOU HAVE SUBMITTED IN YOUR WRITTEN
24 TESTIMONY?
25 A. I DO.
7 - [add a note]
1 MR. BOIES: I HAND THE WITNESS OVER FOR
2 CROSS-EXAMINATION, YOUR HONOR.
3 THE COURT: VERY WELL. MR. WARDEN?
4 MR. WARDEN: THANK YOU.
5 CROSS-EXAMINATION
6 MR. WARDEN: WITH THE COURT'S LEAVE, MS. WHEELER
7 WILL OPERATE THE ELMO AND HAND APPROPRIATE EXHIBITS TO THE
8 WITNESS AND THEN TO THE COURT.
9 THE COURT: PERFECTLY ALL RIGHT.
10 MR. WARDEN: THANK YOU.
11 THE COURT: MAY I ASK YOU IF YOU ARE REFERRING TO
12 ANY SPECIFICS OF HIS DIRECT TESTIMONY IN THE COURSE OF
13 YOUR CROSS-EXAMINATION, YOU LET ME KNOW THE PAGE AND
14 NUMBER.
15 MR. WARDEN: YES, AND I WILL BE PROCEEDING IN
16 SUCH FASHION AND I WILL HOPE THE WITNESS HAS IT HIMSELF IN
17 FRONT OF HIM.
18 BY MR. WARDEN:
19 Q. DO YOU, MR. BARKSDALE?
20 A. YES I DO.
21 Q. MR. BARKSDALE, I'M JOHN WARDEN, AND I WILL BE
22 EXAMINING YOU ON BEHALF OF MICROSOFT.
23 A. NICE TO MEET YOU, MR. WARD.
24 Q. NICE TO MEET YOU, SIR.
25 MR. BARKSDALE, WHEN DID YOU PERSONALLY FIRST HAVE
8 - [add a note]
1 CONTACT WITH THE DEPARTMENT OF JUSTICE ABOUT MICROSOFT?
2 A. I HAVE BEEN ASKED THAT QUESTION, AND I DON'T KNOW
3 THAT I RECOLLECT EXACTLY THE MONTH OR WHATEVER, BUT I DO
4 REMEMBER A COUPLE OF--IT SEEMS LIKE A COUPLE OF PEOPLE
5 COME INTO OUR OFFICES, IN 1995, SOMETIME PRIOR TO THE
6 RELEASE OF WINDOWS 95, INVESTIGATING A MATTER THAT THEY
7 WERE LOOKING INTO REGARDING AOL IN A COMPLAINT AOL HAD
8 FILED, AND THEY ASKED SOME OF OUR PEOPLE SOME QUESTIONS,
9 AND IT SEEMS TO ME I MAY HAVE BEEN INTERVIEWED OR HAD A
10 CONVERSATION WITH, IT SEEMS LIKE, TWO MEN THAT CAME BY TO
11 SEE ME.
12 Q. OKAY. THAT'S BEFORE THE INTRODUCTION WINDOWS 95,
13 SOMETIME IN THE SUMMER OF '95. AND THAT CONTACT, ASSUMING
14 YOU DID HAVE ONE, AS YOU THINK YOU MAY HAVE, WAS INITIATED
15 BY THE DEPARTMENT; IS THAT YOUR TESTIMONY?
16 A. YES, SIR.
17 Q. OKAY. WAS THAT THE FIRST TIME NETSCAPE, AS A
18 COMPANY, HAD ANY CONTACT WITH THE DEPARTMENT OF JUSTICE
19 ABOUT MICROSOFT?
20 A. I DON'T KNOW THAT I KNOW THE ANSWER TO THAT, SIR.
21 Q. BUT, TO THE BEST OF YOUR KNOWLEDGE, WAS IT THE FIRST
22 TIME?
23 A. IT MAY HAVE BEEN.
24 Q. AT THE TIME OF THAT INTERVIEW, DID YOU HAVE COUNSEL
25 RETAINED TO DEAL WITH YOU IN DEALINGS WITH THE JUSTICE
9 - [add a note]
1 DEPARTMENT ABOUT MICROSOFT?
2 A. YOU MEAN OTHER THAN IN-HOUSE COUNSEL?
3 Q. ALL RIGHT. FIRST IN-HOUSE COUNSEL, WERE THEY
4 ATTENDING TO THE MATTER?
5 A. I BELIEVE THEY WERE, YES, SIR.
6 Q. DID YOU HAVE OUTSIDE COUNSEL RETAINED?
7 A. I DON'T THINK WE DID, NO, SIR.
8 Q. WHEN DID YOU RETAIN MR. REBACK?
9 A. SOMETIME, AND IT SEEMS TO ME MAYBE THE SUMMER OR FALL
10 OF '95, BUT I DON'T KNOW THAT, AND I'M NOT CLEAR ON THAT.
11 Q. YOU THINK THAT WAS AFTER THIS FIRST VISIT ABOUT--
12 A. MAY HAVE BEEN.
13 Q. AND THE SUBJECT OF THAT FIRST COMMUNICATION OR VISIT
14 WAS WHAT, AGAIN?
15 A. THEY WERE ASKING SOME GENERAL QUESTIONS, IT SEEMED TO
16 ME, ABOUT WHAT WE THOUGHT ABOUT THE DEVELOPMENT OF THE
17 INTERNET; WHAT ROLE, IF ANY, AOL; AS AN ONLINE SERVICE
18 PROVIDER AND LATER AN INTERNET SERVICE PROVIDER, MIGHT
19 HAVE; WHETHER OR NOT WE THOUGHT THE INCLUSION OF
20 MICROSOFT'S--MICROSOFT MSN NETWORK ICON WITH THE MICROSOFT
21 OPERATING SYSTEM, WHETHER WE THOUGHT THAT WAS UNFAIR,
22 PREDATORY OR WHATEVER. IT SEEMS TO ME THAT WAS THE GIST
23 OF IT.
24 Q. OKAY. WHEN DID YOU NEXT MEET WITH--YOU PERSONALLY
25 NEXT MEET--WITH THE JUSTICE DEPARTMENT ABOUT MICROSOFT?
10 - [add a note]
1 A. I DON'T REMEMBER EXACTLY ANY OF THE DATES, BUT IT
2 WOULD SEEM TO ME THE NEXT TIME WOULD HAVE BEEN WELL AFTER
3 THAT. PROBABLY IN '96.
4 Q. IN '96. HOW ABOUT OTHER REPRESENTATIVES OF NETSCAPE,
5 INCLUDING COUNSEL? DID THEY MEET MORE FREQUENTLY THAN YOU
6 DID?
7 A. I THINK THEY DID, YES, SIR.
8 Q. AND DO YOU KNOW WHAT THE SUBJECTS OF THOSE MEETINGS
9 WERE?
10 A. LIKE I SAID, I THINK INITIALLY IT WAS DEALING WITH
11 THE AOL ISSUE.
12 AND YOU COULD CORRECT ME ON THIS, BUT I THINK
13 THAT ISSUE WAS DROPPED SOMETIME IN LATE; 95, AND THEY
14 CONTINUED TO DISCUSS WITH US OTHER MATTERS I'M SURE MUCH
15 MORE OFTEN WITH OTHER PEOPLE IN OUR COMPANY THAN WITH ME.
16 Q. WHAT WERE THOSE OTHER MATTERS?
17 A. THE ISSUE OF JUST MICROSOFT'S POSITION VIS-A-VIS
18 NETSCAPE. BY THEN, WE HAD FELT SORT OF THE HEAT OF
19 MICROSOFT'S PRACTICES AND, I THINK, CONTINUED TO DISCUSS
20 THOSE.
21 Q. WERE ANY OF THESE MEETINGS OR COMMUNICATIONS BETWEEN
22 NETSCAPE AND THE JUSTICE DEPARTMENT INITIATED BY NETSCAPE?
23 A. I'M SURE AFTER THAT THERE MAY HAVE BEEN A TIME WHEN
24 WE SENT THEM A DOCUMENT OR SAID SOMETHING TO THEM. I
25 DON'T REMEMBER MYSELF EVER DOING THAT, BUT I WOULDN'T
11 - [add a note]
1 QUESTION IT. PERHAPS EITHER COUNSEL DID THAT, OR
2 WHATEVER.
3 Q. NOW, HOW MANY--ON HOW MANY OCCASIONS DO YOU THINK
4 PERSONALLY--AND WE WILL CUT THIS OFF FOR NOW AT MAY 1ST OF
5 THIS YEAR--YOU MET WITH THE DEPARTMENT OF JUSTICE?
6 A. AS OF MAY 1ST OF '98?
7 Q. YES, SIR.
8 A. I THINK--I BELIEVE IN MY DEPOSITION I RECALLED SIX
9 DIFFERENT MEETINGS.
10 Q. AND HOW MANY TIMES HAVE YOU MET WITH JOEL KLEIN?
11 A. WELL, IN MY DEPOSITION, I BELIEVE I RECALLED THREE
12 DIFFERENT TIMES, PLUS ONE THAT I DIDN'T PUT IN MY
13 DEPOSITION ONLY BECAUSE I WAS ON A PANEL, A FORUM ONE
14 TIME, AND HE WAS ONE OF THE SPEAKERS, AND I WAS ONE OF THE
15 SPEAKERS, BUT I WOULDN'T CALL THAT A MEETING. WE DIDN'T
16 DISCUSS ANY BUSINESS MATTERS.
17 Q. SO YOUR TESTIMONY IS STILL THE SAME THREE TIMES; IS
18 THAT RIGHT?
19 A. YES, SIR.
20 Q. HAVE ANY OF THESE MEETINGS BEEN ONE ON ONE?
21 A. WELL, THERE WAS ONE WHICH WAS TWO ON ONE.
22 Q. ALL RIGHT. WHICH WAS THAT?
23 A. THAT WAS A MEETING SOMETIME LAST YEAR, IT SEEMS TO
24 ME, OR EARLIER THIS YEAR, WHERE HE AND ANOTHER MAN WHO
25 WAS, AS I UNDERSTAND IT, CONSULTANT TO HIM, THE DEPARTMENT
12 - [add a note]
1 OF JUSTICE, NAMED DENHAM, CAME BY MY HOUSE TO VISIT WITH
2 ME IN PALO ALTO ONE MORNING.
3 Q. WHO WAS THE MAN? DENHAM, DID YOU SAY?
4 A. BOB DENHAM, I BELIEVE WAS HIS NAME. HE WAS FORMERLY
5 WITH THE BROKERAGE FIRM, WAS HEAD OF ONE OF THE MAJOR NEW
6 YORK FIRMS. I CAN'T REMEMBER EXACTLY WHICH ONE.
7 AND, I GATHERED, HE WAS GIVING BUSINESS ADVICE TO
8 THE DEPARTMENT OF JUSTICE BASED ON HIS BUSINESS
9 EXPERIENCE.
10 Q. THAT WAS AT YOUR HOME IN PALO ALTO LATE LAST YEAR,
11 EARLY THIS YEAR?
12 A. SOMETHING LIKE THAT, YES, SIR.
13 Q. OKAY. HOW LONG DID THAT MEETING LAST?
14 A. APPROXIMATELY AN HOUR TO AN HOUR AND A HALF,
15 SOMETHING LIKE THAT. I OFFERED THEM BREAKFAST, AND THEY
16 ACCEPTED.
17 Q. WHO ARRANGED THE MEETING, OR WHO SET IT UP?
18 A. WELL, IT SEEMS TO ME, IF I CAN REMEMBER, THE BEST WAS
19 THAT THEY ASKED TO SEE ME. MR. KLEIN WAS IN CALIFORNIA IN
20 THAT AREA, APPARENTLY, TALKING TO SEVERAL PEOPLE AND ASKED
21 IF I COULD SEE HIM, AND I SAID YES.
22 AND AS FAR AS SETTING IT UP, DO YOU MEAN THE
23 ARRANGEMENTS FOR THE VENUE?
24 Q. YES.
25 A. I'M SURE THAT WOULD HAVE BEEN ME SINCE IT WAS MY
13 - [add a note]
1 HOUSE, BUT PALO ALTO IS A VERY SMALL COMMUNITY, A LOT OF
2 REPORTERS WHO WATCH ALL THE RESTAURANTS, AND I TEND TO GET
3 REPORTED WHEN I GO THERE, PARTICULARLY IF I'M SITTING WITH
4 AN ASSISTANT ATTORNEY GENERAL.
5 Q. WHAT WAS DISCUSSED AT THIS MEETING?
6 A. WE DISCUSSED--I WAS RESPONDING AT THAT TIME TO SOME
7 QUESTIONS THAT MR. KLEIN HAD ABOUT WHAT DID I THINK MIGHT
8 BE REMEDIES THAT WOULD BE APPROPRIATE IN THE CASE THAT
9 MICROSOFT, THAT THEY HAD AGAINST MICROSOFT IN THIS COURT,
10 I BELIEVE, ON THE VIOLATION OF THEIR--
11 Q. THE CONSENT DECREE?
12 A. THE CONSENT DECREE THAT HAD COME DOWN THE PRIOR FALL,
13 YES, SIR.
14 Q. HAD NETSCAPE URGED THAT THAT CONTEMPT PROCEEDING BE
15 BROUGHT IN THE CONSENT DECREE?
16 A. I BELIEVE WE HAD, YES, SIR.
17 Q. HOW MANY WRITTEN SUBMISSIONS, IF ANY, HAS NETSCAPE
18 MADE TO THE DEPARTMENT OF JUSTICE TO TRY TO GET THE
19 DEPARTMENT TO SUE MICROSOFT?
20 A. AS I SAID, ALMOST ALL OF THE INTERACTIONS I HAVE HAD,
21 OR THAT I'M DIRECTLY AWARE OF, HAVE COME AT REQUEST OF THE
22 DEPARTMENT OF JUSTICE ASKING US QUESTIONS, BUT I'M SURE WE
23 HAVE GIVEN WRITTEN SUBMISSIONS. I REMEMBER A COUPLE OF
24 WHITE PAPERS OR STRATEGY DOCUMENTS, WHATEVER YOU CALL
25 THEM, THAT WERE SUBMITTED.
14 - [add a note]
1 AS FAR AS UNSOLICITED OTHER MATTERS, THERE MAY BE
2 SOME. I HAVE NO WAY OF KNOWING.
3 Q. DO YOU KNOW WHEN THE WRITTEN SUBMISSIONS WERE MADE?
4 A. NO, SIR.
5 Q. DIDN'T NETSCAPE ASK THE JUSTICE DEPARTMENT TO TRY TO
6 BLOCK MICROSOFT FROM HAVING THE MSN ICON ON THE WINDOWS
7 DESKTOP?
8 A. WE MAY HAVE.
9 Q. WHY?
10 A. BECAUSE WE FELT IT WOULD DISADVANTAGE OUR BUSINESS AS
11 WELL AS MICROSOFT'S IF--I MEAN AS WELL AS AOL'S, EXCUSE
12 ME, IF IT WERE INCLUDED IN THE DESKTOP. WE FELT THAT THAT
13 WAS AN UNFAIR ADVANTAGE FOR ONE ONLINE SERVICE PROVIDER TO
14 HAVE IN AN OPEN INTERNET WORLD TO BE BUNDLED WITH THE
15 DESKTOP.
16 Q. AND WHY DID YOU CARE ABOUT AOL? IT'S NOT A PART OF
17 YOUR BUSINESS, IS IT?
18 A. WHY DID I CARE ABOUT AOL, OR ARE THEY PART OF OUR
19 BUSINESS?
20 Q. FIRST QUESTION, WHY DID YOU CARE ABOUT AOL?
21 A. WE CONSIDERED THEM TO BE A KINDRED SPIRIT.
22 Q. YOU HAVE NO INVESTMENT IN OR OWNERSHIP INTEREST IN
23 AOL, I TAKE IT?
24 A. NOT THAT I'M AWARE OF.
25 Q. NOR THEY IN YOU?
15 - [add a note]
1 A. NO, SIR.
2 Q. NOW, MSN, WHAT WAS ITS POSITION IN THE WORLD AT THE
3 TIME THAT YOU TRIED TO KEEP THE ICON OFF THE DESKTOP?
4 A. MSN WAS A NEW ONLINE SERVICE THAT MICROSOFT--MSN
5 STANDS FOR MICROSOFT NETWORK, WHICH AT THAT TIME WAS A
6 PROPRIETARY SPECIAL-PURPOSE NETWORK THAT MICROSOFT HAD
7 BEEN WORKING ON FOR SOME TIME TO COMPETE IN THE ONLINE
8 SERVICE NETWORKS THAT WERE AVAILABLE AT THAT TIME, LIKE
9 AOL. IT WAS TO COMPETE WITH AOL AND OTHER COMPANIES LIKE
10 AOL.
11 Q. AND AOL AND THESE OTHER COMPANIES WERE ALREADY
12 ESTABLISHED; IS THAT RIGHT?
13 A. THEY WERE ALREADY IN BUSINESS.
14 Q. AND THEY HAD CUSTOMERS?
15 A. YES.
16 Q. THEY WERE DOING BUSINESS?
17 A. YES.
18 Q. AND MSN WAS A STARTUP, WASN'T IT?
19 A. I WOULD ARGUE THAT, BUT THEY WOULD BE A STARTUP OF A
20 VERY LARGE COMPANY THAT WOULD HAVE SOME UNFAIR ADVANTAGES,
21 BUT I DON'T KNOW EXACTLY WHEN MSN STARTED UP.
22 Q. NOW, DIRECTING YOUR ATTENTION TO THE SUMMER OF '95
23 PRIOR TO THE INTRODUCTION OF WINDOWS 95, ISN'T IT A FACT
24 THAT NETSCAPE WAS IN REGULAR COMMUNICATIONS WITH THE
25 DEPARTMENT OF JUSTICE AT THAT TIME?
16 - [add a note]
1 A. NOT THAT I'M AWARE OF. I KNOW THAT WE COMMUNICATED
2 WITH THEM WHEN THEY ASKED US QUESTIONS. I DON'T KNOW IF
3 YOU WOULD CALL THAT REGULAR COMMUNICATION.
4 Q. WEREN'T YOU LOBBYING THEM TO GO AFTER MICROSOFT AT
5 THAT TIME?
6 A. WE SUGGESTED THAT ENTER OUR COMPLAINT IN THE MATTER
7 OF AOL AT THAT TIME, YES, SIR.
8 Q. WHY DO YOU CALL THAT "IN THE MATTER OF AOL"?
9 A. BECAUSE I THINK THAT WAS THE COMPLAINT THAT WAS
10 BEFORE THEM, WHICH WAS, IF--AND I MAY BE INCORRECT ABOUT
11 THIS. I THINK IT WAS, AOL WAS TRYING TO ENJOIN OR GET
12 SOME RELIEF FROM MICROSOFT, INCLUDING THIS BUTTON OR ICON
13 OR A DIRECT LINK TO WINDOWS PRODUCTS FROM MICROSOFT
14 NETWORK.
15 Q. THAT IS, PUTTING THE ICON MSN ON THE DESKTOP; IS THAT
16 WHAT YOU'RE TALKING ABOUT?
17 A. YES, SIR, THAT OR SOMETHING MORE EMBEDDED.
18 Q. MORE EMBEDDED, WHAT WOULD THAT BE?
19 A. IT COULD COME UP WITH THE MSN AS PART OF THE
20 OPERATING SYSTEM LIKE THEY NOW CLAIM THE BROWSER IS NOW
21 PART OF THE OPERATING SYSTEM.
22 Q. WHAT DO YOU MEAN "COME UP" AS PART OF THE OPERATING
23 SYSTEM?
24 A. WHEN YOU START THE MACHINE, IT BECOMES OPERATIONAL.
25 AND ONE WAY OF ACCESSING IT OR CALLING THE PROGRAM UP
17 - [add a note]
1 COULD BE AN ICON ON THE SCREEN.
2 Q. NOW, DO YOU KNOW WHETHER AOL HAD ICONS ON DESKTOPS AT
3 THAT TIME?
4 A. I BELIEVE AOL HAD SOME ICONS ON DESKTOPS FROM THE PC
5 ORIGINAL EQUIPMENT MANUFACTURERS THAT THEY WERE DEALING
6 WITH WHO HAD PUT AOL ON SOME OF THOSE MACHINES AS AOL TO
7 ONE OF THE PC MANUFACTURERS' ARRANGEMENT.
8 Q. SO AOL, AS I UNDERSTAND YOU, WITH YOUR SUPPORT, WAS
9 TRYING TO DENY MICROSOFT NETWORK A POSITION THAT AOL
10 ITSELF ALREADY HAD ON MANY PCS; IS THAT CORRECT?
11 A. NO, SIR.
12 Q. OH, REALLY? WHAT WAS IT TRYING TO DO, THEN?
13 A. IT WAS TRYING TO BE ON ALL PCS. SINCE WINDOWS IS ON
14 ALL PCS--AND I DON'T BELIEVE AOL WAS ON ALL PCS. THAT
15 WOULD BE A VERY BIG ADVANTAGE FOR ANY COMPANY.
16 Q. WOULD IT BE A GREAT ADVANTAGE TO BE ON ALL PCS
17 PURCHASED BY CORPORATIONS BY THE THOUSANDS FOR USE IN
18 THEIR OWN INTERNAL OPERATIONS, FOR AN ONLINE SERVICE?
19 A. MAY OR MAY NOT. CORPORATIONS TEND TO NOT INSTALL
20 THOSE FEATURES ALWAYS ON CORPORATE PURCHASED MACHINES.
21 THEY MAY NOT PUT ANY SOFTWARE ON THE MACHINE.
22 Q. WOULD IT SURPRISE YOU IF THE FACTS WERE THAT AOL WAS
23 ON THE DESKTOPS OF 90 PERCENT OF THE PCS MADE FOR HOME
24 USAGE THROUGH OEM CONTRACTS?
25 A. NO, SIR, THAT WOULDN'T SURPRISE ME.
18 - [add a note]
1 Q. TELL US WHO GARY REBACK IS, WOULD YOU PLEASE.
2 A. MR. REBACK IS AN ATTORNEY WITH THE WILSON, SONSINI
3 LAW FIRM IN PALO ALTO.
4 Q. HAS HE BEEN RETAINED BY NETSCAPE?
5 A. HE HAS BEEN IN THE PAST. I DON'T BELIEVE HE'S ON
6 RETAINER TO US ANY LONGER.
7 Q. WHEN DID YOU FIRST RETAIN HIM?
8 A. I DON'T KNOW, BUT PROBABLY IN THE SPRING OF '95.
9 Q. AND FOR WHAT PURPOSE WAS HE RETAINED IN THE SPRING OF
10 '95?
