World War 3.0: Microsoft and Its Enemies

by Ken Auletta

Overview

The Internet Revolution, like all great industrial changes, has made the world's elephantine media companies tremble that their competitors-whether small and nimble mice or fellow elephants-will get to new terrain first and seize its commanding heights. In a climate in which fear and insecurity are considered healthy emotions, corporate violence becomes commonplace. In the blink of an eye-or the time it has taken slogans such as "The Internet changes everything" to go from hyperbole to banality-"creative destruction" has wracked the global economy on an epic scale.

No one has been more powerful or felt more fear or reacted more violently than Bill Gates and Microsoft. Afraid that any number of competitors might outflank them-whether Netscape or Sony or AOL Time Warner or Sun or AT&T or Linux-based companies that champion the open-source movement or some college student hacking in his dorm room-Microsoft has waged holy war on all foes, leveraging its imposing strengths.

In World War 3.0, Ken Auletta chronicles this fierce conflict from the vantage of its most important theater of operations: the devastating second front opened up against Bill Gates's empire by the United States government. The book's narrative spine is United States v. Microsoft, the government's massive civil suit against Microsoft for allegedly stifling competition and innovation on a broad scale. With his superb writerly gifts and extraordinary access to all the principal parties, Ken Auletta crafts this landmark confrontation into a tight, character- and incident-filled courtroom drama featuring the best legal minds of our time, including David Boies and Judge Richard Posner. And with the wisdom gleaned from covering the converging media, software, and communications industries for The New Yorker for the better part of a decade, Auletta uses this pivotal battle to shape a magisterial reckoning with the larger war and the agendas, personalities, and prospects of its many combatants.

Product Details

ISBN-13:	9780375506796
Publisher:	Random House Publishing Group
Publication date:	02/15/2001
Sold by:	Random House
Format:	eBook
Pages:	464
File size:	604 KB

About the Author

Ken Auletta as been the "Annals of Communication" columnist for The New Yorker since 1992. He is the author of seven previous books, including three national bestsellers. In ranking him as America's premier media critic, the Columbia Journalism Review concluded, "No other reporter has covered the new communications revolution as thoroughly as has Auletta."

He has written for various newspapers and magazines and appeared regularly as a television interviewer and analyst. He started writing for The New Yorker in 1977.

He grew up in Coney Island and now lives in New York City with his wife and daughter.

Read an Excerpt

Chapter 1: The Prosecutors



Bill Gates's nemesis, United States Assistant Attorney General Joel I. Klein, appeared an unlikely foe. Gates demonized the five foot seven, fifty-two-year-old chief of the Justice Department's Antitrust Division as a corporate-baiting populist, but in fact Klein was at first very much the voice of restraint in internal debates over whether to sue Microsoft. Klein was more Washington insider than maverick and proud of it. His was the classic second-generation immigrant-success story: he was a Bronx-born son of hardworking immigrant Jews from Hungary and Russia who pushed him to get the college education they lacked and who swelled with pride when he earned an academic scholarship to Columbia, where he majored in economics. After graduating magna cum laude from both Columbia and Harvard Law, where he was articles editor of the Harvard Law Review, Klein came to Washington in 1973 to clerk first for Chief Judge David
Bazelon of the U.S. Court of Appeals for the D.C. Circuit, and then for Supreme Court Justice Lewis Powell, Jr., where Klein was a passionate advocate for social justice, seeking to nudge the more conservative Powell (a nudge Powell welcomed). In their book on the Supreme Court—The Brethren—Bob Woodward and Scott Armstrong offer a
miniprofile of only one clerk: Joel Klein. "Powell had a profound impact on me," said Klein, who saw him as a philosopher-king. When Klein faces tough issues, he says he asks himself, "What would Justice Powell do?" What Powell usually did was move slowly, carefully.

After clerking for Justice Powell, Klein joined a public-interest law firm, the Mental Health Law Project, where he litigated on behalf of the mentally ill and retarded. Later, he and two colleagues started a law firm specializing in constitutional and health-care cases, and he remained active in mental-health issues, serving as treasurer of the World Federation for Mental Health and as chairman of the Green Door, a community-based mental health-treatment program in Washington.

