United States v. Microsoft Corp

147 F.3d 935 (D.C. Cir. 1998)

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Nature of the Case

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Facts

A computer operating system provides a basic support structure for an application via 'application programming interfaces' ('APIs'). Each operating system's APIs are unique; hence, applications tend to be written for particular operating systems. In an earlier opinion, also arising from litigation generated by the Justice Department's 1994 antitrust suit against D, IBM chose to install D's operating system on its personal computers. D acquired an 'installed base' on millions of IBM and IBM-compatible PCs. That base constituted an exceptional advantage, and created exceptional risks of monopoly, because of two characteristics of the software industry--increasing returns to scale and network externalities. D's large installed base increases the incentive for independent software vendors to write compatible applications and thereby increases the value of its operating system to consumers. D had established a commanding share of the marketplace in excess of 90%. A consent decree with United States (P) in prior litigation enjoined D from conditioning the sale of its operating system on the additional purchase of a separate software product. The decree left a massive hole in it such that D could take those same products and integrate them into the operating system and sell the integrated product with impunity. D integrated its web browser, Internet Explorer, with its Windows 95 operating system. D's Windows 95 license agreements have required OEMs to accept and install the software package as sent to them by Microsoft, including Internet Explorer, and have prohibited OEMs from removing any features or functionality, i.e., capacity to perform functions such as browsing. P alleged a violation of the consent decree. P claimed that this agreement and license effectuated a 'tie-in' between the operating system and the browser. P filed a petition seeking to hold D in civil contempt. D had responded that a Windows 95 operating system without the Internet Explorer software code simply would not function. The district court issue a preliminary injunction barring Microsoft from 'forcing OEMs to accept and preinstall the software code' separately distributed as Internet Explorer 3.0. D appealed.