11 A. HE WAS RETAINED TO HELP US MAKE OUR CASE IN THE EVENT
12 IT WOULD HELP US TO KEEP THE PLAYING FIELD FOR INTERNET
13 SOFTWARE OPEN.
14 Q. SO, IN THE SPRING OF '95, YOU WERE ALREADY GEARED UP
15 FOR POTENTIAL LEGAL ACTION TO, QUOTE, KEEP INTERNET
16 SOFTWARE OPEN; IS THAT CORRECT?
17 A. YES, SIR.
18 Q. WHAT'S THE SPRING OF '95?
19 A. WELL, IN CALIFORNIA, IT WOULD PROBABLY BE ANY TIME
20 BETWEEN FEBRUARY AND JUNE.
21 Q. THANK YOU.
22 DID MR. REBACK PROVIDE THE DEPARTMENT OF JUSTICE
23 IN JULY 1995 WITH A DETAILED CHRONOLOGY OF NETSCAPE'S
24 DEALINGS WITH MICROSOFT?
25 A. HE MAY HAVE. I'M NOT SURE.
19 - [add a note]
1 Q. I'M GOING TO ASK MS. WHEELER TO MARK AS DEFENDANT'S
2 EXHIBIT 1 AND HAND TO THE COURT AND THE WITNESS, A
3 DOCUMENT ON THE LETTERHEAD OF WILSON, SONSINI, DATED JULY
4 28TH, 1995, BEARING BATES NUMBERS ATR 11465, 66, 67, AND
5 68.
6 A. DO YOU WANT ME TO READ THIS?
7 Q. YOU COULD LOOK THROUGH IT TO THE EXTENT YOU WANT.
8 I'M GOING TO ASK YOU A COUPLE OF QUESTIONS ABOUT IT, AND
9 THE FIRST ONE IS, HAVE YOU EVER SEEN IT BEFORE?
10 A. I DON'T BELIEVE I HAVE, NO, SIR. I MAY HAVE, BUT I
11 DON'T REMEMBER SEEING IT, NO, SIR.
12 Q. YOU DO NOT REMEMBER THIS DOCUMENT?
13 A. I DON'T--I DON'T REMEMBER SEEING IT. I MAY HAVE.
14 Q. OKAY. AND AT THIS TIME, MR. REBACK WAS ACTING AS
15 YOUR COUNSEL; CORRECT?
16 A. ONE OF, YES, SIR.
17 Q. WAS HE DEALING WITH THE DEPARTMENT OF JUSTICE ON YOUR
18 BEHALF?
19 A. IN CERTAIN MATTERS, I THINK HE WAS. I THINK HE WAS
20 ALSO RETAINED BY OTHERS TO DEAL WITH THE DEPARTMENT OF
21 JUSTICE ON THEIR BEHALF, SO I DON'T KNOW THAT HE WAS
22 DEALING EXCLUSIVELY WITH THE DEPARTMENT OF JUSTICE ON
23 BEHALF OF NETSCAPE.
24 Q. BUT HE WAS DEALING ON BEHALF OF NETSCAPE. HE MAY
25 HAVE HAD OTHER CLIENTS?
20 - [add a note]
1 A. YES, SIR.
2 Q. AND TAKING A LOOK AT THIS CHRONOLOGY, DO YOU BELIEVE
3 IT WAS ACCURATE AND COMPLETE?
4 A. I HAVE NO REASON TO DOUBT THAT IT ISN'T COMPLETE.
5 IT'S RATHER LENGTHY.
6 Q. AND YOU AND YOUR COUNSEL HAD EVERY INCENTIVE TO MAKE
7 IT ACCURATE AND COMPLETE, DID YOU NOT?
8 A. WE WOULD HAVE, SURE. I DON'T KNOW THAT I WOULD HAVE,
9 BUT I WOULD HAVE DEPENDED ON COUNSEL.
10 IT MAY NOT BE ACCURATE, BUT IF YOU ASKED ME NOW
11 TO LOOK AT EVERY SINGLE ONE OF THESE EVENTS, THERE MIGHT
12 BE SOME THAT WERE MISSED.
13 Q. YEAH. WHEN I SAY YOU, MR. BARKSDALE, I MEANT
14 NETSCAPE. I DIDN'T EXPECT YOU TO PERSONALLY BE PREPARING
15 DOCUMENTS, PARTICULARLY DETAILED ONES.
16 OKAY. YOU COULD PUT THAT ASIDE FOR NOW. OR YOU
17 MAY READ IT, IF YOU LIKE.
18 (WITNESS REVIEWS DOCUMENT.)
19 A. ALL RIGHT, SIR.
20 Q. DID YOU VIEW AT THE TIME YOU BECAME INVOLVED--IN
21 TALKING WITH THE JUSTICE DEPARTMENT, DID YOU VIEW THEIR
22 INVESTIGATIONS AND EVENTUALLY THIS ACTION AS CREATING AN
23 OPPORTUNITY FOR NETSCAPE?
24 A. YOU MEAN, IN ADDITION TO THE OPPORTUNITY WE ALREADY
25 HAD?
21 - [add a note]
1 Q. AN ADDITIONAL OPPORTUNITY OR A GREATER OPPORTUNITY
2 FOR NETSCAPE.
3 A. LET ME MAKE SURE I UNDERSTAND WHAT YOU'RE ASKING ME.
4 THIS ACTION, WHICH ACTION?
5 Q. THE LAWSUIT THAT WE ARE HERE TRYING.
6 A. OH, I THOUGHT YOU WERE TALKING ABOUT THIS MEMO.
7 Q. NO, I'M THROUGH WITH THAT MEMO FOR THE MOMENT.
8 A. DID I ANTICIPATE THAT THIS ACTION--LAWSUIT BY THE
9 DEPARTMENT OF JUSTICE WOULD PROVIDE AN OPPORTUNITY FOR
10 NETSCAPE?
11 Q. YES.
12 A. I THINK--AGAIN, YOU'RE ASKING MY PERSONAL OPINION. I
13 ALWAYS REGARDED IT, I THINK, AS A WAY OF PROTECTING AN
14 OPPORTUNITY THAT WE THOUGHT WE HAD ALL ALONG.
15 Q. IS THAT THE CORPORATE VIEW AS WELL AS YOUR PERSONAL
16 VIEW?
17 A. I COULDN'T ANSWER THAT, SIR. I DON'T KNOW THAT I
18 WOULD KNOW THE CORPORATE VIEW. I COULD JUST GIVE YOU MY
19 VIEW ON THAT.
20 Q. YOU ARE THE CHIEF EXECUTIVE OFFICER; RIGHT?
21 A. I AM, BUT I FOUND THAT SOMETIMES PEOPLE SPEAK FOR MY
22 CORPORATION WITHOUT NECESSARILY CHECKING WITH ME.
23 Q. RIGHT, BUT YOU ARE AUTHORIZED TO SPEAK FOR THE
24 CORPORATION, ARE YOU NOT?
25 A. I AM IN MOST MATTERS, YES, SIR.
22 - [add a note]
1 Q. SO I WILL REPEAT MY QUESTION. IS THE TESTIMONY YOU
2 HAVE GIVEN THE CORPORATE VIEW AS WELL AS YOUR PERSONAL
3 VIEW?
4 A. I THINK MY VIEW HAS BEEN AS I STATED, THAT I HAVE
5 REGARDED IT AS PROTECTING AN OPPORTUNITY WE HAVE. SO, NOT
6 TO QUIBBLE, THAT MEANS IT IS AN OPPORTUNITY.
7 Q. NOW, SINCE MAY 1, 1998, HOW MANY TIMES HAVE YOU MET
8 WITH REPRESENTATIVES OF THE DEPARTMENT OF JUSTICE WITH
9 RESPECT TO THE BRINGING OF THIS ACTION OR ITS PROSECUTION
10 AFTER IT WAS BROUGHT?
11 A. SINCE MAY OF THIS YEAR?
12 Q. YES, FROM MAY 1 ON.
13 A. I DO NOT KNOW. I WOULD HAVE TO LOOK AT MY CALENDAR.
14 IT'S BEEN SEVERAL TIMES. DIFFERENT REPRESENTATIVES OF THE
15 DEPARTMENT OF JUSTICE WOULD BE, I WOULD ESTIMATE, OH, FIVE
16 OR SIX TIMES.
17 Q. FIVE OR SIX TIMES?
18 A. BUT IT'S AN ESTIMATE. IT COULD BE A FEW MORE, FEW
19 LESS.
20 Q. FOR A TOTAL OF HOW MANY HOURS, YOU THINK?
21 A. WITH THE REPRESENTATIVE OF THE DEPARTMENT OF JUSTICE?
22 Q. YES.
23 A. NOT COUNTING WHEN I WAS GIVING MY DEPOSITION?
24 Q. WE WILL EXCLUDE THE DEPOSITION.
25 A. PROBABLY 10 TO 12 HOURS.
23 - [add a note]
1 Q. AND HOW MANY HOURS DID YOU SPEND PREPARING YOUR
2 DIRECT TESTIMONY?
3 A. HOURS?
4 Q. DAYS? WEEKS? WHATEVER.
5 A. WELL, I SPENT A LOT OF TIME. I MEAN, I SPENT
6 APPROXIMATELY FOUR DAYS, BUT I WAS DOING OTHER THINGS
7 DURING THE FOUR DAYS. IF YOU ASKED ME TO ADD UP THE
8 HOURS, IT PROBABLY WOULD BE AN AVERAGE OF SIX HOURS A DAY
9 FOR FOUR DAYS.
10 Q. OKAY. TWENTY-FOUR HOURS, BASICALLY?
11 A. NOT COUNTING THE EDITING AND PREPARATION OF THE
12 DIRECT, BUT YOU SAID GETTING READY FOR THIS, I PRESUME,
13 AFTER I SUBMITTED IT.
14 Q. OH, OKAY. SO, YOU SPENT 24 HOURS GETTING READY FOR
15 CROSS-EXAMINATION; IS THAT RIGHT?
16 A. BY YOU, YES, SIR.
17 Q. RIGHT. AND WHO WERE YOU WITH, IF ANYONE, WHILE YOU
18 WERE DOING THAT?
19 A. A LOT OF TIMES I WAS WITH MY WIFE.
20 Q. DID SHE CONTRIBUTE TO THAT PREPARATION?
21 A. SHE PROVIDED A CALMING INFLUENCE.
22 Q. AND WHO ELSE BESIDES YOUR WIFE, MR. BARKSDALE?
23 A. I WAS WITH MY LAWYERS ON THIS MATTER THAT WE
24 RETAINED, AS WELL AS OUR OWN IN-HOUSE GENERAL COUNSEL.
25 Q. DID YOU SPEND ANY TIME WITH JUSTICE DEPARTMENT
24 - [add a note]
1 LAWYERS?
2 A. I DID. I SPENT A LITTLE BIT OF TIME ON SUNDAY.
3 Q. SUNDAY. WERE YOU OUT HERE ON THE EAST COAST ON
4 SUNDAY?
5 A. YES, SIR.
6 Q. WERE YOU IN COURT YESTERDAY?
7 A. NO, SIR.
8 Q. THIS MORNING?
9 A. NO, SIR.
10 Q. NOW, GOING BACK TO THE DIRECT TESTIMONY, HOW MANY
11 HOURS, DAYS, WEEKS, WHATEVER, DID YOU SPEND WORKING ON THE
12 DIRECT TESTIMONY AS OPPOSED TO PREPARING FOR
13 CROSS-EXAMINATION?
14 A. WELL, MAY I EXPLAIN HOW I PREPARED IT?
15 Q. YOU CERTAINLY MAY.
16 A. ALL RIGHT. BASICALLY, AFTER I WAS DEPOSED IN JULY, I
17 THINK IN THE MIDDLE OF JULY SOMETIME, I GOT TOGETHER WITH
18 OUR IN-HOUSE COUNSEL, I BELIEVE, AND WE BEGAN TO PREPARE
19 SORT OF THE SUMMARY OF THAT AND THE POINTS MADE AND THE
20 ISSUES THAT WE THOUGHT WOULD BE IMPORTANT. ONCE IT WAS
21 DETERMINED THAT I WAS THE ONE GIVING THE DIRECT
22 TESTIMONY--AND I DON'T KNOW WHEN THAT CAME DOWN, BUT IT
23 SEEMED TO ME THAT SOMEBODY TOLD ME THAT I WAS GOING TO BE
24 THE ONE CALLED AS A WITNESS IN LATE AUGUST OR SOMETHING
25 LIKE THAT, OR EARLY SEPTEMBER.
25 - [add a note]
1 SO, ONCE THAT HAPPENED, WE TOOK THE INFORMATION
2 FROM THE DEPOSITION, MET WITH HER. SHE PREPARED THE
3 DRAFTS, AND I WOULD REVIEW THE DRAFTS, AND THEN I WOULD
4 COMMENT AND THERE WAS BACK AND FORTH. AND THEN OUR
5 OUTSIDE COUNSEL WORKED SOME ON IT AS WELL, AND I EDITED,
6 COMMENTED, TALKED ON THE TELEPHONE WITH--YOU KNOW, DURING
7 THAT PERIOD. SEVERAL HOURS.
8 Q. A TOTAL OF SEVERAL HOURS IS ALL YOU SPENT?
9 A. SOMEWHERE, TEN, TWENTY, THIRTY, HOURS.
10 Q. TEN TO TWENTY TO THIRTY?
11 A. I JUST DON'T REMEMBER. IT WAS A LOT OF--IT WAS MY
12 DEPOSITION, WHICH WAS ALMOST A DAY AND A HALF, AND I FELT
13 THAT WAS PREPARATION.
14 Q. ALL RIGHT. LET'S--
15 A. THAT WOULD BE PART OF THE 20 OR 30. IF YOU ADDED TO
16 THAT, IT WOULD BE ANOTHER TEN HOURS OR SO.
17 Q. LET'S PUT THE DEPOSITION ASIDE. THE QUESTION REALLY
18 WAS HOW MANY HOURS DID YOU PREPARE THE WRITTEN DIRECT
19 EXAMINATION, I UNDERSTAND, THAT OTHERS ASSISTED?
20 A. PERHAPS A COUPLE OF DOZEN.
21 ME, PERSONALLY NOW?
22 Q. YES, YOU PERSONALLY.
23 A. I WOULD SAY PROBABLY JUST PREPARING, IT WOULD BE
24 COUPLE OF DOZEN, MAYBE.
25 Q. THAT INCLUDES THE EDITING AND REWRITING AND SO ON?
26 - [add a note]
1 A. (WITNESS NODS.)
2 AND SOME RATHER LENGTHY MEETINGS THAT WE HAD
3 WHERE WE WERE JUST TALKING ABOUT IT.
4 Q. RIGHT. AND DID YOU SPEND ANY TIME WITH JUSTICE
5 DEPARTMENT LAWYERS IN THAT PROCESS?
6 A. I DON'T BELIEVE WE DID. I DIDN'T.
7 Q. I BELIEVE YOU REFERRED A LITTLE WHILE AGO TO YOUR
8 BEING CALLED AS A WITNESS.
9 ARE YOU HERE UNDER SUBPOENA?
10 A. COUNSEL, YOU WOULD HAVE TO EXCUSE ME. I DON'T KNOW
11 WHAT THE LEGAL TERM IS. I AM HERE BECAUSE I WAS INVITED,
12 AND I CAME.
13 Q. YOU WERE INVITED. NO ONE SAID, "MR. BARKSDALE, YOU
14 ARE COMMANDED TO APPEAR"?
15 A. NOT THAT I REMEMBER, BUT I JUST GOT IT FROM THE
16 LAWYERS, AND THEY SAID YOU JUST ARE SUPPOSED TO SHOW UP.
17 MR. WARDEN: I ASK MS. WHEELER TO HAND TO THE
18 WITNESS AND YOUR HONOR WHAT WAS MARKED AS DEFENDANT'S
19 EXHIBIT 2 FOR IDENTIFICATION, A DOCUMENT ENTITLED "PROJECT
20 ROCKET LAUNCH PLAN," BEGINNING WITH NETSCAPE BATES NUMBER
21 47223 AND ENDING AT 47327.
22 BY MR. WARDEN:
23 Q. HAVE YOU EVER SEEN THIS DOCUMENT BEFORE,
24 MR. BARKSDALE?
25 A. I BELIEVE I MAY HAVE. I REMEMBER SOME OF THE VISUALS
27
1 ON IT.
2 DO YOU KNOW THE DATE OF THIS?
3 Q. SIR, I DO NOT, AND MY INSPECTION DOESN'T REVEAL THAT
4 IT BEARS A DATE.
5 IS THIS A RENDERING ON PAPER OF WHAT WERE SLIDES
6 FOR OVERHEAD PRESENTATIONS?
7 A. YES, SIR.
8 MR. WARDEN: I OFFER THIS AS DEFENDANT'S
9 EXHIBIT 2, YOUR HONOR.
10 MR. BOIES: NO OBJECTION.
11 MR. HOUCK: NO OBJECTION.
12 THE COURT: DEFENDANT'S 2 IS ADMITTED.
13 (DEFENDANT'S EXHIBIT NO. 2 WAS
14 ADMITTED INTO EVIDENCE.)
15 BY MR. WARDEN:
16 Q. I DIRECT YOUR ATTENTION TO THE SECOND PAGE OF THE
17 DOCUMENT, "THE SITUATION."
18 A. YES, SIR.
19 Q. AND PARTICULARLY TO THE FOURTH BULLET POINT WHICH
20 READS, "DOJ AND COURT ACTIONS CREATE OPPORTUNITY FOR
21 NETSCAPE." DO YOU SEE THAT?
22 A. YES, SIR.
23 Q. DO YOU AGREE WITH THAT STATEMENT?
24 A. THE ROCKET PROJECT, WHICH WAS OUR INTERNAL NAME FOR
25 WHEN WE DECIDED TO MAKE THE--OUR CLIENT BROWSER-FREE,
28 - [add a note]
1 WHICH WAS IN JANUARY OF '98, THIS PAST JANUARY, SO I
2 ASSUME THIS DOCUMENT WAS SOMETIME BEFORE THAT OR AROUND
3 THAT TIME. WE CERTAINLY CREATED--WE THOUGHT THAT BECAUSE
4 THE COURT HAD RULED THAT MICROSOFT HAD TO UNBUNDLE THE
5 CLIENT--THE BROWSER FROM THE OPERATING SYSTEM, WE THOUGHT
6 THAT WAS AN OPPORTUNITY FOR US TO GO BACK TO THAT MARKET
7 AND MARKET OUR PRODUCTS NOW THAT WE DECIDED TO MAKE IT
8 FREE. UNDER ROCKET PRIOR TO THAT, OUR PRODUCT HAD NOT
9 BEEN FREE.
10 AND SINCE THIS WAS ALWAYS CONSIDERED ONE OF THE
11 CHIEF ADVANTAGES MY COMPETITOR HAD, WE THOUGHT WE COULD GO
12 BACK AS WELL AS THE COURT HAD TOLD THEM TO UNBUNDLE THE
13 PRODUCT.
14 Q. WHEN YOU SAY GO BACK AND MAKE IT FREE, YOU MEAN BACK
15 TO THE WAY IT WAS AT THE BEGINNING OF NETSCAPE; IS THAT
16 RIGHT?
17 A. NO, SIR.
18 Q. WELL, WHAT DO YOU MEAN GO BACK, THEN?
19 A. WELL, GO BACK AND MAKE THE PRODUCT FREE. AT THE
20 BEGINNING OF NETSCAPE, THE BETA PRODUCT WAS FREE. THE
21 COMMERCIAL PRODUCT IS ALWAYS--HAD A COST TO IT.
22 Q. WHAT DO YOU MEAN--
23 A. I MEAN, GO BACK TO THE PC OEM'S THAT WE HAD BEEN
24 WORKING WITH--WE WERE TRYING TO GET THEIR BUSINESS FOR THE
25 PAST TWO YEARS--NOW THAT WE MADE IT FREE, GO BACK TO THE
29 - [add a note]
1 PCS MANUFACTURERS AND SEE IF WE COULD ARRANGE TO GET OUR
2 PRODUCT PUT ON THEIR DESKTOP.
3 Q. ISN'T IT TRUE THAT PRESSING THE GOVERNMENT'S ACTIONS
4 AGAINST MICROSOFT WAS A KEY ELEMENT OF YOUR COMPETITIVE
5 STRATEGY?
6 A. I WOULDN'T SAY IT WAS A KEY ELEMENT. I HAVE ALWAYS
7 ALREADY REGARDED IT AS A SIDELINE ON THE ASSUMPTION THAT
8 WE HAD MANY MORE IMPORTANT THINGS TO DO.
9 Q. OKAY, MR. BARKSDALE. I'M NOW GOING TO REFER TO YOUR
10 WRITTEN DIRECT. I BELIEVE YOU STILL HAVE IT IN FRONT OF
11 YOU.
12 A. YES, SIR.
13 Q. AND I DIRECT YOUR ATTENTION TO PARAGRAPH THREE.
14 THREE LINES FROM THE BOTTOM OF PAGE ONE, YOU SAY,
15 "NETSCAPE HAS CREATED BROWSER PRODUCTS."
16 WHAT IS A BROWSER PRODUCT?
17 A. THE THIRD LINE FROM THE BOTTOM? OH, I SEE.
18 "NETSCAPE HAS CREATED BROWSER PRODUCTS," YES, SIR.