Klein aspired to be inside the tent, and opportunities came at the annual Renaissance Weekends in Hilton Head, South Carolina, which were dominated by powerful Democrats and those who wanted to be, and which were co-organized by his Harvard classmate Philip Lader. Through this network, Klein came to the attention of Renaissance regulars such as Bill and Hillary Clinton, and when Clinton ran for president in 1992, Klein was aboard as a volunteer. When Clinton appointed Ruth Bader Ginsburg to the Supreme Court, Klein was asked to help prepare her for her Senate confirmation. In 1993, he was recruited by White House Counsel Bernard Nussbaum to succeed Vincent Foster as deputy White House counsel. He found himself quickly caught up in the internal debate over how much the Clintons should reveal about the failed Whitewater land deal and the proper handling of it. Klein pushed for full disclosure, and criticized Nussbaum's attendance at meetings with Treasury officials who were investigating the land deal. This position helped earn him the enmity of Nussbaum, who thought Klein too eager to please a braying press corps. "I don't talk about people I have nothing good to say about,"snapped Nussbaum when asked about Klein. Klein proved correct in his assessment that if the White House didn't release all documents relating to Whitewater, they would see them drip out torturously, one at a time.

With White House support, Klein was chosen by Anne K. Bingaman, head of the Justice Department's Antitrust Division, to be her deputy in 1995. At the time Klein came aboard, he found that Microsoft was at the top of the division's agenda, as it had been since 1993, when the members of the Federal Trade Commission had deadlocked over whether Microsoft's business practices were unduly thuggish and Bingaman's department had launched a major investigation. A year later,
Microsoft and Justice reached a settlement whereby Microsoft agreed to a consent decree that placed curbs both on its freedom to tie products together and on some of its contract restrictions, including one provision that had required PC manufacturers to pay a royalty to Microsoft for each machine sold regardless of whether it used Microsoft's operating system. But the consent decree also secured for Microsoft the right to "integrate" new features into its products, as
long as these features or applications were truly integrated and not bolted on to kill competition. The provision was vaguely worded: Microsoft was allowed, for example, to develop new features but not to sell or market them, which might be a distinction without a difference and one over which the two sides might one day bicker.

Among Klein's first tasks on joining the division was to defend this agreement with Microsoft in a Tunney Act proceeding, a normal procedure whereby the courts certify that such decrees are in the public interest. Although a Tunney Act proceeding is meant as a check, usually consent agreements are rubber-stamped by a judge. In this case, Judge Stanley Sporkin of the U.S. District Court didn't cooperate, however. Sporkin took the unusual step of ordering two hearings, during which he made much of a book he had read on the beach that was critical of Microsoft, and he questioned each side about its content.*

James Clark, the chairman of Netscape, irate at what he felt were Microsoft's efforts to strong-arm its way to dominance in the browser business, asked Gary Reback, an attorney with the Silicon Valley law firm of Wilson, Sonsini, Goodrich & Rosati, to weigh in. Reback filed an exhaustive amicus brief on behalf of three anonymous clients, as is permitted under the Tunney Act, in which he asserted that the consent decree was toothless and therefore not in the public interest. At the end of the hearings, Sporkin concurred, ruling in February 1995 that the consent decree was an "ineffective remedy" to curb Microsoft's predations. Sporkin did not mince words:

Microsoft has done extremely well in its business in a relatively short period of time, which is a tribute both to its talented
personnel and to this nation's great ethic that affords every citizen the ability to rise to the top. Microsoft, a rather new corporation, may not have matured to the position where it understands how it should act with respect to the public interest and the ethics of the market place. In this technological age, this nation's cutting edge companies must guard against being captured by their own technology and becoming robotized.

Table of Contents

	Chronology	xi
	Prologue	xvii
Chapter 1	The Prosecutors	3
Chapter 2	Hard Core	28
Chapter 3	The First Pitch	38
Chapter 4	Opening Salvos	53
Chapter 5	The Government's Story	77
Chapter 6	Microsoft's Hole Gets Deeper	108
Chapter 7	Spin	130
Chapter 8	The Real Bill Gates	140
Chapter 9	Children at Play	160
Chapter 10	Elephants and Mice	170
Chapter 11	Microsoft's Witnesses Speak	182
Chapter 12	Nerds in the Bunker	210
Chapter 13	Spring Break	228
Chapter 14	Exile	236
Chapter 15	The Trial's Final Innings	252
Chapter 16	The Trial Pauses, the Planet Doesn't	265
Chapter 17	Judge Jackson's "Facts"	284
Chapter 18	The Mediator	309
Chapter 19	Disconnect: Washington, D.C., vs. Redmond, Washington	317
Chapter 20	Davos, Again	333
Chapter 21	So Much Effort, So Little Result	340
Chapter 22	Remedy, and Appeal	369
Chapter 23	Microsoft Loses Even if It Wins	385
	Glossary	398
	Acknowledgments	403
	Bibliography	409
	Index	415

What People are Saying About This

Lawrence Lessig

The Microsoft case is the most important legal dispute of this century or the last. Ken Auletta has done something extraordinary in making its significance sing. His book is a perfect integration of the legal and the business drama at the heart of the case. His insights are relevant not just to the narrow field of antitrust, but to democracy in a technology-governed world in general, and to the struggles that will define the coming decades.
— (Lawrence Lessig, author of Code and Other Laws of Cyberspace)