19 Q. WHAT ARE BROWSER PRODUCTS?
20 A. A BROWSER IS GENERALLY ASSUMED TO BE A PRODUCT THAT
21 ALLOWS YOU TO--USING A GRAPHICAL-USER INTERFACE OR AN
22 EASY-TO-USE INTERFACE FOR NORMAL HUMAN BEINGS,
23 NONTECHNOLOGISTS, TO EASILY PERUSE THE WORLD WIDE WEB AND
24 TO GATHER INFORMATION, TO BRING IT BACK AND BE ABLE TO DO
25 THINGS LIKE IT LIKE EDIT IT, RESEND IT OR PRINT IT OR
30 - [add a note]
1 WHATEVER. IT'S A PRODUCT CATEGORY THAT WE FEEL THAT WE
2 HAD A LOT TO DO WITH IN THE CREATION OF THE NETSCAPE
3 NAVIGATOR.
4 Q. SO, ANY PRODUCT THAT PERFORMS THE FUNCTION YOU
5 DESCRIBED IS A BROWSER PRODUCT; IS THAT CORRECT?
6 A. NO, SIR.
7 Q. WHAT MAKES A BROWSER PRODUCT UNIQUELY A BROWSER
8 PRODUCT?
9 A. WELL, I WOULD ALSO SAY THAT IT'S SOLD INDEPENDENTLY,
10 THAT IT HAS ITS OWN MARKET, THAT IT HAS ITS OWN RELEVANCE,
11 THAT IT'S GOT AN ABILITY TO GET IT SEPARATE AND APART FROM
12 OTHER PRODUCTS, WOULD BE ONE OF THE PRODUCT
13 CHARACTERISTICS.
14 I THINK AS FAR AS FUNCTION, THERE ARE OTHER WAYS
15 TO PERFORM SOME OF THOSE FUNCTIONS THROUGH OTHER MEANS, IF
16 THAT'S YOUR QUESTION.
17 Q. WHAT FUNCTIONS, IF ANY, BESIDES BROWSING ARE
18 PERFORMED BY NETSCAPE NAVIGATOR?
19 A. EDITING, COMPOSING. IT HAS A LINK TO OUR ELECTRONIC
20 MAIL. IT HAS SEVERAL FUNCTIONS THAT FACILITATE
21 COMMUNICATING OVER THE INTERNET.
22 Q. IS NETSCAPE NAVIGATOR A BROWSER PRODUCT?
23 A. YES, SIR, IT IS.
24 Q. WHAT FUNCTIONS, IF ANY, BESIDES BROWSING ARE
25 PERFORMED BY NETSCAPE COMMUNICATOR?
31 - [add a note]
1 A. WELL, THE NETSCAPE COMMUNICATOR, FIRST AND FOREMOST
2 IS A BROWSER, BUT IT HAS SOME OTHER FUNCTIONS. IT HAS A
3 BUILT-IN AUTOMATIC ACCESS TO IBM MAINFRAMES CALLED 3270
4 COMPATIBILITY. IT HAS A CALENDAR FEATURE THAT ALLOWS YOU
5 TO DOWNLOAD YOUR CALENDAR AND MODIFY IT AND SEND IT TO
6 SOMEONE ELSE. IT HAS AN ELECTRONIC MESSAGING OR MAIL
7 SYSTEM COMPONENT TO IT. IT HAS TWO OR THREE OTHER, YOU
8 KNOW, COMPONENTS THAT ARE PUT TOGETHER, IN ADDITION TO THE
9 NETSCAPE NAVIGATOR.
10 Q. IS COMMUNICATOR A BROWSER PRODUCT?
11 A. IT INCLUDES A BROWSER PRODUCT, AND ITS PRIMARY
12 FUNCTION IS THROUGH HTML CHARACTERISTICS, BUT IT WOULD BE
13 ACTUALLY A BUNDLED PRODUCT THAT INCLUDES A BROWSER.
14 Q. NOW, HOW HAVE THE FUNCTIONS OF NAVIGATOR CHANGED
15 BETWEEN ITS INTRODUCTION, COMMERCIAL INTRODUCTION, TO THE
16 MARKETPLACE AND TODAY?
17 A. THE FUNCTIONS?
18 Q. YES.
19 A. IN HUNDREDS OF WAYS, I SUPPOSE. YOU MEAN, HOW IT
20 EXECUTES WHAT--
21 Q. NO, NO.
22 A. FEATURES?
23 Q. WHAT IT DOES.
24 A. I WOULD SAY THAT IT'S EXPANDED ITS FEATURE LIST QUITE
25 DRAMATICALLY.
32 - [add a note]
1 ITS BASIC FUNCTION, AS A COMPUTER APPLICATION, IS
2 THAT IT BROWSES THE INTERNET, AND SO IT'S ENHANCED THAT,
3 BUT I DON'T KNOW THAT IT'S DRAMATICALLY CHANGED THAT
4 FUNCTION.
5 Q. WHEN WAS THE COMMUNICATOR FIRST INTRODUCED?
6 A. AS A COMMERCIAL PRODUCT, I THINK IT WENT ON THE
7 MARKET AT THE END OF THE SECOND QUARTER OF 1997.
8 Q. SO--
9 A. SECOND CALENDAR QUARTER, I'M SORRY.
10 Q. FIFTEEN MONTHS AGO?
11 A. YES, END OF JULY. I MEAN, THE END OF JUNE.
12 Q. HAS COMMUNICATOR'S FUNCTIONS CHANGED OVER TIME?
13 A. WELL, THE NEWEST VERSION WHICH WE ANNOUNCED--WHICH WE
14 RELEASED YESTERDAY CALLED THE "NETSCAPE COMMUNICATOR 4.5"
15 HAS MANY ENHANCEMENTS TO IT. IT HAS BASICALLY THE SAME
16 FUNCTIONS, BUT IT'S GOT A LOT OF NEW IMPROVED THINGS TO
17 IT. AND THAT'S THE FIRST MAJOR RELEASE OF THE
18 COMMUNICATOR SINCE WE CREATED IT IN 1997.
19 Q. WELL, WHAT ARE THE IMPROVEMENTS SINCE THE ORIGINAL
20 RELEASE?
21 A. WELL, IT HAS A MORE ROBUST AND WE BELIEVE, EASIER TO
22 USE MAIL INTERFACE.
23 IT HAS IMPROVED SOME OF ITS GRAPHICS CAPABILITY.
24 IT HAS A--THE NAVIGATOR ITSELF HAS BEEN GREATLY
25 UPGRADED AFTER SEVEN POINT RELEASES. WE INCLUDED ALL OF
33 - [add a note]
1 THOSE INTO ONE NEW RELEASE OF THE NAVIGATOR WHICH HAS
2 SMART BROWSING AS A FEATURE. IT HAS THE ABILITY TO GIVE
3 YOU ATTACHED INFORMATION. WHEN YOU GO TO A SITE, IT WILL
4 TELL YOU WHAT OTHER RELATED SITES YOU MIGHT BE INTERESTED
5 IN. THAT'S A NEW FEATURE OF IT.
6 IT HAS A NUMBER OF THINGS THAT WE BELIEVE ARE
7 IMPROVEMENTS. IT HAS A-BUG REPORTING SYSTEM WHERE A USER
8 FINDS A BUG, IT ALLOWS THEM TO QUICKLY E-MAIL BACK TO OUR
9 ENGINEERS TO FIX THAT. IT'S THE PRODUCT STOCKED WHICH I
10 BELIEVE WAS THE FIRST MAJOR PRODUCT TO HAVE THAT KIND OF
11 CAPABILITY.
12 I COULD GET YOU A LONG LIST.
13 Q. THAT WILL DO, THANKS.
14 A. I HOPE YOU BUY THE PRODUCT.
15 Q. I'M NOT LIKELY TO BE ONE OF YOUR CUSTOMERS FOR ANY
16 NUMBER OF REASONS.
17 WAS THE FIRST COMMERCIAL PRODUCT RELEASED BY
18 NETSCAPE CALLED NAVIGATOR 1.0?
19 A. NO, SIR.
20 Q. WHAT WAS IT CALLED? I'M SORRY.
21 A. EXCUSE ME, THE FIRST COMMERCIAL PRODUCT?
22 Q. YES.
23 A. WE ACTUALLY RELEASED THREE PRODUCTS SIMULTANEOUSLY ON
24 DECEMBER THE 15TH, 1994, AND THEY WERE THE NETSCAPE
25 NAVIGATOR 1.0, AND THE NETSCAPE COMMUNICATOR, WHICH WAS--I
34 - [add a note]
1 MEAN--EXCUSE ME, THE TWO SERVER PRODUCTS. ONE WAS FOR
2 COMMERCE, AND ONE WAS--WHICH WAS A SECURED SERVER, AND THE
3 OTHER WAS AN UNSECURED SERVER FOR PUBLISHERS. AND SO THE
4 THREE PRODUCTS GAVE YOU BOTH A CLIENT AND A SERVER FAMILY
5 TO USE.
6 Q. AND WHEN MARKETED TO THE ENTERPRISE OR BUSINESS
7 CHANNEL, THOSE WERE THE BROWSER, THE CLIENT AND THE SERVER
8 MARKETED TOGETHER?
9 A. THEY WERE IN SOME CASES AND NOT IN OTHER CASES.
10 Q. OKAY. NOW, DID NAVIGATOR 1.0 INCLUDE FUNCTIONS OR
11 FEATURES OTHER THAN BROWSING?
12 A. WELL, IT INCLUDED ONLY FUNCTIONS AND FEATURES THAT WE
13 NOW ASCRIBE TO BROWSING, BUT THERE WERE SOME FEATURES SUCH
14 AS THE ABILITY TO PULL DOWN A LIST OF SITES YOU HAVE BEEN
15 TO. YOU WOULDN'T CALL THAT BROWSING THEN OR WOULD YOU
16 NECESSARILY CALL IT BROWSING NOW, BUT PEOPLE WHO USE
17 BROWSERS SAY THAT WAS A FUNCTION OF THE BROWSER. THERE
18 WERE THINGS OF THAT NATURE.
19 Q. BUT THEN, THEREAFTER, WERE ADDED FEATURES, I BELIEVE
20 YOU TESTIFIED, IN ADDITION TO BROWSING TO THAT PRODUCT, TO
21 NAVIGATOR?
22 A. TO THE NAVIGATOR.
23 Q. YES.
24 A. AGAIN, EACH TIME YOU ADD ONE, IT WOULD NOT ALWAYS BE
25 NECESSARILY ASSUMED THAT THAT'S A BROWSING FEATURE, BUT IT
35 - [add a note]
1 BECOMES PART OF THE BROWSING PRODUCT.
2 Q. HOW ABOUT E-MAIL?
3 A. WELL, E-MAIL, ACTUALLY, YOU ACCESS E-MAIL THROUGH THE
4 BROWSER INTERFACE OR WINDOW--EXCUSE ME FOR USING THE TERM,
5 BUT THROUGH THE BROWSER SPACE, AND THE BROWSER IS NOT
6 ACTUALLY PERFORMING E-MAIL, BUT THE E-MAIL IS A FUNCTION
7 WITHIN THE COMMUNICATOR.
8 NOW, THERE ARE WAYS NOW CALLED HTML E-MAIL THAT
9 ACTUALLY ALLOW YOU TO GET E-MAIL THAT IS SERVED FROM A
10 SERVER, BUT I DON'T WANT TO OVERCOMPLICATE IT, BUT AGAIN
11 YOU WOULDN'T WANT TO CALL THAT BROWSER DOING E-MAIL BUT
12 GIVES YOU ACCESS TO E-MAIL.
13 Q. OKAY. AND AS THESE FEATURES WERE ADDED, THEY CAME TO
14 BE PART OF WHAT PEOPLE REGARDED AS A BROWSER?
15 A. AS A PART OF THE BROWSER APPLICATION, YES, SIR.
16 Q. OKAY. AND WHY WERE THESE FEATURES ADDED?
17 A. TO MAKE THE PRODUCT A BETTER PRODUCT.
18 Q. YOU THOUGHT USERS WOULD LIKE THEM; IS THAT CORRECT?
19 A. OBVIOUSLY.
20 Q. AND HAS IT BEEN YOUR PRODUCT STRATEGY WITH RESPECT TO
21 YOUR CLIENT AND SERVER TO MAKE THEM BETTER BY INCREASING
22 FUNCTIONALITY OR FEATURES OVER TIME?
23 A. YES, SIR.
24 Q. DID THE ADDITION OF ANY OF THESE FEATURES OR
25 FUNCTIONALITY TO THE BROWSER MAKE ANY SOFTWARE PRODUCTS
36 - [add a note]
1 SOLD BY COMPETITORS ON THE STAND-ALONE BASIS LESS
2 DESIRABLE OR POPULAR?
3 A. YOU MEAN LIKE OTHER BROWSERS?
4 Q. HOW ABOUT E-MAIL?
5 A. WELL, LET'S JUST TAKE BROWSERS. THERE WERE THEN
6 SOMETHING LIKE 30 DIFFERENT BROWSER PRODUCTS ON THE MARKET
7 AT THAT TIME, AND CERTAINLY WE WERE HOPING TO MAKE OTHER
8 BROWSER PRODUCTS LESS DESIRABLE.
9 E-MAIL, AS A PART OF COMMUNICATOR, WAS A PRODUCT
10 THAT, WHEN OFFERED, DID COMPETE WITH OTHER E-MAIL
11 PRODUCTS.
12 Q. AND E-MAIL PRODUCTS WERE SOLD ON THE STAND-ALONE
13 BASIS, WERE THEY NOT, BY SOME PEOPLE?
14 A. BY THAT TIME, MOST E-MAIL PRODUCTS WERE SOLD--EXCUSE
15 ME. THERE WAS A FEW FREE E-MAIL PRODUCTS SUCH AS EUDORA,
16 NAMED AFTER EUDORA WELTY. AT THAT POINT, JUNE OF '97,
17 THERE WERE PROBABLY SOME SOLD AS A SEPARATE PRODUCT. I'M
18 NOT SURE WHICH ONES THEY WERE. BY THEN, COMPANIES LIKE
19 LOTUS AND MICROSOFT HAD, FOR SOME TIME, BEEN INCLUDING
20 E-MAIL AS PART OF THEIR CLIENT'S SOFTWARE.
21 Q. BY "CLIENT'S SOFTWARE," YOU MEAN WHAT?
22 A. EXCUSE ME. APPLICATIONS THAT WOULD RUN ON A WORK
23 STATION OR A PC ON THE DESKTOP.
24 Q. SO, WHEN WAS IT--THE END OF '97?--YOU SAID THAT YOU
25 ADDED E-MAIL?
37 - [add a note]
1 A. I SAID IT WAS WHEN WE RELEASED THE COMMUNICATOR,
2 WHICH WAS--
3 Q. JUNE, LATE JUNE?
4 A. JUNE OF '97, RIGHT IN THE MIDDLE, YES, SIR.
5 Q. WHAT WAS YOUR MARKET SHARE IN WHAT YOU REFERRED TO IN
6 YOUR TESTIMONY AS THE BROWSER MARKET AT THE END OF JUNE
7 1997?
8 A. I COULD ONLY GIVE YOU AN ESTIMATE, BUT FROM OUR
9 INTERNAL NUMBERS, IT WOULD PROBABLY BE SOMEWHERE IN THE
10 NEIGHBORHOOD OF--YOU'RE TALKING NOW ABOUT MARKET SHARE OF
11 BROWSERS OR MARKET SHARE OF E-MAILS?
12 Q. BROWSERS.
13 A. MARKET SHARE OF BROWSERS WOULD HAVE BEEN 70 PERCENT.
14 Q. WAS E-MAIL ADDED TO NAVIGATOR AND COMMUNICATOR?
15 A. NO, SIR. IT'S A PART OF COMMUNICATOR. I'M SAYING,
16 WHEN YOU ARE IN THE NAVIGATOR FUNCTION, IT TELLS YOU YOU
17 HAVE E-MAIL, AND THEN YOU ACCESS E-MAIL AND DISPLAY IT
18 THROUGH THE BROWSER.
19 AND VICE VERSA. YOU COULD BE IN E-MAIL AND GO
20 BACK TO THE BROWSER, SO THEY WORK TOGETHER.
21 Q. AND IS IT YOUR TESTIMONY THAT THE E-MAIL CAPABILITY
22 IS NOT INCLUDED IN ANY PRODUCT CALLED "NAVIGATOR" AS
23 OPPOSED TO "COMMUNICATOR"?
24 A. NO, SIR. I SAID A MINUTE AGO WE HAVE A PRODUCT
25 CALLED EXPRESS, WHICH IS A FUNCTION, WHICH BASICALLY USES
38 - [add a note]
1 THE BROWSER JUST TO LOOK AT E-MAIL, BUT IT WOULDN'T BE A
2 STAND-ALONE E-MAIL CLIENT IN THE NORMAL SENSE OF THE WORD.
3 THE E-MAIL IS ACTUALLY BEING PERFORMED ON A SERVER
4 NORMALLY AT SOME OTHER PORTAL OR INTERNET SERVICE PROVIDER
5 SITE OR ON YOUR CORPORATE E-MAIL SERVER, AND IT'S JUST A
6 WAY OF GETTING ACCESS FROM DIFFERENT COMPUTERS AROUND THE
7 WORLD.
8 MAYBE I'M MAKING TOO FINE A DISTINCTION.
9 Q. YOU COULD SEND OR RECEIVE E-MAIL WITH THAT FEATURE?
10 A. YES, YOU CAN.
11 Q. AND DESPITE THE SIZE OF YOUR MARKET SHARE IN THE
12 BROWSER MARKET, YOU THOUGHT IT WAS PERFECTLY ALL RIGHT TO
13 ADD THAT E-MAIL FUNCTIONALITY TO YOUR CLIENT; IS THAT
14 CORRECT?
15 A. ABSOLUTELY.
16 Q. AND YOU BELIEVED, DID YOU NOT, THAT USERS BENEFITED
17 FROM HAVING THAT MULTI-FUNCTIONAL PRODUCT?
18 A. DID AND DO.
19 Q. WAS THERE A PERIOD WHEN NAVIGATOR WASN'T AVAILABLE AT
20 ALL FOR LICENSING; I.E., THAT COMMUNICATOR WAS YOUR ONLY
21 PRODUCT?
22 A. I THOUGHT YOU MEANT--WAS THERE A PERIOD--THE
23 COMMUNICATOR, AS IT ORIGINALLY CAME OUT IN MANUFACTURING,
24 WAS A BUNDLED PRODUCT, AND WE CAME BACK WITH THE NAVIGATOR
25 AS A STAND-ALONE PRODUCT.
39 - [add a note]
1 Q. SO, AT THE END OF JUNE '97, YOU DROPPED NAVIGATOR; IS
2 THAT CORRECT?
3 A. WE INCLUDED NAVIGATOR AS A COMPONENT OR PART OF THE
4 COMMUNICATOR. AND WITHIN A VERY SHORT PERIOD OF TIME
5 CREATED A SEPARATE STAND-ALONE NAVIGATOR ONLY.
6 Q. WHEN DID THAT HAPPEN, THAT SEPARATE STAND-ALONE
7 REVIVAL?
8 A. I HONESTLY DON'T REMEMBER, BUT IT SEEMS LIKE IT WAS A
9 FEW MONTHS, LIKE THIS FALL OR SEPTEMBER, MAYBE.
10 Q. AND I TAKE IT FROM YOUR TESTIMONY JUST NOW THAT YOU
11 DO NOT CONSIDER COMMUNICATOR A SEPARATE STAND-ALONE
12 BROWSER?
13 A. I CONSIDER COMMUNICATOR AN APPLICATION THAT AMONGST
14 MANY OF ITS FUNCTIONS IT CAN BROWSE. IT HAS A BROWSER
15 PRODUCT WITH IT--IN IT INCLUDED, SEPARABLE FROM BUT ALSO
16 INCLUDED.
17 Q. OKAY. GOING TO PAGE TWO OF YOUR DIRECT TESTIMONY,
18 PARAGRAPH THREE, IN THE CARRYOVER SENTENCE AT THE TOP OF
19 THE PAGE YOU STATE THAT "MICROSOFT'S WINDOWS OPERATING
20 SYSTEM SOFTWARE IS THE SOFTWARE AT THE HEART OF OVER 90
21 PERCENT OF ALL PERSONAL COMPUTERS IN THE WORLD." DO YOU
22 SEE THAT STATEMENT?
23 A. YES, SIR.
24 Q. WINDOWS ISN'T A SINGLE PRODUCT, IS IT?
25 A. I WOULD THINK THAT IN THE NORMAL DISCUSSION OF
40 - [add a note]
1 WINDOWS, MOST PEOPLE WOULD SAY THAT IT'S A SINGLE PRODUCT.
2 IT'S AN OPERATING SYSTEM. IT HAS MANY COMPONENTS.
3 Q. ISN'T IT TRUE THAT ABOUT 25 PERCENT OF THE PERSONAL
4 COMPUTERS IN THE WORLD BEFORE THE INTRODUCTION OF
5 WINDOWS 98 HAD WINDOWS 95 AS AN OPERATING SYSTEM, 40
6 PERCENT WINDOWS 3.1, TEN PERCENT WINDOWS NT 4.0, AND FIVE
7 PERCENT WINDOWS NT 3.5?
8 A. I WOULDN'T ARGUE WITH THAT KIND OF A BREAKDOWN. I
9 WOULD SAY THAT'S PROBABLY THE NEIGHBORHOOD, BUT MOST
10 PEOPLE REFER TO WINDOWS AS WINDOWS INCLUDING WHETHER IT'S
11 VERSION 3.1, WINDOWS 95, WINDOWS 98. IT'S ALL GENERALLY
12 REFERRED TO AS WINDOWS, IF THAT'S YOUR POINT.
13 Q. BUT AN INDEPENDENT SOFTWARE VENDOR, DOES HE WRITE TO
14 WINDOWS, OR DOES HE WRITE SEPARATELY TO THE FOUR VERSIONS
15 OF WINDOWS THAT I HAVE ITEMIZED?
16 A. HE WOULD WRITE SEPARATELY, IN MOST CASES, TO THE FOUR
17 VERSIONS.
18 Q. LET'S GO TO PAGE THREE, PARAGRAPH FIVE. THE FIRST
19 SENTENCE REFERS TO A POPULAR LINE OF COMPUTERS OF COMPAQ.
20 DO YOU SHE THAT?
21 A. YES, SIR.
22 Q. WHAT LINE WAS THAT?
23 A. SECOND--OH. THE SECOND LINE.
24 Q. WHAT LINE OF COMPUTERS?
25 A. I THINK IT WAS CALLED PRESARIO. I COULD BE WRONG.
41 - [add a note]
1 Q. PRESARIO?
2 A. YES, SIR.
3 Q. MOVING ALONG TO THE THIRD SENTENCE, "ALTHOUGH COMPAQ
4 WANTED TO FEATURE THE NETSCAPE NAVIGATOR ICON ON THE
5 DESKTOPS OF COMPAQ COMPUTERS"--THAT'S THE PRESARIOS; IS
6 THAT RIGHT?
7 A. YES, SIR.
8 Q. "REFLECTING," YOU SAY, "THE POPULARITY OF THE
9 NETSCAPE NAVIGATOR WITH CONSUMERS, NETSCAPE LEARNED THAT
10 COMPAQ NO LONGER INTENDED TO PUT NAVIGATOR ON THE DESKTOP
11 SHORTLY AFTER MICROSOFT THREATENED TO CANCEL COMPAQ'S
12 WINDOWS LICENSE."
13 NOW, WHERE DID YOU HEAR THIS?
14 A. I THINK THE FIRST TIME I HEARD IT WAS FROM OUR
15 SALESPERSON WHO CALLS ON COMPAQ.
16 Q. AND WHAT DID HE SAY OR SHE SAY?
17 A. HE SAID, "BASICALLY, YOU WON'T BELIEVE THIS, BUT
18 MICROSOFT INSISTED THAT UNLESS COMPAQ ALSO INCLUDED THE IE
19 ICON ON THE DESKTOP, THEY WERE GOING TO CANCEL OR HAD
20 CANCELED COMPAQ'S LICENSE FOR WINDOWS."
21 Q. SO, AS ORIGINALLY REPORTED TO YOU, MICROSOFT'S
22 POSITION WAS NOT THAT IT WAS GOING TO CANCEL BECAUSE OF
23 THE ADDITION OF THE NAVIGATOR ICON. ITS POSITION WAS THAT
24 IT WOULD CANCEL IF THE IE ICON WERE REMOVED; IS THAT
25 CORRECT?
42 - [add a note]
1 A. AS THE ORIGINAL STATEMENTS, I THINK, THAT WOULD
2 PROBABLY BE CORRECT. LATER THEY CAME BACK AND CHANGED IT
3 CONSIDERABLY.
4 Q. WELL, THE STATEMENT HERE IN YOUR WRITTEN DIRECT ISN'T
5 CONSISTENT WITH THE ORIGINAL REPORT TO YOU; IS THAT
6 CORRECT?
7 A. I DON'T BELIEVE I HAVE SAID ANYTHING DIFFERENT THAN
8 THAT HERE. I SAID WE LEARNED. YOU ASKED ME THE ORIGINAL
9 STATEMENT. IT WAS LIKE, IT SEEMS TO ME, THREE OR FOUR
10 STATEMENTS OVER A PERIOD OF TWO OR THREE DAYS THAT
11 CAME--BUT THE ORIGINAL STATEMENT WAS MORE ALONG THOSE
12 LINES. THEN AS IT EVOLVED THEY SAID THEY WEREN'T GOING TO
13 CARRY OUR PRODUCT.
14 SO, WHAT I TRIED TO REPORT HERE IS KIND OF THE
15 END RESULT, NETSCAPE LEARNED THAT COMPAQ NO LONGER
16 INTENDED TO PUT NAVIGATOR ON THE DESKTOP.
17 Q. DID THEY EVER REPORT TO YOU OR YOUR SALESMAN THAT
18 MICROSOFT SAID IT WOULD CANCEL THE WINDOWS LICENSE
19 AGREEMENT IF NETSCAPE NAVIGATOR WERE PUT ON THE DESKTOP?
20 A. THEY MAY HAVE, BUT I DON'T REMEMBER IT BEING SAID
21 EXACTLY THAT WAY.
22 Q. DO YOU HAVE ANY BASIS WHATSOEVER FOR SUGGESTING TO
23 THE COURT THAT THAT WAS THE CASE?
24 A. NO, AND THAT'S NOT WHAT I SAY HERE.
25 Q. DO YOU KNOW WHETHER COMPAQ WAS IN BREACH OF ITS
43 - [add a note]
1 LICENSE AGREEMENT WITH MICROSOFT AT ANY POINT DURING THE
2 EVENTS DESCRIBED IN PARAGRAPH FIVE?
3 A. I DO NOT KNOW. I KNOW THAT, OR IT WAS MY
4 UNDERSTANDING THAT THEY WERE TOLD THAT THEY WERE IN
5 BREACH, SO I ASSUMED THAT THEY WERE IN BREACH, BUT I DON'T
6 KNOW THAT THEY TOLD ME THAT.
7 Q. DO YOU BELIEVE THAT MICROSOFT SHOULD BE PRECLUDED
8 FROM ENFORCING ITS CONTRACT RIGHTS?
9 A. I WOULDN'T CHARACTERIZE IT THAT WAY, NO, SIR.
10 Q. LET'S GO TO PAGE FOUR, PARAGRAPH SIX, THE LAST
11 SENTENCE USES THE WORD "TYING." DO YOU SEE THAT?
12 A. YES, I DO.
13 Q. WHAT'S YOUR DEFINITION OF THAT TERM?
14 A. TO ME IT'S REQUIRING ONE--A CUSTOMER TO TAKE ONE
15 PRODUCT IN ADDITION TO ANOTHER PRODUCT THEY HAVE TO BUY OR
16 WHATEVER. THEY GET IT WHETHER THEY WANT IT OR NOT.
17 Q. YOU HAVE TO BUY ONE IN ORDER TO GET THE OTHER; IS
18 THAT RIGHT?
19 A. WELL, THEY HAVE TO HAVE THE FIRST PRODUCT, AND SO BY
20 INCLUDING THE SECOND PRODUCT UNDERNEATH THE WING OF THE
21 FIRST, THEY ARE TIED--THE TWO ARE TIED TOGETHER IN A WAY
22 THAT SOME WOULD CONSIDER INAPPROPRIATE, IF NOT ILLEGAL.
23 Q. OKAY. THEN YOU USED THE TERM "MONOPOLY PRODUCT." DO
24 YOU SEE THAT?
25 A. YES.
44 - [add a note]
1 Q. WHAT IS A MONOPOLY PRODUCT?
2 A. WELL, TO ME--AND I'M NOT A LAWYER, BUT TO ME IT'S A
3 PRODUCT THAT HAS A CLEAR DOMINANCE IN THE MARKET TO THE
4 EXTENT THAT THE MARKET NO LONGER HAS A FREE CHOICE AS TO
5 THE USE OF THE PRODUCT.
6 Q. DOES YOUR DEFINITION DISTINGUISH BETWEEN, FOR
7 EXAMPLE, A MONOPOLY OF DIAMONDS BY VIRTUE OF HAVING
8 CONTROL OVER THE SOURCE OF PRODUCTION AND A MONOPOLY,
9 LET'S SAY, OF THE CANNED SOUP BUSINESS BECAUSE PEOPLE WANT
10 TO BUY YOUR SOUP?
11 A. AS LONG AS THERE ARE COMPETING PRODUCTS ON THE SHELF
12 FOR SOUP, IF I CAN ACCESS EITHER AND BY EITHER WITHOUT
13 BEING THE OTHER OR ANY OF THE STUFF IN THE SOUP THAT I MAY
14 NOT WANT BECAUSE THEY HAVE INCLUDED IT WITHOUT ASKING ME,
15 I WOULD THINK THAT WOULD BE AN OPEN MARKET.
16 Q. DOES TYING HAVE ANYTHING TO DO WITH MONOPOLY?
17 A. I JUST THOUGHT I WOULD THROW IT IN THERE.
18 Q. YEAH, THAT'S WHAT I THOUGHT. I WOULD MOVE TO STRIKE
19 AS NONRESPONSIVE.
20 THE COURT: OVERRULED.
21 BY MR. WARDEN:
22 Q. I PUT MY QUESTION AGAIN.
23 A. I DON'T KNOW ANYTHING ABOUT THE DIAMOND QUESTION. I
24 KNOW THE SOUP--I'M NOT SURE I UNDERSTAND THE SOUP
25 QUESTION.
45 - [add a note]
1 Q. WELL, LET ME ASK YOU TO ASSUME THAT CAMPBELLS SOUPS
2 SELLS 80 TO 90 PERCENT OF THE CANNED SOUPS IN GROCERY
3 STORES IN THE UNITED STATES. JUST ASSUME THAT.
4 A. YES, SIR.
5 Q. AND LET ME ASK YOU TO ASSUME THAT DEBEERS'S CENTRAL
6 BUYING OFFICE CONTROLS THE SALE OF 90 PERCENT OF THE
7 WORLD'S DIAMOND PRODUCTION.
8 A. YES, SIR.
9 Q. DO YOU DISTINGUISH BETWEEN MONOPOLY POWER THAT
10 DEBEERS CONSOLIDATED BUYING OFFICE HAS AND THE, I DON'T
11 KNOW, MAYBE YOU DON'T EVEN THINK CAMPBELL'S HAS MONOPOLY
12 POWER, DO YOU?
13 THE COURT: WHAT'S YOUR QUESTION?
14 MR. WARDEN: MY QUESTION IS, HE'S USED THE TERM
15 MONOPOLY POWER, AND I WANT TO KNOW WHAT IT MEANS, AND I'M
16 GOING TO GIVE HIM THOSE TWO EXAMPLES.
17 THE COURT: I THOUGHT HE DEFINED IT ONCE, BUT YOU
18 COULD HAVE HIM DEFINE IT AGAIN.
19 MR. WARDEN: THANK YOU, YOUR HONOR.
20 BY MR. WARDEN:
21 Q. DOES CAMPBELL'S HAVE MONOPOLY POWER IF IT SELLS 80 TO
22 90 PERCENT OF THE CANNED SOUPS IN THIS COUNTRY?
23 A. NOT BECAUSE IT HAS A HIGH PERCENTAGE, NO, SIR. I
24 DIDN'T SAY THAT PERCENTAGE HAS ANYTHING TO DO WITH
25 MONOPOLY.
46 - [add a note]
1 Q. YOU SAID SOMETHING ABOUT THEIR BEING NO OTHER PRODUCT
2 AVAILABLE, DIDN'T YOU?
3 A. NO, I DID NOT SAY THAT. I SAID YOU DIDN'T HAVE A
4 CHOICE AS TO WHICH PRODUCT. THE CONSUMER WAS NOT FREE TO
5 CHOOSE.
6 Q. OKAY. MONOPOLY, THERE IS A MONOPOLY PRODUCT IF THE
7 CONSUMER IS NOT FREE TO CHOOSE; IS THAT CORRECT?
8 A. YOU ASKED ME MY DEFINITION.
9 Q. IN YOUR DEFINITION.
10 A. I'M NOT A LAWYER.
11 Q. NO, THIS IS YOUR TESTIMONY.
12 A. THAT'S CORRECT.
13 Q. YOU GENERALLY USED THE TERM?
14 A. THAT'S WHAT I WOULD GENERALLY USE THE TERM, LIKE THE
15 CONSUMER IN THE CASE OF WINDOWS, THE BUYER OF THE PC GETS
16 THE MACHINE, AND THEY GOT WINDOWS, WHETHER THEY WANTED IT
17 OR NOT, AND THE PC OEM MANUFACTURER WHO SOLD IT TO THEM
18 HAS TO SUBSCRIBE OR CONTRACT WITH MICROSOFT BECAUSE HE
19 CAN'T EXIST WITHOUT THAT MICROSOFT WINDOWS CONTRACT.
20 THAT, TO ME, IS A MONOPOLY.
21 Q. BUT MICROSOFT'S CONTRACTS DON'T REQUIRE THE OEM TO
22 INSTALL ITS OPERATING SYSTEMS ON ALL ITS COMPUTERS, DO
23 THEY?
24 A. MICROSOFT'S CONTRACTS, I BELIEVE, REQUIRE THE
25 USER--OR EXCUSE ME. THE USER IS OBLIGATED TO GET
47 - [add a note]
1 MICROSOFT'S PRODUCTS BECAUSE THERE ISN'T ANOTHER WAY THAT
2 HE COULD SELL HIS PCS.
3 NOW, THERE ARE OCCASIONS WHERE THE END USER,
4 LET'S SAY, A CORPORATE ACCOUNT, MIGHT SAY I WANT YOU TO
5 SHIP ME THAT DELL COMPUTER WITH WINDOWS 3.1 BECAUSE THAT'S
6 MY STANDARD VERSUS WINDOWS 95. THAT WOULD BE WHERE THE
7 USER HAS A CHOICE BETWEEN WINDOWS, BUT THE PC MANUFACTURER
8 TODAY IS PRETTY MUCH OBLIGATED TO PROVIDE WINDOWS BECAUSE
9 THAT'S THE MOST POPULAR PRODUCT OUT THERE, AND HE COULD
10 NOT EXIST WITHOUT IT.
11 Q. I BET THE CORPORATE CUSTOMER COULD ALSO SAY, "I WANT
12 A PC WITH UNIX," COULDN'T HE?
13 A. SURE, HE COULD.
14 Q. AND HE WOULD GET IT, WOULDN'T HE?
15 A. NOT FROM MOST MANUFACTURERS, NO, SIR.
16 Q. HOW ABOUT IBM?
17 A. WELL, ON THE CASE OF IBM, HE WOULDN'T GET IT ON THE
18 PCS. HE WOULD GET IT ON ANOTHER PRODUCT. YOU ASKED ME
19 ABOUT PCS.
20 Q. WELL, I DID ASK ABOUT PCS; YOU ARE QUITE RIGHT.
21 NOBODY IS SUPPLYING THE PCS WITH UNIX?
22 A. INTEL PCS?
23 Q. WELL, WHAT KIND OF PCS ARE THERE?
24 A. THE GENERAL NOMENCLATURE IN THE INDUSTRY IS A PC IS
25 AN IBM-COMPATIBLE PC WHICH IS A SPECIFIC INSTRUCTION SET.
48 - [add a note]
1 THERE ARE A FEW SMALL UNIX IMPLEMENTATIONS ON AN INTEL
2 PLATFORM, YES, SIR, BUT I DON'T THINK THEY AMOUNT
3 TO--THEY'RE A VERY SMALL PART OF THE INDUSTRY.
4 Q. IF YOU WANTED YOUR PC WITH OS-2, YOU COULD GET THAT
5 TOO, COULDN'T YOU?
6 A. FROM SOME MANUFACTURERS.
7 Q. WHAT ABOUT IBM?
8 A. THAT WOULD BE THE ONE.
9 Q. BECAUSE IT'S THEIR OPERATING SYSTEM; RIGHT?
10 A. YES, SIR.
11 THE COURT: WOULD THIS BE AN APPROPRIATE TIME FOR
12 A MID-AFTERNOON RECESS?
13 MR. WARDEN: YES, SIR.
14 THE COURT: TEN MINUTES.
15 (BRIEF RECESS.)
16 MR. WARDEN: YOUR HONOR, I FORGOT TO OFFER
17 EXHIBIT 1, WHICH I DO AT THIS TIME, NOT FOR THE TRUTH OF
18 ITS CONTENTS, OBVIOUSLY, BUT AS THE REPRESENTATIONS MADE
19 BY NETSCAPE TO THE JUSTICE DEPARTMENT.
20 THE COURT: FOR WHATEVER PURPOSE YOU WANT TO
21 OFFER IT.
22 MR. WARDEN: THANK YOU.
23 MR. BOIES: MAY I HAVE JUST A MOMENT?
24 THE COURT: SURE.
25 (COUNSEL CONFERRING.)
49
1 MR. BOIES: NO OBJECTION.
2 THE COURT: DEFENDANT'S 1 IS ADMITTED.
3 (DEFENDANT'S EXHIBIT NO. 1 WAS
4 ADMITTED INTO EVIDENCE.)
5 BY MR. WARDEN:
6 Q. I BELIEVE JUST BEFORE THE BREAK, MR. BARKSDALE--AND
7 BY THE WAY, DURING THE BREAK DID YOU SPEAK TO ANYONE ABOUT
8 YOUR TESTIMONY?
9 A. NO, SIR. I SPOKE TO PEOPLE IN THE HALL, BUT NOT
10 ABOUT THE TESTIMONY.
11 Q. NOT ABOUT THE TESTIMONY?
12 A. NO.
13 EXCUSE ME. MY WIFE SAID I WAS DOING A GOOD JOB
14 WITH MY TESTIMONY.
15 Q. WELL, THAT'S YOUR MOST IMPORTANT AUDIENCE.
16 A. THAT'S RIGHT.
17 Q. OTHER THAN THE COURT, OF COURSE.
18 A. OF COURSE.
19 Q. DID YOU TESTIFY THAT CONSUMERS HAVE NO CHOICE BUT TO
20 TAKE PCS WITH WINDOWS?
21 A. TESTIFIED WHERE?
22 Q. HERE, JUST BEFORE THE BREAK.
23 A. OH. I SAID THAT--WHAT I MEANT TO SAY WAS THE VAST,
24 VAST MAJORITY OF THE PCS IN THE WORLD THAT ARE SHIPPED BY
25 PC OEM MANUFACTURERS TO CONSUMERS COME WITH WINDOWS, AND
50 - [add a note]
1 DOES NOT MEAN THERE ARE NO OTHER CHOICES.
2 FOR INSTANCE, ALTHOUGH GENERALLY THE MACINTOSH IS
3 NOT REGARDED AS A PC, YOU COULD LUMP IT IN THE CATEGORY.
4 IF YOU BOUGHT AN APPLE MACINTOSH, IT WOULD NOT HAVE A
5 WINDOWS OPERATING SYSTEM.
6 Q. AND SOME INTEL-BASED PCS COME WITHOUT WINDOWS; IS
7 THAT CORRECT?
8 A. THEY MAY. I DON'T KNOW EXACTLY IF ANY DO. I KNOW
9 THERE IS AN OPERATING SYSTEM THAT RUNS UNIX ON AN INTEL
10 PLATFORM, BUT I DON'T KNOW IF IT'S SOLD THROUGH PC OEM'S.
11 IF IT IS, IT'S VERY SMALL.
12 Q. WHAT ABOUT OS-2?
13 A. I DON'T BELIEVE IBM SHIPS PCS ANYMORE WITH OS-2 ON
14 IT. YOU COULD GET IT FROM IBM.
15 EXCUSE ME, FOR CORPORATE ACCOUNT, I THINK IBM
16 STILL SHIPS IT, BUT FOR CONSUMER YOU COULD GET IT, BUT IT
17 DOESN'T COME SHIPPED WITH IT.
18 Q. WHY DOES THE OEM SHIP WITH WINDOWS?
19 A. BECAUSE THE WAY THE NETWORK OF DESKTOP APPLICATIONS
20 HAS EVOLVED, THE VAST MAJORITY OF APPLICATIONS TODAY THAT
21 ARE WRITTEN FOR DESKTOP COMPUTERS ARE WRITTEN FOR WINDOWS.
22 AND AS A RESULT, THE ASSUMPTION IS NOW MADE ALMOST
23 UNIVERSALLY LIKE VHS HAS TAKEN OVER VERSUS BETA, THAT
24 SINCE ALL OF THE USER APPLICATIONS ARE FOR WINDOWS, I, AS
25 A PC OEM, WOULD WANT TO SHIP WINDOWS FOR MY CUSTOMERS
51 - [add a note]
1 BECAUSE THEY ARE GOING TO HAVE APPLICATIONS THAT ARE
2 SUPPORTED BY WINDOWS.
3 Q. IS IT FAIR TO SAY NOBODY IS GOING TO BUY YOUR PC IF
4 YOU DON'T SHIP IT WITH WINDOWS?
5 A. THERE MAY BE A FEW BRAVE SOULS, BUT I DON'T KNOW
6 MANY.
7 CERTAINLY, I DON'T KNOW THAT IT WOULD BE A
8 HUNDRED PERCENT, BUT IT WOULD BE A VERY HIGH PERCENTAGE
9 ANYBODY WOULD ACKNOWLEDGE, I THINK, A PC SHIPPED TODAY
10 WOULD COME WITH WINDOWS 98, FOR INSTANCE, THE LATEST
11 PRODUCT TO CONSUMERS.
12 Q. AND THAT'S BECAUSE CONSUMERS WANT THE MACHINES WITH
13 WINDOWS; IS THAT CORRECT?
14 A. CONSUMERS WANT THE APPLICATIONS THAT RUN ON WINDOWS,
15 AND NOW SINCE ALMOST ALL APPLICATIONS ARE ONLY FOR
16 WINDOWS, OR YOU COULD BE ASSURED THERE WOULD BE A WINDOWS
17 VERSION OF ANY APPLICATION JUST ABOUT ON THE PLANET, IT'S
18 TO THE CONSUMER'S ADVANTAGE TO HAVE THIS NETWORK EFFECT,
19 IF YOU WANT, OF APPLICATIONS RUNNING ON OPERATING SYSTEMS.
20 AND WINDOWS, TO ITS CREDIT, HAS BECOME THE STANDARD FOR
21 THOSE APPLICATIONS.
22 Q. WE WILL COME BACK TO THE TERM "NETWORK EFFECT"
23 SOMETIME LATER, BUT--
24 A. PROBABLY WILL.
25 Q. --I PROMISE YOU.
52 - [add a note]
1 BUT IS THIS ANYTHING OTHER THAN AN EXTENDED WAY
2 OF SAYING THAT CONSUMERS CHOOSE TO BUY PERSONAL COMPUTERS
3 WITH WINDOWS OPERATING SYSTEMS?
4 A. I ACTUALLY WOULD NOT SAY IT THAT WAY.
5 Q. WELL, IF IT ISN'T A QUESTION OF CONSUMER CHOICE FOR
6 THAT PRODUCT, WHY DO THE OEM'S SHIP WITH WINDOWS?
7 A. BECAUSE THERE IS NO OTHER OPERATING SYSTEM TODAY,
8 PRACTICALLY SPEAKING.
9 Q. WELL, I THINK WE ESTABLISHED FROM YOUR OWN TESTIMONY
10 THAT THERE ARE, IN FACT, OTHER OPERATING SYSTEMS.
11 A. NOT--
12 Q. LET ME FINISH MY QUESTION.
13 A. YES, SIR.
14 Q. I BEG YOUR PARDON.
15 ARE YOU SAYING ANYTHING MORE THAN THAT CONSUMERS
16 DON'T WANT TO BUY PCS WITH THOSE OTHER OPERATING SYSTEMS?
17 A. I WOULD SAY CONSUMERS HAVE NO REAL CHOICE ANYMORE BUT
18 TO BUY PCS WITH THAT OPERATING SYSTEM.
19 Q. HAVE THE OEM'S FORECLOSED CONSUMER CHOICE?
20 A. I THINK THAT THE OEM'S HAVE RESPONDED TO THE FACT
21 THAT THERE IS NO OTHER CHOICE. THAT IS JUST A FACT NOW IN
22 THAT MARKETPLACE.
23 Q. WELL, LET OS-2 EXISTS, DOESN'T IT?
24 A. I'M SORRY?
25 Q. OS-2 EXISTS, DOES IT NOT?
53 - [add a note]
1 A. BARELY.
2 Q. WELL, IT'S THERE. IBM CREATED IT. IT COULD MAKE AS
3 MANY COPIES OF IT AS IT WANTS, CAN'T IT?
4 A. THERE ARE PROBABLY HUNDREDS OF OPERATING SYSTEMS OF
5 ONE TYPE OR ANOTHER, BUT NONE OF THEM HAVE MORE THAN FEW
6 USERS ANYMORE. USED TO, BUT DON'T ANYMORE. I GIVE
7 MICROSOFT CREDIT FOR THAT.
8 Q. AND THE REASON THEY DON'T ANYMORE IS BECAUSE PEOPLE
9 DON'T WANT TO BUY THEM OR HAVE THEM ON THEIR COMPUTERS;
10 ISN'T THAT RIGHT?
11 A. PEOPLE WANT TO RUN APPLICATIONS THAT ARE NO LONGER
12 SUPPORTED BY OS-2. YOU CAN'T GET A NEW PRODUCT TODAY THAT
13 RUNS ON OS-2 OR MORE THAN A HANDFUL OF THEM IN A COMPUTER
14 STORE.
15 SO, IF YOU'RE A CONSUMER AND YOU WANT TO RUN
16 THESE VARIOUS NEW APPLICATIONS, THEY ALL RUN ON WINDOWS
17 AND NOTHING ELSE.
18 Q. AND THOSE APPLICATIONS ARE CREATED BY LITERALLY
19 HUNDREDS OF THOUSANDS OF INDEPENDENT SOFTWARE VENDORS, ARE
20 THEY NOT?
21 A. YES, SIR, LIKE NETSCAPE.
22 Q. THANK YOU.
23 AND YOU ARE ONE OF THE PRINCIPAL ONES, ARE YOU
24 NOT?
25 A. I HOPE SO.
54 - [add a note]
1 Q. AND NOBODY TOLD YOU NOT TO CREATE APPLICATIONS FOR
2 OS-2, DIDN'T THEY?
3 A. NO, SIR.
4 IN FACT, OUR PRODUCT RUNS VERY WELL WITH OS-2.
5 Q. GOOD. SO, WHAT OTHER APPLICANTS RUN WELL WITH OS-2?
6 A. NOT MANY OTHERS.
7 Q. WHY DID YOU MAKE ONE FOR OS-2?
8 A. IBM IS A PARTNER OF MINE, AND THEY ASKED US TO.
9 THE COURT: I'M SORRY?
10 THE WITNESS: IBM IS AN OEM PARTNER OF MINE.
11 THEY DISTRIBUTE OUR PRODUCT ON THEIR OTHER COMPUTERS AND
12 THEIR SERVERS, AND SO THEY ASKED US TO BUILD AN OS-2
13 VERSION OF THE NETSCAPE APPLICATION FOR THEIR COMPUTERS.
14 BY MR. WARDEN:
15 Q. AND YOU HAVE DONE SO?
16 A. YES, SIR.
17 Q. AND THAT KIND OF MUTUALLY BENEFICIAL COOPERATION IS
18 COMMON IN THE COMPUTING INDUSTRY, ISN'T IT?
19 A. NO, SIR.
20 Q. IT ISN'T?
21 A. NOT WITH IBM AND OS-2. WE DO IT BECAUSE THEY HAVE
22 MANY OTHER THINGS TO SELL FOR US. MOST ISV'S DO NOT DEAL
23 WITH IBM ON A DIRECT BASIS ANYMORE.
24 Q. I DIDN'T MAKE MY QUESTION ESPECIALLY CLEAR. YOUR
25 POSITION WITH IBM IS UNUSUAL OR UNIQUE; IS THAT WHAT
55 - [add a note]
1 YOU'RE SAYING?
2 A. CERTAINLY NOT UNIQUE, BUT WE ARE ONE OF THE FEW LARGE
3 SOFTWARE OEM COMPANIES THAT IBM DEALS WITH FOR THEIR AIX
4 PLATFORM AND OTHER VARIANTS OF OPERATING SYSTEMS FOR THEIR
5 CORPORATE CLIENTS ON THE SERVER SIDE.
6 Q. HOW ABOUT ON THE PC SIDE?
7 A. IBM WOULD PROBABLY HAVE A FEW, BUT NOT MANY, ISP
8 RELATIONSHIPS ON THE PC SIDE ANYMORE, AND THEY NO LONGER
9 SHIP THE RETAIL PRODUCT WITH THE OS-2, OR THE CONSUMER
10 PRODUCT.
11 Q. YOU MEAN, THEY MAY SHIP IT IN THE ENTERPRISE MARKET?
12 A. YES, SIR.
13 Q. I HAVE USED THE TERM "ENTERPRISE MARKET" SIMPLY
14 BECAUSE IT'S ONE FOUND IN A NUMBER OF YOUR DOCUMENTS. CAN
15 YOU STATE FOR THE RECORD WHAT THAT MEANS.
16 A. WE DIDN'T COIN THE TERM "ENTERPRISE," BUT GENERALLY
17 IT'S REFERRED TO PRODUCTS THAT SERVE THE CORPORATE MARKET,
18 THE GOVERNMENT MARKET, THE EDUCATIONAL MARKET OR OTHER
19 INSTITUTIONS WHO PURCHASE PRODUCTS LIKE THIS ON A CONTRACT
20 LARGE QUANTITY NOT ONE AT A TIME, AND DO CORPORATE OR
21 GOVERNMENT KIND OF FUNCTIONS WITH THESE PRODUCTS.
22 Q. OKAY. WHAT PERCENTAGE OF PCS SOLD IN THIS COUNTRY,
23 AND LET'S SAY THIS YEAR, ARE SOLD INTO THE ENTERPRISE
24 MARKET?
25 A. OF PCS?
56 - [add a note]
1 Q. YES.
2 A. I WOULD ESTIMATE--I'M NOT AN AUTHORITY ON THAT. I
3 WOULD--JUST A GUESS?
4 Q. OR YOUR CLOSEST ESTIMATE, YES. I MEAN, YOU ARE IN
5 THIS BUSINESS, GENERALLY.
6 A. I WOULD SUPPOSE THIS YEAR THAT MAY BE 40 PERCENT, 30
7 TO 40 PERCENT.
8 Q. AND IS THERE ONLY ONE OTHER MARKET, THE CONSUMER
9 MARKET, OR ARE THERE FURTHER BREAKDOWNS?
10 A. FOR PC'S?
11 Q. YES.
12 A. THERE MAY BE SOME NICHE MARKETS, BUT PROBABLY NOT
13 RELEVANT.
14 Q. SO MAYBE 40 PERCENT ENTERPRISE, 55 TO 60 PERCENT
15 CONSUMER?
16 A. YES, SIR, BUT I CAN'T STAND BY THAT. IT USED TO BE A
17 MUCH HIGHER PERCENTAGE ENTERPRISE, LOWER CONSUMER, AND NOW
18 WITH THE SUB-THOUSAND DOLLAR PCS ON THE MARKET, YOU SEE
19 THAT MARKET REALLY TURN MUCH MORE TO CONSUMERS.
20 Q. BECAUSE THERE IS INCREASED VOLUME IN THE CONSUMER
21 SEGMENT; IS THAT CORRECT?
22 A. I THINK THEY PIERCED A NEW PRICE BARRIER IN AN
23 ATTEMPT TO BROADEN THE MARKET.
24 Q. AND IT HAS BROADENED THE MARKET?
25 A. YES, SIR.
57 - [add a note]
1 Q. NOW, IN THE ENTERPRISE SEGMENT, DO PCS COMPETE WITH
2 OTHER PRODUCTS?
3 A. YES, THEY DO.
4 Q. WHAT ARE THOSE OTHER PRODUCTS?
5 A. PCS, AS WE DEFINED IT SO FAR THIS AFTERNOON, WOULD
6 COMPETE WITH MACINTOSH PRODUCTS FROM APPLE COMPUTER
7 COMPANY. THEY WOULD COMPETE WITH WORK STATION PRODUCTS
8 FROM COMPANIES LIKE SUN MICROSYSTEMS OR SGI, SILICON
9 GRAPHICS, INCORPORATED, OR HEWLETT-PACKARD WORK STATIONS.
10 Q. OKAY. WHAT ARE WORK STATIONS, AND THEN WE WILL GO ON
11 TO THE NEXT PRODUCT.
12 A. WORK STATIONS WOULD BE GENERALLY DEFINED AS HIGHER
13 PERFORMANCE DESKTOP MACHINES THAT PERFORM MUCH MORE
14 COMPUTER-INTENSIVE APPLICATIONS LIKE GRAPHIC DESIGN,
15 ADVANCED THREE-DIMENSIONAL RENDERING FROM MANUFACTURING
16 COMPANIES AND SO FORTH.
17 Q. OKAY. ANY OTHER PRODUCTS THAT COMPETE WITH PCS AND
18 WORK STATIONS IN THE ENTERPRISE SEGMENT?
19 A. PCS WOULD COMPETE WITH, I SUPPOSE, IN SOME CASES, A
20 VARIETY OF SMALLER NICHE PRODUCTS LIKE THE NETWORK
21 COMPUTER, BUT THEY'RE ONLY A FEW HUNDRED, MAYBE A
22 HUNDRED-THOUSAND OF THOSE SOLD SO FAR IN THE WORLD, SO IT
23 WOULD BE A SMALL, SMALL MACHINES LIKE THAT, MAYBE, YOU
24 COULD INCLUDE SOME OF THOSE.
25 Q. IS THAT A PRODUCT THAT'S GOING ANY PLACE, THE NETWORK
58 - [add a note]
1 COMPUTER?
2 A. THERE ARE SOME WHO THINK IT WILL, AND SOME WHO ARE
3 NOT SO SURE.
4 Q. WHAT DO YOU THINK?
5 A. I HAVE MY DOUBTS, AS IS CURRENTLY KNOWN.
6 Q. RETURNING TO PAGE FOUR OF YOUR DIRECT, THE LAST
7 SENTENCE OF PARAGRAPH SIX, WE DISCUSSED MONOPOLY PRODUCT.
8 THE NEXT TERM USED THERE IS "BROWSER." WHAT DO YOU MEAN
9 BY "BROWSER"?
10 A. I THINK I ALREADY DEFINED THAT.
11 Q. THAT'S THE SAME THING AS BROWSER PRODUCT THAT WAS
12 USED IN AN EARLIER PARAGRAPH; IS THAT RIGHT?
13 A. I THINK SO.
14 Q. OKAY. NOW, WHAT IS THE BASIS FOR THE LAST PHRASE IN
15 THAT SENTENCE? HOW DO YOU KNOW THAT?
16 A. YOU'RE TALKING ABOUT THE PHRASE ABOUT SPENDING
17 HUNDREDS OF MILLIONS OF DOLLARS TO DISTRIBUTE IT?
18 Q. I AM.
19 A. WELL, JUST A VARIETY OF REPORTS AND THINGS I READ
20 OVER THE LAST TWO OR THREE YEARS, STATEMENTS FROM
21 MICROSOFT THAT THEY WERE SPENDING BILLION DOLLARS ON
22 INTERNET PRODUCTS THAT THEY MADE AT ONE OF THEIR FINANCIAL
23 PRESS CONFERENCES; THE FACT THAT THEY PROBABLY USED AS
24 DEVELOPER DOLLARS ABOUT AS MUCH AS--AT LEAST AS MUCH AS
25 NETSCAPE HAS SPENT ON BUILDING IT, WHICH WOULD BE SEVERAL
59 - [add a note]
1 HUNDRED MILLION DOLLARS. THEY HAVE TALKED TO PEOPLE AND
2 OTHERS ABOUT HOW THEY'RE SPENDING A LOT OF MONEY ON IT.
3 THAT WOULD BE--IT'S MY SORT OF KNOWLEDGE OF WHAT IT WOULD
4 COST YOU TO BUILD A PRODUCT AND DISTRIBUTE A PRODUCT LIKE
5 THAT.
6 Q. THANK YOU. MOVING ON TO PARAGRAPH SEVEN, THE PHRASE
7 "TO CUT OFF NETSCAPE'S AIR SUPPLY" IS USED IN ABOUT THE
8 SEVENTH OR EIGHTH LINE.
9 IS THAT A PHRASE YOU COINED?
10 A. NO, SIR.
11 Q. WHO SAID THAT FOR THE FIRST TIME? WHO DID COIN IT?
12 A. COINING THE PHRASE "CUTTING OFF NETSCAPE'S AIR
13 SUPPLY" OR "CUTTING OFF THEIR AIR SUPPLY"? YOU MEAN
14 EXACTLY IN THE QUOTES HERE?
15 Q. THAT OR WHATEVER VARIANT OF IT. I MEAN, YOU QUOTED
16 IT. IF IT'S NOT AN EXACT QUOTE--
17 A. THE FIRST I HEARD OF IT WAS LARRY ELLISON USED IT IN
18 SOME OF HIS COMPETITIVE ISSUES, "LET'S CUT OFF THEIR AIR
19 SUPPLY."
20 Q. WHO IS LARRY?
21 A. LARRY ELLISON IS THE CHAIRMAN OR PRESIDENT/CEO OF
22 ORACLE COMPANY.
23 Q. AND HOW DID HE USE THE PHRASE?
24 A. TO DISADVANTAGE A COMPETITOR TO THE POINT THAT THEY
25 COULD NO LONGER INVEST IN THE PRODUCT.
60 - [add a note]
1 Q. AND WHOSE AIR SUPPLY WAS HE SUGGESTING BE CUT OFF?
2 A. I THINK IT WAS INFORMIX AND SYBASE.
3 Q. DID YOU HEAR HIM USE IT?
4 A. NO, SIR, I READ THAT ACCOUNT IN A BOOK PUBLISHED
5 ABOUT MR. ELLISON.
6 BUT IN THIS CASE, I THINK THE FIRST I HEARD OR
7 READ ABOUT IT, I THINK IT WAS PAUL MARITZ OF MICROSOFT,
8 BUT...
9 Q. WHEN DID YOU FIRST HEAR THIS ABOUT NETSCAPE,
10 SUPPOSEDLY, BY MR. MARITZ?
11 A. SOMETIME AFTER THE, QUOTE, BROWSER WAR STARTED, WHICH
12 WOULD GENERALLY BE THE FALL OF '95ISH TO THE SPRING OF
13 '96, SOMEWHERE IN THERE.
14 Q. BEFORE THIS CASE WAS FILED IN MAY OF THIS YEAR?
15 A. YES.
16 Q. NOW, TO WHOM, ACCORDING TO THE REPORT YOU HEARD--YOU
17 DIDN'T HEAR MR. MARITZ SAY THIS, DID YOU?
18 A. NO, I DID NOT.
19 Q. ALL RIGHT. AND TO WHOM WAS IT REPORTED TO YOU THAT
20 HE HAD SAID IT?
21 A. I DON'T REMEMBER.
22 Q. AND WHEN AND WHERE DID HE SAY IT?
23 A. I DON'T REMEMBER.
24 Q. DID YOU EVER KNOW?
25 A. IS THAT THE QUESTION?
61 - [add a note]
1 Q. DID YOU EVER KNOW WHEN HE SAID IT?
2 A. OH. IT'S BEEN PLACED OR REPEATED SO MANY TIMES IN
3 ARTICLES AND MAGAZINES AND ATTRIBUTED TO THEM THAT I TOOK
4 IT FOR GRANTED THAT HE SAID IT IN SOME PLACE THAT A
5 RESPONSIBLE REPORTER WOULD HAVE GIVEN CREDENCE TO. IT'S
6 THAT SORT OF UNDERSTANDING. IT'S AN OFT-REPEATED PHRASE
7 CONCERNING MICROSOFT VERSUS NETSCAPE, "CUT OFF AIR
8 SUPPLY."
9 Q. SO, IT'S YOUR UNDERSTANDING THAT MR. MARITZ MADE THIS
10 STATEMENT IN A FORUM SUFFICIENTLY PUBLIC TO BE OVERHEARD
11 BY A REPORTER; IS THAT CORRECT?
12 A. OR SOMEONE WHO TALKED TO A REPORTER.
13 Q. DO YOU KNOW?
14 A. I ALREADY SAID I DON'T KNOW.
15 Q. OKAY. NOW, YOU GAVE ME EARLIER A DEFINITION OF
16 MONOPOLY POWER; DO YOU RECALL THAT?
17 A. YES, SIR.
18 Q. AND I BELIEVE YOU STATE AT LENGTH IN YOUR TESTIMONY,
19 NOT ANY MORE LENGTH NECESSARILY THAN NOT TO BE PEJORATIVE,
20 THAT YOU WERE EMPLOYED AT IBM?
21 A. THAT WAS MY FIRST JOB OUT OF COLLEGE.
22 Q. DID YOU BELIEVE WHEN YOU WORKED THERE THAT IBM WAS A
23 MONOPOLIST?
24 A. I DON'T KNOW THAT I BELIEVE THAT. I WAS TOLD THAT
25 THEY WERE ON A CONSENT--1956 CONSENT DECREE, SO AS A
62 - [add a note]
1 SALESMAN, I WAS TRYING TO ACT LIKE THEY WERE A MONOPOLIST.
2 WE HAD TO GO BY THIS CONSENT DECREE.
3 Q. AND WHAT DID THAT CONSENT DECREE RELATE TO, IF YOU
4 RECALL?
5 A. MONOPOLIZATION OF THE PUNCH-CARD INDUSTRY.
6 Q. RIGHT.
7 A. AND I WAS SELLING PUNCH-CARD MACHINES. THAT WAS A
8 LONG TIME AGO.
9 Q. IT SURE WAS. DID YOU STAY AT IBM PAST THE PUNCH-CARD
10 ERA?
11 A. I DID.
12 Q. SO, YOU WERE NO LONGER SELLING PUNCH-CARD MACHINES AT
13 THAT POINT AFTER THAT ERA HAD COME TO A CLOSE; IS THAT
14 CORRECT?
15 A. I WAS WITH IBM FROM '65 TO '72.
16 Q. OKAY. WHAT WAS IBM'S MARKET SHARE IN MAINFRAME
17 COMPUTERS IN 1972?
18 A. '72?
19 Q. IF YOU CAN RECALL.
20 A. IT WAS HIGH. IT WAS PROBABLY 60 TO 80 PERCENT.
21 Q. HOW ABOUT IN THE OPERATING SYSTEM SOFTWARE THAT WAS
22 USED ON THAT HARDWARE?
23 A. ON THAT HARDWARE IT WAS ONLY THE OPERATING SYSTEM
24 THAT WOULD RUN.
25 Q. SO THE CONSUMER HAD NO CHOICE BUT TO BUY THE IBM
63 - [add a note]
1 OPERATING SYSTEM FOR THE IBM MAINFRAME; IS THAT RIGHT?
2 A. IN THAT CASE THERE WEREN'T CONSUMERS BUYING IBM
3 MAINFRAMES AS WE DEFINED IT HERE. THERE WERE ONLY
4 ENTERPRISE CUSTOMERS BUYING MAINFRAMES.
5 Q. I ACCEPT YOUR AMENDATION OF MY QUESTION. CUSTOMERS
6 HAD NO CHOICE BUT TO--
7 A. THEY COULD CERTAINLY CHOOSE NOT TO BUY AN IBM
8 MAINFRAME, BUT IF THEY BOUGHT AN IBM MAINFRAME, THEY GOT
9 THE OPERATING SYSTEM BECAUSE THEY BOTH WERE PRODUCED BY
10 IBM.
11 Q. IT CAME BUNDLED; IS THAT RIGHT?
12 A. AT THAT TIME IBM UNBUNDLED THE OPERATING SYSTEM AND
13 COMPUTER CONSULTANTS FROM THE HARDWARE, AS PART OF A COURT
14 AGREEMENT IN 1968, I BELIEVE. THEY WERE FORCED TO.
15 Q. AND--WELL, I THOUGHT YOU TOLD ME THAT THE MACHINES
16 ONLY WORK WITH IBM OPERATING SYSTEMS?
17 A. IT'S WHAT WE CALL A PRETTY NICE BUNDLE DEAL. I THINK
18 THAT THEY WERE REQUIRED TO DO THAT, AND SO WE SOLD 1THE
19 SOFTWARE WAS SEPARATELY PRICED AND THE HARDWARE WAS
20 SEPARATELY PRICED. NOW, WHAT HAPPENED WAS THAT CREATED
21 THE ABILITY FOR HARDWARE MANUFACTURERS TO POP UP THAT WERE
22 NOT IBM, AND MANY LIKE AMDOL AND THOSE BEGAN USING IBM
23 OPERATING SYSTEMS, SO THEY WERE UNBUNDLED FOR THE PURPOSE
24 OF CREATING THIS WHOLE NEW INDUSTRY THAT SPRUNG UP FOR
25 PEOPLE WHO COMPETE WITH IBM IN THE MAINFRAME HARDWARE
64 - [add a note]
1 BUSINESS, AND THAT CREATED THAT WHOLE INDUSTRY.
2 Q. WHERE IS THE MAINFRAME HARDWARE BUSINESS TODAY? IS
3 IT ALIVE AND WELL?
4 A. THE MAINFRAME BUSINESS TODAY, YOU GET--AS RECENTLY AS
5 LAST WEEK I READ A VERY BULLISH REPORT BY SOME ANALYSTS
6 ABOUT IBM'S MAINFRAME BUSINESS, BUT I THINK BY TODAY YOU
7 GOTTEN SO MANY NEW DEFINITIONS OF IT, IT WOULD BE A LITTLE
8 HARD TO PINPOINT IT, BUT IT SEEMS TO BE DOING RATHER WELL.
9 Q. HAS IT BEEN A GROWTH SEGMENT IN THE COMPUTER
10 INDUSTRY?
11 A. IT WOULD NOT--I DON'T THINK YOU WOULD CHARACTERIZE IT
12 AS A GROWTH SEGMENT. IT'S STILL AN ENORMOUSLY BIG PART OF
13 THE COMPUTER INDUSTRY.
14 Q. DID IBM MAKE MANY COMPUTERS IN 1972?
15 A. THEY WERE JUST COMING OUT WITH THEIR FIRST PRODUCT AT
16 THAT TIME CALLED "SERIES ONE."
17 Q. AND HOW DID THEIR POSITION IN THAT SEGMENT COMPARE
18 WITH THEIR POSITION IN MAINFRAMES?
19 A. LIKE I SAY, THAT WAS BRAND NEW THEN. THAT WAS A NEW
20 SEGMENT DESIGNED TO COMPETE WITHIN COMPANY PRODUCTS LIKE
21 DIGITAL CORPORATION'S MINICOMPUTERS AND OTHERS, AND IBM
22 HAD A REASONABLE BUT PROBABLY SMALLER SHARE THAN--I KNOW
23 THEY HAD A SMALLER SHARE THAN DEC, AND THERE WERE SOME
24 OTHER COMPANIES IN THAT FIELD. DATA GENERAL BY THAT TIME
25 HAD PRODUCTS AND SO FORTH.
65 - [add a note]
1 Q. AND WHAT IS IBM'S POSITION IN THE PC SEGMENT TODAY?
2 A. TODAY?
3 Q. YES.
4 A. I THINK AS A SHARE OF UNITS SHIPPED, IF THAT'S WHAT
5 YOU MEAN, I THINK IBM IS NOW THIRD OR FOURTH PLACE WITH
6 ABOUT PROBABLY A FIVE OR SIX SHARE OF MARKET.
7 Q. FIVE OR SIX PERCENT?
8 A. I'M NOT SURE, BUT PROBABLY IN THAT RANGE, LESS THAN
9 TEN PERCENT.
10 Q. THANK YOU.
11 A. OF UNITS SHIPPED.
12 Q. CORRECT.
13 GOING TO PAGE FIVE, PARAGRAPH EIGHT.
14 A. YES, SIR.
15 Q. YOU DON'T NEED TO READ ANY PARTICULAR SENTENCE. MY
16 QUESTION IS SIMPLE. HAS MICROSOFT CONTRIBUTED TO THE
17 POPULARITY OF THE INTERNET?
18 A. OF COURSE.
19 Q. HAS ANY FEATURES OF WINDOWS 98 OR WINDOWS 95 MADE IT
20 EASIER FOR USERS TO TAKE ADVANTAGE OF THE INTERNET?
21 A. SOME, YES.
22 Q. HAVE THE EFFORTS OF MICROSOFT FORCED NETSCAPE TO
23 IMPROVE ITS PRODUCTS?
24 A. ABSOLUTELY.
25 Q. YOU DON'T REALLY BELIEVE, DO YOU, THAT BUT FOR
66
1 NETSCAPE, WEB BROWSING WOULDN'T EXIST?
2 A. I DON'T THINK I SAID THAT.
3 Q. I DIDN'T SUGGEST YOU DID.
4 A. WELL, THEN--
5 Q. LET'S JUST TAKE A LOOK AT THE FIRST SENTENCE. "I
6 OFTEN ASKED PEOPLE WHERE BROWSER TECHNOLOGY WOULD BE TODAY
7 HAD NETSCAPE NOT COME ALONG, AND THE RESPONSE"--YOU'RE NOT
8 GIVING YOUR OWN OPINION, YOU'RE SAYING WHAT OTHERS TELL
9 YOU--"IS UNIFORM. IT WOULD BE FAR BEHIND WHERE IT IS
10 NOW." YOU BELIEVE THAT TO BE TRUE YOURSELF, OR IS THAT
11 JUST WHAT OTHER PEOPLE--
12 A. I BELIEVE THAT TO THE BOTTOM OF MY HEART.
13 Q. HOW FAR BEHIND?
14 A. OH, I DON'T KNOW, BUT TWO OR THREE YEARS PROBABLY.
15 THEY WEREN'T EVEN GOING IN THAT DIRECTION UNTIL NETSCAPE
16 MADE IT A POPULAR PRODUCT.
17 Q. WHO IS "THEY"?
18 A. MICROSOFT.
19 Q. WEREN'T THERE TEN, TWENTY OTHER BROWSER MAKERS AT THE
20 TIME NETSCAPE WAS FORMED?
21 A. THERE WERE.
22 Q. AND IN FACT, WASN'T MOSAIC CREATED NOT EVEN BY
23 NETSCAPE, BUT BY STUDENTS AT THE UNIVERSITY OF ILLINOIS?
24 A. WHO WERE THE FIRST EMPLOYEES OF NETSCAPE.
25 Q. WELL, THEY DIDN'T DO THAT FOR NETSCAPE WHEN THEY
67 - [add a note]
1 WORKED AT THE UNIVERSITY OF ILLINOIS, DID THEY?
2 A. NO, SIR, BUT THAT PRODUCT IS NOT GOING ANYWHERE, NOR
3 ARE ANY OTHER BROWSERS.
4 Q. YOURS WAS BETTER, IS WHAT YOU'RE SAYING?
5 A. OURS HAD CERTAIN COMPONENTS AND FEATURES THAT SEEMED
6 TO BE BETTER.
7 Q. RIGHT. AND IF YOU HADN'T DONE THAT, DON'T YOU THINK
8 SOMEBODY ELSE WOULD HAVE DONE IT?
9 A. I DON'T REALLY THINK THEY WOULD HAVE DONE IT TO THE
10 DEGREE IT HAPPENED BECAUSE OF NETSCAPE'S POSITION PRODUCT
11 BRAND AWARENESS AND DISTRIBUTION TECHNOLOGIES, PUSH,
12 DRIVE, COMMITMENT. NO, I DON'T.
13 Q. LET'S GO TO PAGE SEVEN, PARAGRAPH TEN. THE FIRST
14 SENTENCE SAYS, "ONE OF NETSCAPE'S COFOUNDERS, MARK
15 ANDRESSEEN, CONCEIVED OF THE GRAPHICAL BROWSER WHILE HE
16 WAS A COMPUTER-SCIENCE STUDENT AT THE UNIVERSITY OF
17 ILLINOIS."
18 WHAT IS THE SOURCE OF YOUR KNOWLEDGE THAT ENABLES
19 YOU TO MAKE THAT STATEMENT?
20 A. THAT HE CONCEIVED OF IT OR WHILE HE WAS AT THE
21 UNIVERSITY OF ILLINOIS?
22 Q. THAT HE CONCEIVED OF IT. THAT'S A WHOLE STATEMENT,
23 THAT HE CONCEIVED OF IT WHILE HE WAS AT THE UNIVERSITY OF
24 ILLINOIS.
25 A. MARK IS GENERALLY CREDITED WITH THAT. MARK HAS TOLD
68 - [add a note]
1 ME THAT. I WORKED WITH MARK TO THIS DAY. HE'S OUR
2 COFOUNDER, AND I THINK THAT HE WAS--HE'S GENERALLY
3 REGARDED AS THAT. HE'S WIDELY RECOGNIZED IN COMPUTER
4 CIRCLES FOR THAT. HE WAS ON THE COVER OF TIME MAGAZINE
5 FOR THAT. OTHER THAN THAT--
6 Q. AS FAR AS HIS WORK AT THE UNIVERSITY OF ILLINOIS OR
7 HIS WORK AT NETSCAPE?
8 A. ALL OF HIS WORK, WHICH WOULD INCLUDE HIS TIME AT THE
9 UNIVERSITY OF ILLINOIS. HE WAS A STUDENT AT THE
10 UNIVERSITY OF ILLINOIS ON A TEAM THERE.
11 Q. RIGHT. WELL, DID HE CONCEIVE IT? WAS HE THE LEADER
12 OF THE TEAM?
13 A. YES, HE WAS.
14 Q. HOW DO YOU KNOW THAT?
15 A. BECAUSE MARK TOLD ME HE WAS.
16 Q. OKAY.
17 A. AND OTHER PEOPLE ON THE TEAM WORKED FOR NETSCAPE, AND
18 THEY ALWAYS ACKNOWLEDGED IT. NOBODY EVER TOLD ME HE
19 WASN'T THE LEADER. THERE WERE 11 STUDENTS. WE HIRED NINE
20 OF THEM.
21 Q. NINE OF ELEVEN?
22 A. SOMETHING LIKE THAT.
23 Q. DID YOU PAY ANY KIND OF COMPENSATION TO THE
24 UNIVERSITY OF ILLINOIS FOR THAT RAID?
25 A. YES, SIR, WE DID.
69 - [add a note]
1 Q. WHAT DID YOU PAY THEM?
2 A. I THINK WE PAID THEM--NOT FOR THE RAID, BUT FOR THE
3 RIGHT TO ABANDON THE PRODUCT. I THINK WE PAID THEM A
4 COUPLE OF MILLION DOLLARS.
5 Q. THAT WAS TO THE UNIVERSITY?
6 A. YES, SIR.
7 Q. LET'S GO TO PAGE EIGHT, PARAGRAPH 12. IN THE FIRST
8 SENTENCE YOU SAY, "THE ENGINEERS AT NETSCAPE CREATED AN
9 ENTIRE NEW BROWSER;" DO YOU SEE THAT?
10 A. YES, SIR.
11 Q. DID THAT BROWSER USE NO CODE FROM THE MOSAIC BROWSER
12 DEVELOPED AT THE NATIONAL CENTER FOR SUPERCOMPUTING
13 APPLICATIONS AT THE UNIVERSITY OF ILLINOIS?
14 A. NO, SIR, IT DID NOT.
15 Q. BY THE WAY, HOW OLD WAS MARK ABDRESSEEN IN 1994?
16 A. I THINK AT THAT TIME HE WOULD HAVE BEEN 22.
17 Q. WAS YOUR COMPANY NAMED MOSAIC AT ONE TIME?
18 A. YES, SIR, IT WAS.
19 Q. WHY WAS THAT CORPORATE NAME CHOSEN?
20 A. WHEN THE ENGINEERS WERE BROUGHT OVER, THE TWO
21 FOUNDERS OF THE COMPANY, I MENTIONED MR. CLARK, I THINK,
22 IN MY TESTIMONY ALSO. THEY NAMED THE COMPANY MOSAIC
23 COMMUNICATIONS CORPORATION IN APRIL OR SO OF '94, AND THE
24 COMPANY WAS RENAMED IN THE FALL OF '94 AFTER THE
25 UNIVERSITY OF ILLINOIS TOLD US THEY DIDN'T LIKE US USING
70 - [add a note]
1 THAT NAME.
2 Q. DID A COMPANY CALLED SPYGLASS SUE MOSAIC?
3 A. SUE US?
4 Q. SUE OR THREATEN TO SUE.
5 A. I DON'T REMEMBER THEM SUING US. THEY MAY HAVE
6 THREATENED US. I DON'T REMEMBER THAT.
7 Q. DID NETSCAPE PAY MONEY TO SPYGLASS TO SETTLE ITS
8 CLAIM?
9 A. I DON'T BELIEVE WE DID, NO, SIR.
10 Q. YOU DON'T.
11 AND WHAT WAS SPYGLASS'S CLAIM?
12 A. LIKE I SAY, I DON'T REMEMBER MAKING A CLAIM, SO I
13 DON'T KNOW WHAT IT WOULD HAVE BEEN. BUT I'M NOT
14 DENYING--I WAS NOT WITH THE COMPANY AT THAT TIME.
15 Q. WHEN DID YOU BECOME A DIRECTOR?
16 A. I BECAME A DIRECTOR, I THINK IT WAS, IN OCTOBER OF
17 '94, SEPTEMBER, OCTOBER, SOMEWHERE IN THERE.
18 Q. AND THE NAME HAD ALREADY BEEN CHANGED TO NETSCAPE AT
19 THAT TIME; IS THAT RIGHT?
20 A. NO, SIR.
21 Q. NO?
22 A. NO.
23 Q. AND AS A DIRECTOR, YOU WEREN'T ADVISED OF ANY DISPUTE
24 WITH MOSAIC--I MEAN, SORRY--WITH SPYGLASS ABOUT THE NAME
25 MOSAIC THAT LED TO THE NAME CHANGE?
71 - [add a note]
1 A. NO, I WAS ADVISED OF THE DISPUTE WITH THE UNIVERSITY
2 OF ILLINOIS, AND I TOLD THE BOARD AND CEO TO SETTLE AND
3 GET OUT OF THERE AND CHANGE THE NAME OF THE COMPANY, BUT I
4 DON'T REMEMBER A SPYGLASS BEING A PARTY TO THAT SUIT.
5 Q. ARE EASE OF USE AND THE ABILITY TO BRING MULTIMEDIA
6 INFORMATION TO THE CONSUMER, PHRASE USED IN THE LAST
7 SENTENCE OF THIS PARAGRAPH, IS THAT WHAT USERS WANT FROM
8 THEIR BROWSERS?
9 A. THAT WOULD BE ONE OF THE THINGS.
10 Q. WHAT ELSE?
11 A. YOU ARE READING NOW FROM PARAGRAPH 11?
12 Q. I'M SORRY. I'M AT PARAGRAPH 12, AND IT WAS AT THE
13 VERY END OF THE PARAGRAPH, AND I JUST ASKED IF EASE OF USE
14 AND THE ABILITY TO BRING MULTIMEDIA INFORMATION TO THE
15 CONSUMER IS WHAT USERS WANT FROM BROWSERS.
16 A. I THINK THOSE WOULD BE THE PRIMARY CHARACTERISTICS.
17 Q. WHAT ELSE WOULD THEY WANT?
18 A. WELL, THEY WOULD WANT--AS A PRODUCT, THEY WOULD WANT
19 RELIABILITY, THEY WOULD WANT A GOOD PRICE, THEY WOULD WANT
20 TO EASE THE EFFECT OF GETTING A HOLD OF IT. THEY WOULD
21 WANT TO BE ABLE TO UPGRADE IT, WOULD WANT A RELIABLE
22 MANUFACTURER. THERE ARE A LOT OF OTHER CHARACTERISTICS,
23 BUT I WOULD THINK THIS WOULD BE A COUPLE OF THE MAIN
24 DRIVERS.
25 Q. THANKS.
72 - [add a note]
1 LOOKING AT PAGE TEN, THAT'S PARAGRAPH 15 THAT
2 BEGINS ON THE PREVIOUS PAGE AND CONCLUDES ON PAGE 11--AND
3 ACTUALLY, I WANT TO DIRECT YOUR ATTENTION TO THE LAST
4 SENTENCE WHICH GOES FROM TEN TO ELEVEN, IF YOU WOULD READ
5 THAT, PLEASE.
6 A. YOU WANT TO READ IT OUT LOUD?
7 Q. NO, YOU COULD READ IT, AND THEN I WILL ASK YOU A
8 QUESTION ABOUT IT.
9 (WITNESS REVIEWS DOCUMENT.)
10 Q. YOU STATE, I BELIEVE, THERE THAT THE PLATFORM ASPECT
11 OF THE BROWSER, TOGETHER WITH SOME BENEFITS OF JAVA, GOING
12 TO THE TOP OF THE 11, "HAD THE POTENTIAL TO SERVE AS A
13 PARTIAL SUBSTITUTE FOR THE WINDOWS OPERATING SYSTEM AS A
14 DEVELOPER PLATFORM;" DO YOU SEE THAT?
15 A. YES, SIR.
16 Q. DID YOU EVER CLAIM THAT THE BROWSER WOULD BE A
17 COMPLETE SUBSTITUTE FOR THE OPERATING SYSTEM AS A
18 DEVELOPMENT PLATFORM?
19 A. NO, SIR, I DIDN'T.
20 Q. DID MARK ABDRESSEEN EVER SO CLAIM?
21 A. I'M AWARE OF A COUPLE OF STATEMENTS MARK MADE AT
22 CONFERENCES ABOUT--THAT THE OPERATING SYSTEM, THAT MANY OF
23 ITS FUNCTIONS WOULD BE REPLACED BY THIS OPEN PLATFORM. I
24 DON'T KNOW IF HE SAID ALL OF THEM, IF THAT WAS YOUR
25 QUESTION, BUT I WOULDN'T ARGUE THAT HE MIGHT HAVE SAID
73 - [add a note]
1 SOMETHING LIKE THAT.
2 Q. DID HE, IN FACT, SAY THAT NETSCAPE WOULD, QUOTE,
3 REDUCE WINDOWS TO A SET OF POORLY DEBUGGED DEVICE DRIVERS,
4 CLOSED QUOTE?
5 A. I BELIEVE THAT WAS ATTRIBUTED TO MARK AS IN HIS SENSE
6 OF HUMOR HE MADE THAT JOKE ONE TIME, WHICH IT WAS A JOKE.
7 Q. IT WAS?
8 A. AND INTENDED TO BE A JOKE, AND STILL IS A JOKE.
9 Q. HAS ITS JOKE QUALITY CHANGED AT ALL OVER TIME?
10 A. MR. ANDRESSEEN IS A YOUNG MAN THEN AND STILL A VERY
11 YOUNG MAN, COMPARED TO YOU AND ME, OFTEN MAKES STATEMENTS
12 THAT I WISH HE MIGHT NOT HAVE IN THE SPIRIT OF JOCULARITY
13 AND SOMETIMES SARCASM THAT HAVE GOTTEN US IN TROUBLE.
14 Q. DID YOU BELIEVE IN 1995 THAT IT WAS POSSIBLE FOR
15 NAVIGATOR TO SERVE AS A SUBSTITUTE FOR AT LEAST THE
16 PLATFORM CHARACTERISTICS OF WINDOWS?
17 A. NO.
18 Q. AND NETSCAPE, AS A COMPANY, DID NOT HOLD THAT BELIEF?
19 A. WE HAVE ALWAYS BELIEVED, AND WE STILL BELIEVE, THAT
20 IT CAN SUBSTITUTE FOR SOME OF THE CHARACTERISTICS. BUT WE
21 HAVE NEVER MAINTAINED IN ANY SERIOUS WAY THAT IT COULD
22 SUBSTITUTE FOR ALL OF IT.
23 Q. PLATFORM CHARACTERISTICS?
24 A. PLATFORM CHARACTERISTICS.
25 Q. NOW, I NOTE IN HERE--AND WE MAY HAVE TO GO BACK TO
74 - [add a note]
1 THE PREVIOUS PAGE, YES, THE SENTENCE BEFORE THE ONE WE
2 WERE LOOKING AT, YOU MAKE REFERENCE TO A NEW SUPER
3 PLATFORM FOR DEVELOPERS OF NETWORK-CENTRIC APPLICATIONS.
4 WHAT ARE NETWORK-CENTRIC APPLICATIONS?
5 A. THESE WOULD BE APPLICATIONS OR FUNCTIONS THAT WOULD
6 BE DESIGNED BY PEOPLE THAT WOULD ASSUME THAT YOU HAVE ALL
7 OF THE PARTICIPANTS OF THE NETWORK, EITHER A CORPORATE
8 NETWORK OR BETWEEN COMPANY NETWORKS OR A WHOLE INNER
9 NETWORK SO THAT THE APPLICATION WORKS TOGETHER SEAMLESSLY
10 ACROSS THE NETWORK, WHICH IS A SORT OF NEW AGE OF
11 APPLICATION DEVELOPMENT THAT'S GOING ON THESE DAYS.
12 Q. COULD SOME APPLICATIONS BE WRITTEN TO DIFFERENT
13 PLATFORMS?
14 A. YES.
15 Q. SO, ONE MIGHT WRITE AN APPLICATION TO A BROWSER OR TO
16 AN OPERATING SYSTEM?
17 A. CAN AND DO AND BOTH.
18 Q. BUT IT IS NOT YOUR TESTIMONY, I TAKE IT, THAT ANY
19 APPLICATION THAT COULD BE WRITTEN TO AN OPERATING SYSTEM
20 CAN BE WRITTEN TO A BROWSER?
21 A. THAT IS CORRECT.
22 Q. NOW, WHEN AN APPLICATION MAKES CALLS TO A BROWSER,
23 DOESN'T THE BROWSER, IN TURN, HAVE TO RELY ON A VARIETY OF
24 SERVICES IN THE OPERATING SYSTEM?
25 A. YES, SIR.
75 - [add a note]
1 Q. LET'S GO TO PAGE 12, PARAGRAPH 17, THE FIRST FULL
2 SENTENCE ON THAT PAGE, "UNFORTUNATELY, UNLIKE OTHER
3 COMPANIES, MICROSOFT'S NEW BUSINESS PLANS ALSO INCLUDED
4 PLANS FOR HOW TO ELIMINATE NETSCAPE AS A COMPETITOR
5 BECAUSE OF THE THREAT THE BROWSER POSED TO MICROSOFT'S
6 WINDOWS MONOPOLY."
7 NOW, THAT'S YOUR CONCLUSION; AM I CORRECT?
8 A. YES.
9 Q. AND IS THAT BASED ON ANYTHING OTHER THAN THE
10 REMAINDER OF YOUR TESTIMONY?
11 A. WELL, I BELIEVE IT'S BASED ON A NUMBER OF STATEMENTS
12 THAT I HAVE READ AND HEARD MADE BY MICROSOFT OVER THE
13 YEARS, INCLUDING MR. GATES'S OWN PAPER WHERE HE SAID A NEW
14 COMPETITOR HAS BEEN BORN ON THE INTERNET, AND HE REFERRED
15 TO US AS A COMPETITOR, WHICH, AT THAT TIME I NEVER--I
16 REALLY DIDN'T--I DIDN'T SEE WHY THEY WERE UPSET ABOUT US.
17 I THOUGHT THAT WE COULD COEXIST. WE WERE NOT GOING TO
18 REPLACE, AS HE SAID, AND MAKE THE OPERATING SYSTEM
19 IRRELEVANT OR GENERIC OR SOMETHING LIKE THAT. THAT WAS
20 NOT OUR INTENT. IT WAS NOT POSSIBLE TO DO THAT, BUT
21 MICROSOFT REGARDED US AS ATTEMPTING TO DO THAT, IT SEEMS,
22 BASED ON WHAT I READ OF WHAT THEY SAID.
23 Q. IS THAT WHAT YOU JUST TESTIFIED TO SET OUT SOMEWHERE
24 IN YOUR WRITTEN DIRECT TESTIMONY?
25 A. NO, SIR, THERE ARE A NUMBER OF PLACES WHERE I HEARD
76 - [add a note]
1 THINGS LIKE THAT DISCUSSED, AND THAT WOULD BE JUST ONE,
2 BUT THIS WAS MY OPINION.
3 Q. THIS IS YOUR OPINION, AND WHAT I'M TRYING TO FIND OUT
4 IS, IS THAT OPINION BASED ON MATERIAL THAT IS NOT INCLUDED
5 IN THE REST OF THE 127 PAGES OF YOUR WRITTEN DIRECT
6 TESTIMONY?
7 A. I MAY--I'M NOT SURE I UNDERSTAND. THIS IS MY DIRECT
8 TESTIMONY, WHICH IS BASICALLY MY OPINION ABOUT A LOT OF
9 THINGS, BUT I DON'T BELIEVE I GAVE EXHIBITS FOR EVERYTHING
10 IN THIS THAT I BELIEVE, NOR WOULD I HAVE IF I WERE GIVEN
11 THIS DIRECT TESTIMONY ON THE STAND.
12 Q. OKAY. SO, THERE MAY BE SOME OTHER DOCUMENTS THAT
13 CORROBORATE THAT STATEMENT; IS THAT WHAT YOU'RE SAYING?
14 A. YES, SIR.
15 Q. BUT YOU HAVE DISCUSSED TO THE EXTENT YOU HAVE
16 KNOWLEDGE OF FACTORS THAT MIGHT SUPPORT THAT CONCLUSION OR
17 OPINION. THEY'RE DISCUSSED ELSEWHERE IN THIS WRITTEN
18 DIRECT TESTIMONY; IS THAT RIGHT?
19 A. NOT ALL, BUT MANY.
20 Q. WHICH ONES WERE LEFT OUT?
21 A. WELL, I DON'T DISCUSS THE HISTORY OR DISCUSS THE
22 BACKGROUND. THIS IS MEANT TO BE THE INTRODUCTION OF THE
23 TESTIMONY, I THOUGHT.
24 Q. I'M NOT LIMITING YOU TO THIS PARAGRAPH. I'M SAYING
25 SOMEWHERE IN THIS WHOLE 127 PAGES, HAVE YOU DISCUSSED
77 - [add a note]
1 EVERYTHING ON WHICH THIS OPINION OR CONCLUSION IS BASED?
2 A. THIS ONE OPINION?
3 Q. YES.
4 A. OH. I WOULD SAY IN MY EXHIBITS--AM I ALLOWED TO USE
5 THAT?
6 Q. SURE.
7 A. I THINK THE EXHIBIT THAT IS THE MINUTES OF THE
8 MEETING OF JUNE OF '95, THAT WAS THE CLEAR IMPRESSION OF
9 THE MICROSOFT PEOPLE, AND THE MEETING IN EARLY JUNE WHEN I
10 MET WITH NATHAN MYHRVOLD AND MARITZ AND ROSEN. THAT WAS
11 SORT OF THE GIST OF IT, THAT THIS WAS--THAT THIS WAS A
12 PLATFORM, AND THAT THEY AND WE WANTED TO OPTIMIZE IT AS A
13 PLATFORM. BUT THEN I LATER FOUND OUT THEY DIDN'T PLAN FOR
14 US TO BE PART OF THAT PARTY.
15 Q. OKAY. WE WILL COME TO THAT IN DUE COURSE.
16 NOW, IS THERE ANYTHING NOT IN EITHER YOUR WRITTEN
17 DIRECT TESTIMONY OR THE EXHIBITS REFERRED TO THEREIN THAT
18 YOU'RE BASING THIS OPINION OR CONCLUSION AT THE TOP OF
19 PAGE 12 ON?
20 A. YOU MEAN ANY OTHER EXHIBITS?
21 Q. ANYTHING ELSE THAT ISN'T AVERRED TO--I THINK YOU SAID
22 THERE MAY BE SOME OTHER CORROBORATING DOCUMENTS.
23 A. YES.
24 Q. BUT IS THERE ANY INFORMATION NOT CONTAINED IN EITHER
25 YOUR DIRECT TESTIMONY OR YOUR EXHIBITS THAT YOU'RE BASING
78 - [add a note]
1 THIS OPINION OR CONCLUSION ON?
2 A. LET ME MAKE SURE I UNDERSTAND THE OPINION OR
3 CONCLUSION. YOU'RE TALKING ABOUT MICROSOFT'S NEW BUSINESS
4 ALWAYS INCLUDES PLAN HOW TO ELIMINATE NETSCAPE AS A
5 COMPETITOR?
6 Q. YES, YES.
7 A. OH, MY GOODNESS. I THOUGHT YOU WERE TALKING ABOUT IT
8 BEING A PLATFORM.
9 WELL, I STILL STAND BY THAT MEETING NOTES. THAT
10 WOULD CERTAINLY--
11 Q. THOSE ARE EXHIBITS TO YOUR TESTIMONY?
12 A. THAT'S WHAT I SAID.
13 Q. YES.
14 A. I WOULD SAY THAT THEIR BEHAVIOR IN THE WAY THEY WENT
15 AFTER THE ISP'S, THE OEM'S, THE ISV'S, THE PEOPLE WHO
16 DISTRIBUTED THESE PRODUCTS, CLEARLY THEY DID NOT--THEY
17 INCLUDED PLANS HOW TO ELIMINATE US AS A COMPETITOR BECAUSE
18 OF THE THREAT THE BROWSER POSED TO MICROSOFT'S WINDOWS
19 MONOPOLY.
20 Q. OKAY. ALL THOSE THINGS ARE REFERRED TO SOMEWHERE IN
21 THIS 127 PAGES, AREN'T THEY?
22 A. I THINK THAT'S 97 PERCENT OF THIS 127 PAGES.
23 Q. WHAT I'M TRYING TO FIND OUT, IS THERE ANYTHING THAT'S
24 NOT IN THIS 127 PAGES AND THE ASSOCIATED EXHIBITS ON WHICH
25 YOU HAVE BASED THIS OPINION OR CONCLUSION, WHICHEVER TERM
79 - [add a note]
1 YOU WOULD PREFER?
2 THE COURT: MR. BARKSDALE, WHAT HE WANTS TO KNOW,
3 IS HE GOING TO GET SANDBAGGED WITH ANYTHING LATER ON?
4 THE WITNESS: I SEE HOW THIS WORKS.
5 MR. WARDEN: THANK YOU, YOUR HONOR.
6 THE WITNESS: THERE MAY BE.
7 BY MR. WARDEN:
8 Q. WHAT?
9 A. ALL I KNOW IS WE WENT AND DISCUSSED THIS OVER A
10 PERIOD OF TIME, THESE PREDATORY ACTS, WITH THE DEPARTMENT
11 OF JUSTICE. WE COULDN'T GET CONTRACTS FROM THESE PEOPLE.
12 WE COULDN'T GET DIRECT STATEMENTS. WE ARE NOT A
13 GOVERNMENT AGENCY OR LAW-ENFORCEMENT AGENCY. WE ASKED OUR
14 DEPARTMENT OF JUSTICE FOR WHOM OR TAXES GO TO PAY THEIR
15 SALARIES TO LOOK INTO THIS MATTER. I ASSUME THEY GOT
16 PLENTY OF THINGS THAT WOULD CORROBORATE THIS. IF YOU ASK
17 ME WHAT THEY HAVE, THEY HAVE NOT MADE THEM AVAILABLE TO
18 ME, BUT I THINK THEY PROBABLY WOULD BE THE ONES YOU WOULD
19 HAVE TO ASK THAT.
20 Q. THAT'S FINE. IF THEY HADN'T MADE THEM AVAILABLE TO
21 YOU, YOU COULDN'T BE BASING YOUR OPINION OR CONCLUSION ON
22 THEM, COULD YOU?
23 A. MY OPINION OR CONCLUSION IS BASED ON WHAT I SAW IN
24 THE OTHER END OF THE RECEIVING END OF THESE ACTS, SO I
25 ASSUME THEY GOT THE DOCUMENTS TO PROVE THE ACTUAL PURPOSE
80 - [add a note]
1 WAS TO PUT US OUT OF BUSINESS.
2 Q. I'M NOT ASKING FOR YOUR ASSUMPTIONS ABOUT INFORMATION
3 SOMEONE ELSE MIGHT HAVE. YOU MADE THIS STATEMENT. THIS
4 IS YOUR SWORN STATEMENT.
5 A. AND I BELIEVE IT.
6 Q. AND I'M ASKING YOU QUITE SIMPLY--YOU COULD TAKE THE
7 JUDGE'S QUESTION IF YOU WOULD LIKE--IS THERE ANYTHING YOU
8 BASED YOUR SWORN STATEMENT ON, THIS CONCLUSORY STATEMENT,
9 OTHER THAN WHAT'S SET FORTH IN THE REST OF YOUR 127 PAGES
10 OF DIRECT TESTIMONY?
11 A. YES, SIR.
12 Q. WHAT?
13 A. FOUR YEARS OF TALKING TO MY SALES FORCE AND MY
14 CUSTOMERS AND THE PEOPLE WHO DEPEND ON ME AND MY
15 SHAREHOLDERS WHO TELL ME THINGS ABOUT WHAT MICROSOFT IS
16 TRYING TO DO TO US.
17 Q. AND ANY IN ANY OF THOSE CONVERSATIONS DID SUBJECTS
18 COME UP THAT AREN'T ADDRESSED IN THESE 127 PAGES?
19 A. YES.
20 Q. WHAT KIND OF SUBJECTS?
21 A. SUBJECTS THAT I THOUGHT WERE IMPORTANT THAT HAD AN
22 INFLUENCE ON MY MIND, BUT I DID NOT BELIEVE WERE PART OF
23 THIS DIRECT TESTIMONY BECAUSE I DID NOT THINK THEY WERE
24 CORE OR CENTRAL TO MY CASE, SUCH AS--WOULD YOU LIKE TO
25 KNOW?
81 - [add a note]
1 Q. YES.
2 A. WELL, FOR EXAMPLE, I HAVE MAINTAINED FOR SOME TIME
3 THAT MICROSOFT HAD A CONCERTED PUBLIC RELATIONS ATTACK ON
4 MY COMPANY THAT THE HIGHEST OFFICIALS OF MICROSOFT MADE
5 STATEMENTS AGAINST MY COMPANY, BUT I DON'T THINK I FURTHER
6 ON ENUMERATED ALL THESE STATEMENTS, THAT BILL GATES IS
7 QUOTED AS SAYING THAT HE WAS GOING TO TAKE US OUT OF
8 BUSINESS TO THE FINANCIAL TIMES, THAT THE PRESIDENT OF
9 MICROSOFT, MR. BALLMER, HAS MADE NUMEROUS STATEMENTS ABOUT
10 GETTING AFTER US AND PUBLISH SOME, AND WE PUT A COUPLE IN
11 HERE, BUT THERE HAVE BEEN MANY OTHERS, BUT I DON'T KNOW IF
12 I'M GOING TO LATER INTRODUCE THEM AT SOME POINT BECAUSE I
13 FELT AT THE TIME IT'S A ROUGH AND TUMBLE WORK AND FIGHT
14 LIKE WE GOT TO FIGHT, BUT I DIDN'T THINK FOR A MINUTE
15 THESE WERE SORT OF NORMAL PITY-PAT COMPETITIVE SORT OF
16 ROUGH AND TUMBLE THINGS.
17 I SAID TRASH TALK IS ON THE COURT--ON THE FLOOR
18 OF THE BASKETBALL COURT, NOT THE COURTROOM, LEAVE IT
19 THERE, AND LET'S GO TO THESE THINGS THAT APPEAR TO BE THE
20 MOST PREDATORY, BUT THERE WERE CERTAINLY OTHER THINGS.
21 Q. IS THERE ANYTHING ELSE YOU THINK THE JUDGE SHOULD
22 BASE HIS DECISION ON THAT YOU HAVEN'T SET FORTH IN THIS
23 127 PAGES?
24 A. NO, SIR, I DON'T THINK SO.
25 Q. NOW, YOU REFERRED TO PAYING TAXES FOR THE DEPARTMENT
82 - [add a note]
1 OF JUSTICE. MICROSOFT DOES THAT TOO, OF COURSE, DOESN'T
2 IT?
3 A. MICROSOFT PAYS A LOT OF TAXES. GOD BLESS THEM FOR
4 IT.
5 Q. AND YOU HAVE A LEGAL DEPARTMENT IN YOUR COMPANY,
6 DON'T YOU?
7 A. YES, SIR.
8 Q. AND YOU HAVE ACCESS TO SOPHISTICATED AND EXPERIENCED
9 OUTSIDE COUNSEL, DO YOU NOT?
10 A. YES, SIR.
11 Q. IF ALL THESE GREAT WRONGS WERE DONE YOU, WHY DIDN'T
12 YOU FILE YOUR OWN LAWSUIT AGAINST MICROSOFT?
13 A. TOO EXPENSIVE.
14 Q. WHAT ARE THE REVENUES OF NETSCAPE THIS YEAR?
15 A. THE PROFITS OR THE REVENUE.
16 Q. THE REVENUES?
17 A. THIS YEAR WOULD BE SEVERAL HUNDRED MILLION DOLLARS.
18 Q. WELL, MAYBE OVER 500 MILLION?
19 A. THIS YEAR, NO, SIR.
20 Q. HOW ABOUT LAST YEAR?
21 A. OVER 500.
22 Q. WHEN DOES YOUR YEAR END, BY THE WAY, YOUR FISCAL
23 YEAR?
24 A. NEXT WEEK, THE END OF OCTOBER. IT'S THAT NEXT WEEK
25 OR THE WEEK AFTER.
83 - [add a note]
1 Q. OKAY. LET'S GO TO PAGE 12, PARAGRAPH 18, ABOUT
2 TWO-THIRDS OF THE WAY DOWN THE PARAGRAPH IT SAYS, "BY THE
3 END OF 1995, NETSCAPE HAD COLLECTED APPROXIMATELY $45
4 MILLION IN REVENUE FROM BROWSERS. YOU SEE THAT?
5 A. YES, SIR.
6 Q. HOW MANY COPIES WAS THAT? HOW MANY UNITS?
7 A. FOR THE FULL YEAR?
8 Q. YES.
9 A. IN CUSTOMERS OR COPIES?
10 Q. COPIES.
11 A. NOW, YOU UNDERSTAND THAT CUSTOMERS GET MULTIPLE
12 COPIES AS YOU RELEASE NEW RELEASES.
13 Q. ALL RIGHT. AS YOU RELEASE NEW RELEASES, THE SAME
14 CUSTOMER MIGHT BUY AN UPGRADED VERSION?
15 A. AS PART OF HIS LICENSE HE GETS AN AUTOMATIC UPGRADE,
16 YES, SIR.
17 Q. HOW MANY--I WILL STICK WITH HOW MANY COPIES.
18 A. HERE YOU'RE REFERRING TO THE END OF '95?
19 Q. THE YEAR 1995.
20 A. FOR THE YEAR 1995, HOW MANY COPIES WOULD WE HAVE
21 DISTRIBUTED, COUNTING RELEASE UPON RELEASE OF THE COPY IN
22 THAT PERIOD OF TIME?
23 I WOULD ESTIMATE--WOULD YOU ACCEPT SEVERAL
24 MILLION?
25 Q. FIVE MILLION? TEN MILLION?
84 - [add a note]
1 A. WELL, YOU SEE, WE DON'T HAVE AN ACCURATE WAY OF
2 KNOWING THAT. I WOULD SAY IT WOULD BE IN EXCESS OF 10
3 MILLION.
4 THE REASON WE DON'T IS MANY COPIES OF OUR PRODUCT
5 ARE REDISTRIBUTED THROUGH WHAT ARE CALLED MIRROR SITES WHO
6 DON'T REPORT BACK TO US THE NUMBER OF COPIES DISTRIBUTED.
7 A LOT OF TIMES WE DISTRIBUTE COPIES INSIDE A CORPORATION
8 AND THEY DISTRIBUTE THEM TO MANY, MANY SEATS THAT THEY
9 DON'T TELL US ABOUT. IN CERTAIN COUNTRIES IN THE WORLD,
10 THEY DISTRIBUTE MILLIONS WITHOUT TELLING ANYTHING ABOUT
11 IT.
12 Q. OR PAYING YOU?
13 A. THAT'S CORRECT, PIRATED COPIES. I WOULD SAY BY THE
14 END OF '95, TEN TO TWENTY MILLION.
15 Q. TWENTY MILLION, THANKS.
16 AND IN THAT YEAR, WHAT WAS THE BREAKDOWN OF YOUR
17 BUSINESS BETWEEN ENTERPRISE AND CONSUMERS?
18 A. I DON'T HAVE THAT NUMBER.
19 Q. DO YOU HAVE ANY RECOLLECTION AT ALL? WAS IT TILTED
20 ONE WAY OR THE OTHER?
21 A. YOU'RE TALKING ABOUT REVENUE OR COPIES?
22 Q. WELL, WE WILL START WITH COPIES, THEN WE WILL GO TO
23 REVENUE.
24 A. WELL, IN THAT PARTICULAR YEAR '95, I WOULD SAY BOTH
25 REVENUE AND COPIES WOULD HAVE BEEN TILTED MORE TOWARDS
85 - [add a note]
1 ENTERPRISE COMPANIES, PURCHASES.
2 Q. ALL RIGHT. LET'S GO TO THE NEXT PAGE, PARAGRAPH 19,
3 THE REFERENCE AT THE TOP OF THE PAGE YOU WILL SEE TO THE
4 OEM DISTRIBUTION CHANNEL.
5 A. YES.
6 Q. COUPLE OF SENTENCES THERE.
7 HOW MANY OEM DEALS DID YOU HAVE IN 1995?
8 A. LET ME MAKE A SHORT DISTINCTION HERE, IF I CAN, THAT
9 WILL HELP BECAUSE IN MY TESTIMONY I DIDN'T BREAK THIS OUT.
10 I WAS GENERALLY REFERRING TO OEM'S AS PC OEM'S, BUT WE
11 ALSO HAD OTHER OEM DEALS WHERE COMPANIES, AS AN OEM
12 DISTRIBUTOR, OUR SERVER PRODUCTS, AND THOSE WOULD BE FEWER
13 IN NUMBER, BUT ACTUALLY CONTRIBUTED A LOT TO OUR REVENUE.
14 BUT FOR THE PC OEM DISTRIBUTION CHANNEL, HOW MANY DID WE
15 HAVE AT THE END OF THAT YEAR? IS THAT WHAT YOU WANT TO
16 KNOW?
17 Q. HOW MANY DID YOU HAVE AT ANY TIME DURING THAT YEAR?
18 WHAT WAS THE LARGEST NUMBER YOU HAD?
19 A. I DON'T KNOW EXACTLY. I WOULD SAY IT WAS TEN TO
20 TWENTY, PROBABLY.
21 Q. AND HOW MANY BROWSERS WERE DISTRIBUTED THROUGH THAT
22 CHANNEL IN 1995?
23 A. IN 1995, PROBABLY NOT VERY MANY, BUT--
24 Q. LESS THAN A MILLION?
25 A. AT THE END OF THE YEAR, WE SHIPPED OUR RETAIL
86 - [add a note]
1 PRODUCT, OUR DOLLAR PRODUCT, AND SO IT PEAKED UP AT THE
2 END OF THE YEAR, BUT I WOULD SAY A FEW MILLION.
3 WE INTRODUCED OUR FIRST RETAIL PRODUCT WHICH WENT
4 ON STORE SHELVES, AND IT ALSO HAD A DIALER IN IT, THIS
5 THING WE WERE TRYING TO GET FROM MICROSOFT IN THIS JUNE
6 MEETING.
7 Q. A DIALER?
8 A. A DIALER, SO YOU COULD DIAL UP THE NETWORK SO A
9 CONSUMER COULD GET ACCESS TO THE NETWORK. WE MADE THAT
10 PRODUCT AVAILABLE TO THE PC OEM'S AT ABOUT THAT TIME, SO
11 IT BECAME A MUCH MORE POPULAR AVENUE FOR US.
12 AND THAT THIS WAS IN NOVEMBER, SO IN NOVEMBER AND
13 DECEMBER WE PROBABLY MOVED, OH, COUPLE OF MILLION.
14 Q. THROUGH THE OEM CHANNEL?
15 A. YES.
16 Q. AND IN 1996, HOW MANY DID YOU MOVE THROUGH THE OEM
17 CHANNEL?
18 A. I DON'T KNOW HOW TO ANSWER THAT SPECIFICALLY. I
19 WOULD SAY SEVERAL MILLION.
20 Q. FEWER THAN FIVE?
21 A. I WOULD SAY PROBABLY MORE THAN FIVE, FEWER THAN TEN.
22 Q. HOW ABOUT 1997?
23 A. CALENDAR '97 WOULD PROBABLY HAVE BEEN FEWER THAN
24 THAT.
25 Q. WELL, HOW MUCH IN COMPARISON?
87 - [add a note]
1 A. BY THEN WE WERE STARTING TO LOSE A LOT OF OUR PC OEM
2 DEALS, SO I GUESS IT WENT DOWN RATHER DRAMATICALLY IN '97,
3 PARTICULARLY IN THE LATTER PART OF '97, PROBABLY FEWER
4 THAN A MILLION.
5 Q. OKAY. AND WHAT WAS YOUR PRICED OEM'S IN 1995? I
6 MEAN, IT COULD BE IN TERMS OF AVERAGE. I'M NOT ASKING FOR
7 A SPECIFIC NUMBER.
8 A. ANYWHERE FROM 50 CENTS TO A FEW DOLLARS, DEPENDING ON
9 THE NUMBER THAT THEY WERE PLANNING TO DISTRIBUTE PER COPY.
10 Q. AND IN '96?
11 A. PER COPY?
12 Q. YES.
13 A. PROBABLY WOULD HAVE BEEN ABOUT THE SAME.
14 Q. AND IN '97.
15 A. PROBABLY ABOUT THE SAME.
16 Q. WHEN YOU SAY A FEW DOLLARS, YOU MEAN LESS THAN FIVE?
17 A. TO A PC OEM IN GENERAL WITH ANY QUANTITY, IT WOULD
18 HAVE BEEN LESS THAN FIVE.
19 EXCUSE ME, JUST TO MAKE SURE I GOT THE RECORD
20 STRAIGHT, DURING '96, I BELIEVE, LATE '95 AND '96, WE
21 ALSO, WITH THE PC OEM'S, HAD DISTRIBUTION ARRANGEMENTS
22 LIKE WITH COMPAQ, WHERE, FOR INSTANCE, IF ONE OF THE ISP'S
23 WOULD HOOK UP THROUGH THIS NEW RETAIL COMPAQ MACHINE, WE
24 GOT A BOUNTY FROM THE ISP TO PAY FOR IT, AND THAT COULD BE
25 MORE THAN $5 PER COPY. THAT WOULD BE IN THE NEIGHBORHOOD
88 - [add a note]
1 OF 15 TO $20 A COPY.
2 Q. WHO PAID YOU THE BOUNTY? THE ISP OR THE OEM?
3 A. THE ISP THAT HAD CONNECTED FOR THIS PARTICULAR OEM
4 WOULD PAY US, I THINK, IN MOST CASES, IF NOT ALL OF IT.
5 Q. YOU SAY HERE, I BELIEVE, IN THE NEXT--WELL, THE THIRD
6 SENTENCE ON PAGE 13, THAT A BROWSER INSTALLED ON A NEW
7 MACHINE PURCHASED BY NEW COMPUTER OWNER WAS VERY LIKELY TO
8 CONTINUE TO BE USED BY THE NEW OWNER. YOU SEE THAT?
9 A. YES.
10 Q. WHAT'S THE BASIS FOR THAT STATEMENT?
11 A. AS THE CONSUMER USE OF THE INTERNET HAS EVOLVED OVER
12 THE LAST FEW YEARS, IN THE FIRST COUPLE OF YEARS OF
13 NETSCAPE'S EXISTENCE, YOU SAW A LOT OF PEOPLE DOWNLOADING
14 THE PRODUCT OFF THE INTERNET ITSELF BECAUSE THEY WERE WHAT
15 WE CALLED EARLY ADOPTERS. THEY WERE TECHNICALLY
16 PROFICIENT. THEY WERE IN THE INDUSTRY, MOST THEM WORKED
17 FOR THE COMPUTER COMPANIES OR WERE IN THE INDUSTRY. AND
18 AS IT BECAME MORE A TRUE RETAIL PRODUCT WHERE PEOPLE WOULD
19 GO TO THE STORE AND IT WAS BUNDLED WITH THE PC THAT THEY
20 BOUGHT, THEY WOULD COME OUT OF THE STORE, AND THEY WOULD
21 TEND TO LOAD IN THE BROWSER AND USE IT, OR IT WOULD COME
22 UP ON THE MACHINE.
23 AND AS THAT HAS CHANGED, YOU SEE VARIOUS STUDIES
24 THAT SAY THAT PEOPLE NOW TEND TO BE MUCH MORE BIASED
25 TOWARDS THE PRODUCT THAT CAME WITH THE MACHINE.
89 - [add a note]
1 Q. WELL, AM I MISTAKEN, THEN, IN READING THIS SENTENCE
2 THAT I JUST REFERRED TO AS REFERRING TO THE CONDITIONS IN
3 1995? I CALL YOUR ATTENTION TO THE FACT THAT THE VERB IS
4 "WAS."
5 A. YES.
6 Q. SO, THAT REFERS TO CONDITIONS IN 1995; IS THAT
7 CORRECT?
8 A. RIGHT.
9 Q. AND IN 1995, IF YOU GOT A NEW MACHINE WITH A BROWSER
10 ON IT, YOU WERE LIKELY TO CONTINUE TO USE IT?
11 A. IT SAYS VERY LIKELY.
12 Q. VERY LIKELY.
13 A. IT IS NOW MORE LIKELY.
14 Q. ALL RIGHT. NOW WE GO ON DOWN--BEFORE WE DO THAT,
15 LET'S SAY CONTINUE TO BE USED. YOU MEAN USED EXCLUSIVELY,
16 OR WOULD THAT INCLUDE HAVING MORE THAN ONE BROWSER ON YOUR
17 MACHINE?
18 A. THAT WOULD INCLUDE, IN SOME CASES, MORE THAN ONE
19 BROWSER IN THE MACHINE. THERE ARE ESTIMATES IT'S
20 SOMEWHERE AROUND, I BELIEVE IT'S 30 PERCENT OF THE PEOPLE
21 WHO USE BROWSERS FROM HOME HAVE BOTH PRODUCTS ON IT, AND
22 THEY CAN USE THEM EITHER/OR, AND THE OTHER 70 PERCENT HAVE
23 ONE OR THE OTHER.
24 Q. BOTH BROWSERS, YOU MEAN YOURS AND MICROSOFT'S; IS
25 THAT RIGHT?
90 - [add a note]
1 A. THOSE ARE THE TWO PREDOMINANT ONES TODAY. IT WOULD
2 BE NORMAL THAT IF YOU HAD ONE WITH THE MACHINE, YOU WOULD
3 USE IT, AND THEN YOU MIGHT BRING IT THE OTHER COMPANY'S
4 PRODUCT AND BEGIN TO USE THEM INTERCHANGEABLY.
5 Q. AND HOW MANY USERS SWITCH BACK AND FORTH?
6 A. I HAVE SEEN STUDIES ON THAT. I DON'T KNOW I HAVE AN
7 ACCURATE ASSESSMENT. I KNOW FOR THOSE WHO USE--WHO HAVE
8 BOTH PRODUCTS ON THE MACHINE, THE MAJORITY PREFER THE
9 NETSCAPE NAVIGATOR.
10 Q. WELL, IF THEY PREFER IT, WHY DO THEY HAVE THE OTHER
11 ONE ON THE MACHINE?
12 A. BECAUSE IT CAME WITH THE MACHINE.
13 Q. I SEE. HOW MANY PEOPLE ARE WE TALKING ABOUT?
14 A. PEOPLE--CONSUMERS?
15 Q. WHATEVER TERM YOU USED AND WHATEVER GROUP YOU WERE
16 TALKING ABOUT.
17 A. PROBABLY TODAY--EXCUSE ME. PEOPLE WHO WOULD HAVE
18 BOTH PRODUCTS, CONSUMERS WHO WOULD HAVE BOTH PRODUCTS?
19 SEVERAL MILLION NOW WOULD HAVE BOTH PRODUCTS. IT'S NOT
20 ALL THAT UNCOMMON.
21 Q. AND THEY'RE PRIMARILY, ACCORDING TO YOUR TESTIMONY,
22 PEOPLE WHO BOUGHT A MACHINE WITH WINDOWS AND ADDED
23 NAVIGATOR OR COMMUNICATOR; IS THAT CORRECT?
24 A. THAT'S WHAT OUR RESEARCH WOULD INDICATE.
25 Q. NOW, ISN'T IT TRUE THAT MICROSOFT INCLUDED INTERNET
91 - [add a note]
1 EXPLORER 1.0 IN WINDOWS 95 WHEN IT WAS FIRST RELEASED TO
2 OEM'S IN AUGUST 1995?
3 A. IS THAT MY TESTIMONY?
4 Q. NO. I DON'T KNOW WHETHER IT IS OR ISN'T. I'M NOT
5 REFERRING TO YOUR TESTIMONY.
6 A. NO, THAT WOULD NOT BE TRUE.
7 Q. THAT IS NOT TRUE. WHEN DID IE 1.0 TECHNOLOGIES GO
8 INTO WINDOWS 95?
9 A. I DON'T KNOW THAT IE 1.0 WENT INTO WINDOWS 95. IT
10 WAS SOLD AS A SEPARATE PRODUCT WHEN YOU GOT THE MACHINE.
11 WHEN YOU SAID IT WAS INCLUDED IN WINDOWS 95, IT REALLY
12 WASN'T. IT WAS A STAND-LONE BROWSER THAT WAS SOLD WITH
13 THE MACHINE IN THE BUNDLE CALLED WINDOWS 95 WHEN IT WAS
14 INTRODUCED IN THE FALL OF '95.
15 Q. IN THE OEM CHANNEL WHEN THE USER GOT IT, WAS IE 1.0
16 ON THE MACHINE?
17 A. ACTUALLY, IN '95 WE STILL HAD A COMMANDING LEAD OF PC
18 OEM'S WHO PREFERRED AND PUT OUR PRODUCT ON THERE AND
19 DIDN'T NECESSARILY SHIP 1.0 WITH IT, BUT IT STILL WAS NOT
20 EVER SHIPPED AS INCLUDED WITH WINDOWS 95. THAT'S THE MAIN
21 POINT I'M MAKING.
22 Q. WHAT DO YOU MEAN BY NOT EVER SHIPPED AS INCLUDED
23 WITH?
24 A. IT WAS A SEPARATE STAND-ALONE BROWSER. IT RAN ON TOP
25 OF WINDOWS 95 LIKE THE NETSCAPE NAVIGATOR DID. IT HAD
92 - [add a note]
1 BEEN LICENSED FROM SPYGLASS THE PREVIOUS FALL, AND THE
2 PRODUCT WAS BASED ON THE SPYGLASS STAND-ALONE BROWSER.
3 Q. AND WAS IT ON A SEPARATE DISK?
4 A. I THINK IT CAME WITH THE WINDOWS 95, EITHER THE
5 ORIGINAL OR THE PLUS, WHICH WAS THE FALL PRODUCT, I THINK,
6 SOMEWHERE IN THERE, ON THE WINDOWS--ON THE HARD DRIVE FROM
7 THE PC OEM.
8 Q. AND ISN'T IT TRUE THAT THE INTERNET EXPLORER ICON
9 APPEARED ON THE DESKTOP OF WINDOWS 95?
10 A. IN SOME CASES. I DON'T THINK IN ALL CASES.
11 Q. YOU DO NOT THINK IN ALL CASES.
12 AND ISN'T IT TRUE THAT THERE WAS NO SEPARATE
13 CHARGE FOR INTERNET EXPLORER 1.0?
14 A. THAT'S SORT OF MY POINT.
15 Q. AND ISN'T IT ALSO TRUE THAT MICROSOFT INCLUDED
16 INTERNET EXPLORER 2.0 IN WINDOWS 95 VERSIONS THAT WERE
17 RELEASED LATER IN THE YEAR 1995?
18 A. I DON'T BELIEVE THAT WAS TRUE THEN EITHER THAT IT WAS
19 INCLUDED. IT WAS INCLUDED WITH THE PRODUCT, AND ICON CAME
20 UP ON THE PRODUCT WHEN YOU LOADED THE CD-ROM. WHETHER IT
21 CAME FROM PC OEM OR NOT, YOU GOT IT.
22 Q. YOU GOT IT, AND YOU GOT IT WITH THE ICON; IS THAT
23 CORRECT?
24 A. IF YOU ELECTED TO LOAD IT.
25 Q. THE CONSUMER HAD TO MAKE THE ELECTION TO LOAD IT?
93 - [add a note]
1 A. AND BY THE WINDOWS 2.0 THEY MAY NOT HAVE. IT MAY
2 HAVE BEEN ON THE SCREEN.
3 Q. NOW, DURING THE PERIOD THAT MICROSOFT WAS INCLUDING
4 IE 1 AND IE 2 IN WINDOWS 95, WHAT WAS MICROSOFT'S SHARE OF
5 THE BROWSER MARKET AS YOU USED THAT TERM?
6 A. WELL, LET'S SEE. PROBABLY BY THE TIME--YOU MEAN BY
7 THE TIME THEY GOT TO 3.0?
8 Q. UP TO THE 3.0 POINT.
9 A. WELL, 3.0 IS THE FALL OF '96; CORRECT? SO, BY THAT
10 TIME, MICROSOFT, I WOULD SAY BY OCTOBER OF '96, PROBABLY
11 HAD FIVE, SIX POINTS OF SHARE.
12 Q. THAT'S PERCENT?
13 A. YES, SIR, PERCENTAGE OF--NOW, THIS PERCENTAGE OF
14 MARKET IS A LITTLE BIT COMPLICATED, BUT THIS WOULD BE
15 BASED ON--OUR INTERNAL CALCULATIONS OF MARKET SHARE ARE
16 BASED ON THE WAY WE DID IT AT THAT TIME, AND STILL TO THIS
17 DAY DO IT, BUT THAT'S OUR SHARE NUMBERS. THAT WOULD NOT
18 NECESSARILY CORRELATE TO OUTSIDE PHONE SURVEYS OF WHAT DO
19 YOU GOT. OURS TEND TO BE MORE REPRESENTATIVE OF WHAT YOU
20 USE.
21 Q. OKAY. I CAN'T ASK YOU TO DO ANY BETTER THAN YOUR
22 COMPANY'S RECORDS.
23 A. AGAIN, '96, I COULD BE MORE SPECIFIC.
24 Q. THAT'S FINE.
25 ISN'T IT TRUE THAT IT WAS NOT UNTIL MICROSOFT
94 - [add a note]
1 RELEASED IE 3.0 THAT ITS SHARE OF WHAT YOU TERM THE
2 BROWSER MARKET BEGAN TO INCREASE?
3 A. YOU MEAN, ISN'T IT TRUE THAT BEGINNING ABOUT '96
4 FALL, IT BEGAN TO INCREASE? THAT WOULD BE VERY TRUE.
5 Q. THAT'S AT THE TIME OF THE RELEASE, FROM THE TIME OF
6 THE RELEASE OF INTERNET EXPLORER 3.0?
7 A. CORRECT.
8 AND THAT NEXT YEAR WE LOST 20 POINTS OF SHARE.
9 Q. LET'S GO ON DOWN TO THE ISP DISCUSSION IN THE SAME
10 PARAGRAPH 19 ON PAGE 13.
11 A. I'M SORRY? IN PARAGRAPH 19?
12 Q. YES. ON PAGE 13.
13 A. I GOT IT.
14 Q. HOW MANY ISP RELATIONSHIPS DID YOU HAVE IN 1995?
15 A. I THINK BY THE END OF '95, WE HAD SOMEWHERE AROUND A
16 THOUSAND--BETWEEN A THOUSAND AND 1200, SOMEWHERE IN THERE,
17 WORLDWIDE.
18 Q. AND HOW MANY BROWSERS WERE DISTRIBUTED THROUGH THEM
19 IN THAT YEAR?
20 A. PROBABLY--IN '95?
21 Q. YES, SIR.
22 A. BY THE END OF THE YEAR, WHICH IS KIND OF WHERE I WAS
23 GETTING TO--YOU SEE UNTIL WE HAD THE DIALER PRODUCT, THE
24 ISP DISTRIBUTION DIDN'T WORK AS WELL. I WOULD SAY
25 PROBABLY BY THE END OF THAT YEAR A RUN RIGHT THROUGH ISP'S
95 - [add a note]
1 WAS PROBABLY HALF OF THAT 20 MILLION I TOLD YOU ABOUT.
2 THAT WOULD BE THE RUN RIGHT NOW. I DON'T KNOW
3 THAT YOU COULD SAY IF YOU TOOK THE FULL YEAR IT WOULD BE--
4 Q. YOU WERE AT THAT ANNUALIZED RATE BY THE END OF THE
5 YEAR?
6 A. YES.
7 Q. SO IT WASN'T HALF OF THE 20 MILLION?
8 A. THAT WAS THE RUN RATE.
9 Q. NOW, YOU NEED AN ISP TO GET CONNECTED TO THE
10 INTERNET, EVEN IF YOU ALREADY HAVE A BROWSER INSTALLED BY
11 THE OEM; IS THAT RIGHT?
12 A. IN ITS BROADEST TERM, THAT WOULD BE CORRECT.
13 Q. AND NONETHELESS, ISP'S OFFER BROWSERS AND CUSTOMERS
14 OBTAIN THEM FROM ISP'S; IS THAT RIGHT?
15 A. THAT IS CORRECT.
16 Q. INCLUDING CUSTOMERS WHO ALREADY HAVE THEM INSTALLED
17 BY THE OEM?
18 A. YES, SIR.
19 Q. IS THE CUSTOMER WHO OBTAINS A BROWSER FROM AN ISP
20 MORE LIKELY TO STICK WITH IT THAN THE CUSTOMER WHO GETS
21 ONE FROM AN OEM?
22 A. THAT WOULD BE A VERY HARD QUESTION TO PUT IT THAT
23 WAY.
24 I THINK TODAY IT WOULD BE--ARE YOU TALKING ABOUT
25 NOW IN '95?
96 - [add a note]
1 Q. LET'S FIRST TAKE '95, AND THEN WE WILL TAKE TODAY.
2 A. I WOULD THINK THAT IN '95 ISP'S, LET'S SAY BY THE END
3 OF THE YEAR WHEN THIS IS BECOMING A VERY POPULAR THING,
4 GOT TO HAVE ONE, ISP'S PROBABLY HAD MORE INFLUENCE OVER
5 END USERS THAN OEM'S BECAUSE THEY COULD DISTRIBUTE THEM
6 MUCH FASTER. IN OTHER WORDS, THEY COULD DISTRIBUTE THEM
7 TO ALL THE WINDOWS 3.1S THAT WERE OUT THERE, NOT JUST NEW
8 MACHINES BEING SHIPPED. FROM A PURE NUMERICAL POINT OF
9 VIEW, IT HAD A BIGGER HEAD START.
10 BUT TODAY--AND AGAIN, TO YOUR QUESTION, IF YOU
11 GOT IT FROM YOUR ISP, YOU WOULD TEND TO USE THAT PRODUCT
12 MORE BECAUSE AN ISP ALSO TENDS TO LINK YOU TO THEIR WEB
13 PAGE WHERE THEY MAY GIVE YOU VARIOUS THINGS TO TRY TO GET
14 YOU BUSINESS WITH, SO YOU TEND TO STICK WITH THAT AS WELL.
15 TODAY, PROBABLY, BY AND LARGE IN THE CONSUMER
16 MARKET, WHICH IS WHO ARE PRIMARILY DEPENDENT ON ISP'S, YOU
17 COULD ARGUE THAT, I DON'T KNOW, PEOPLE ARE VERY LIKELY TO
18 STAY WITH EITHER THE ISP OR THE PRODUCT ISP GAVE THEM OR
19 THE PC OEM, LITTLE BIT OF BOTH. I DON'T KNOW THAT I COULD
20 CUT IT THAT FINE.
21 Q. IN 1995, HOW MUCH DID NETSCAPE CHARGE PER BROWSER IN
22 THE ENTERPRISE SEGMENT? AVERAGE WOULD BE FINE.
23 A. OH, MY GOODNESS. AGAIN, IT WAS A DISCOUNT PROGRAM
24 BASED ON THE NUMBER OF SEATS THAT THE ENTERPRISE LICENSED
25 FROM US, AND IT WOULD HAVE RANGED FROM A FEW DOLLARS TO
97 - [add a note]
1 40, $50.
2 NO, ABOUT 30 TO $40.
3 Q. HOW ABOUT IN RETAIL CHANNELS?
4 A. RETAIL, BECAUSE IT WASN'T A DISCOUNTED PRODUCT, THEY
5 WOULD HAVE BEEN PAYING AROUND--THE RETAIL PRICE, THE SHELF
6 PRICE WOULD HAVE BEEN 49, AROUND THERE. THE RETAILER
7 COULD SET DIFFERENT PRICES AND OFFER DISCOUNTS.
8 Q. HOW ABOUT THOSE WHO DOWNLOADED IT FROM THE INTERNET?
9 A. THE HOME CONSUMER? IN '95?
10 Q. YES.
11 A. I THINK THE PRICE WAS $39. IT MAY HAVE BEEN CHANGED
12 TO 49 AT THE END OF THE YEAR.
13 Q. IT WASN'T AVAILABLE, IN FACT, FREE FOR DOWNLOAD
14 FROM--
15 A. NO, SIR.
16 Q. NO?
17 A. NO.
18 AND IF YOU LOOK AT THE LICENSE, IT SAYS YOU HAVE
19 A 90-DAY FREE TRIAL IF THAT'S WHAT YOU MEAN, BUT THEN IN
20 90 DAYS IF YOU CONTINUE ON USING THIS PRODUCT, PLEASE SEND
21 US $39 OR $49.
22 Q. AND HOW MANY OF THEM DID?
23 A. MILLIONS.
24 Q. HOW MANY MILLIONS?
25 A. WELL, WE NEVER WERE ABLE TO ACCURATELY CALCULATE
98
1 THAT, BUT I WOULD SAY IT WAS A NICE PRODUCT FOR US. IT
2 BROUGHT IN SEVERAL MILLION DOLLARS PER QUARTER FOR US, BUT
3 I DON'T KNOW EXACTLY HOW MANY END PRODUCTS IT WOULD BE.
4 Q. WHAT PERCENTAGE OF PEOPLE WHO DOWNLOADED PAY?
5 A. I DON'T HAVE THAT NUMBER.
6 Q. DID YOU EVER TRY TO FIGURE THAT OUT?
7 A. I DON'T THINK I DID. IT WAS NOT FIGURE-OUTABLE,
8 GIVEN OUR ACCOUNTING SYSTEM.
9 Q. DID YOU MAKE ANY EFFORT TO ENFORCE PAYMENT
10 REQUIREMENTS AGAINST THOSE WHO DIDN'T PAY?
11 A. IT WAS NOT COMPENSATORY TO DO THAT.
12 Q. DID YOU EVER--
13 A. EXCUSE ME. YOU'RE TALKING STILL ABOUT THE ONE RETAIL
14 CUSTOMER THAT LOADED ONE COPY?
15 Q. THAT'S CORRECT.
16 A. WE DID NOT HAVE AN ENFORCEMENT METHOD TO GET THEM TO
17 PAY US BECAUSE IT COST MORE THAN $39 TO COLLECT THE $39.
18 Q. DIDN'T YOU HAVE EVERY USER'S E-MAIL ADDRESS?
19 A. YES.
20 NO. WE WOULD HAVE HAD THE VAST MAJORITY OF THEM.
21 Q. DID YOU EVER SEND THEM AN E-MAIL WHEN THEY DIDN'T
22 PAY?
23 A. I THINK WE TRIED THAT A COUPLE OF TIMES AND DIDN'T
24 SEEM TO WORK TOO WELL.
25 Q. DO YOU HAVE A BREAKDOWN OF BROWSER REVENUES BETWEEN
99 - [add a note]
1 CONSUMERS AND ENTERPRISES? NOT COPIES NOW. REVENUES.
2 A. NOW?
3 Q. NO, BACK IN 1995, AND THEN WE WILL TALK ABOUT NOW.
4 A. I DON'T THINK WE DID. WE COULDN'T--WE COULDN'T KEEP
5 UP WITH IT WELL ENOUGH AT THAT TIME.
6 Q. LET'S TAKE A LOOK AT PARAGRAPH 20 THERE ON THE SAME
7 PAGE. IN THE SECOND LINE YOU REFER TO NETSCAPE'S BUSINESS
8 MODEL.
9 DO YOU HAVE COPY OF THAT BUSINESS MODEL, OR CAN
10 YOU HAVE ONE LOCATED IN NETSCAPE'S FILES?
11 A. OUR FIRST WRITTEN BUSINESS MODEL THAT I'M AWARE OF
12 WAS IN THE NOVEMBER '95ISH TIME FRAME. I COULD PROBABLY
13 FIND A COPY OF IT FOR YOU. I DON'T HAVE A COPY OF IT. I
14 REMEMBER ONE BEING PRODUCED.
15 Q. WELL, I ASK MY COLLEAGUES TO LOOK FOR THIS IN THE
16 NETSCAPE PRODUCTION, AND THEY ADVISED ME WE CAN'T FIND
17 ONE. IF YOU COULD FIND ONE, PERHAPS I WOULD GREATLY
18 APPRECIATE THAT.
19 A. I THINK I COULD FIND YOU ONE. WE PRODUCED JUST TWO
20 OR THREE COPIES BECAUSE THIS IS A VERY PRIVATE DOCUMENT.
21 IT MAY NOT BE PUBLICLY AVAILABLE, BUT IT'S FAIRLY
22 EASY TO GET YOUR HAND ON THE DOCUMENT WE PUT TOGETHER
23 BASED ON THAT DOCUMENT WHEN WE WENT OUT FOR A SECOND ROUND
24 OF FINANCING IN THE SPRING OF '95 AND RAISED SOME MONEY,
25 AND IT WAS BASED ON THE DOCUMENT.
100 - [add a note]
1 Q. OKAY. THAT'S NOT THE IPO. THAT'S THE SECOND PRIVATE
2 PLACEMENT?
3 A. ROUND B, YES, SIR.
4 Q. OKAY.
5 THE COURT: MR. WARDEN, WHEN YOU FIND A
6 CONVENIENT PLACE TO BREAK FOR THE DAY.
7 MR. WARDEN: THIS IS QUITE A CONVENIENT PLACE.
8 THE COURT: THEN WE ARE THROUGH FOR THE DAY.
9 10:00 TOMORROW MORNING.
10 (WHEREUPON, AT 4:54 P.M., THE HEARING WAS
11 ADJOURNED UNTIL 10:00 A.M., THE FOLLOWING DAY.)
101 - [add a note]
1 CERTIFICATE OF REPORTER
2
3 I, DAVID A. KASDAN, RPR, COURT REPORTER,
Do HEREBY TESTIFY THAT THE FOREGOING PROCEEDINGS WERE
STENOGRAPHICALLY RECORDED BY ME AND THEREAFTER REDUCED
TO FORM BY COMPUTER-ASSISTED TRANSCRIPTION UNDER
MY DIRECTION AND SUPERVISION; AND THAT THE FOREGOING
TRANSCRIPT IS A TRUE RECORD AND ACCURATE RECORD OF THE
PROCEEDINGS. I FURTHER CERTIFY THAT I AM NEITHER COUNSEL
FOR, RELATED TO, NOR EMPLOYED BY ANY OF THE PARTIES TO THIS
ACTION IN THIS PROCEEDING, NOR FINANCIALLY OR OTHERWISE
INTERESTED IN THE OUTCOME OF THIS LITIGATION.
___________________
15 DAVID A. KASDAN