Richard C. Levin

With assurance and skill, Ken Auletta weaves complex economic, legal, and technological ideas into a most compelling story. Like all fine courtroom dramas, the book's hallmark is its vivid delineation of the character of the protagonists. To transform a complex antitrust case into such a gripping narrative is an impressive accomplishment.
— (Richard C. Levin, Beinecke Professor of Economics and President, Yale University)

Ron Chernow

It is hard to imagine a more absorbing account of Microsoft's marathon battle with the U.S. government and its legions of tenacious rivals. In prose that is at once deft, lucid and knowing, Ken Auletta unravels the mysteries of antitrust law, as well as the arcana of computers and the Internet, with magisterial ease. Who else could have packed so much information between two covers and yet made the narrative so fluent and compelling? Best of all, the book is liberally sprinkled with memorable portraits of the protagonists, ranging from the amazingly shrewd prosecutor, David Boies, to the doughty Judge Thomas Penfield Jackson. And the portrait of Bill Gates -- brilliant and visionary, but also mercurial, immature, and ultimately self-destructive -- takes on a tragic aura that no reader will forget. This book is a gripping courtroom drama, an elegy for Microsoft's warrior culture, and mandatory reading for anyone interested in the future of the Information Age.
— (Ron Chernow, author of Titan: The Life of John D. Rockefeller, Sr.)

Editorial Reviews

The Barnes & Noble Review
In World War 3.0: Microsoft and Its Enemies, Ken Auletta tells the story of history's most expensive antitrust case, the two-year-long courtroom battle between Microsoft and the Department of Justice that was estimated to have cost Microsoft alone over $100 million in legal fees. In a captivating book, parts of which were originally published as essays in The New Yorker, Auletta relates how Justice Department lawyer Joel Klein originally decided to challenge Microsoft for alleged anticompetitive practices directed against Netscape, how super-lawyer David Boies turned the government's originally weak case into a sure win, how the two sides came within inches of settling, and how Judge Thomas Penfield Jackson finally came to his now infamous decision to break up the corporate Goliath.

But this well-crafted and highly readable narrative is more than just a reporter's digest of the facts of the Microsoft trial. Auletta also paints vivid portraits of many of the trial's key figures, among them Boies, Judge Jackson, and Bill Gates himself. Although he readily admits that Bill Gates possesses a rare form of genius, Auletta portrays the 45-year-old tycoon as essentially an overgrown adolescent. He is fiercely competitive and quick to lose his temper, as when he broke down in frustration and shouted, "The government is wrong! They're just wrong!" He uses teenage jargon such as "hard core," a now infamous Microsoft term meaning tough and combative. And his two literary heroes are Holden Caulfield and Jay Gatsby, archetypal figures of adolescent stubbornness and romanticism. Although these characteristics may have helped propel Gates's entrepreneurial career, encouraging him to take risks that others would deem impossible, they also made him appear arrogant and untrustworthy in the eyes of Judge Jackson.

Like Gates, government lawyer David Boies is a risk taker, but unlike him, the slightly disheveled-looking trial lawyer is completely an adult. Boies, who gained even greater visibility for his Supreme Court defense of Al Gore last December, thrives on playing the game. Inside and outside of the courtroom, he is a high-stakes gambler. In an interview with Auletta, he admitted that "had Microsoft asked first, I might have represented Microsoft. I certainly don't think Microsoft was an evil empire. Nor do I think so now." Nonetheless, he went after Microsoft without mercy, pulling no punches in an all-out attempt to beat the opposition.

Boies's case presumably convinced Judge Jackson, though many trial watchers, particularly those inside Microsoft, believe that the judge was prejudiced against the corporation from the onset. Although Jackson often appears dim-witted and, according to Auletta, actually fell asleep in court on one occasion, Boies has said of him that he is much like Presidents Truman and Reagan. All three men "had been underestimated, had their intellects questioned, yet surprised critics with their tenacious convictions and vigorous common sense." Reading the book, it is hard not to agree with Boies's assessment. In fact, anyone who reads this book will walk away with not only a detailed knowledge of the ins and outs of the case against Microsoft but also an increased understanding of the chief players' methods and motives.

--Laura Beers

bn.com

He painstakingly recreates the broader context of the conflict, not only Microsoft's allegedly predatory behavior toward Netscape Navigator, but also its supposedly bullying treatment of companies like Apple, Intel, Sony, Sun Microsystems, Oracle and even, arguably, I.B.M.
— New York Times

Christopher Lehmann-Haupt

A long and interesting new book...At the heart of the book is a superb courtroom diary.
—New York Observer

James Buchan

Auletta has talked to everyone, has read everything and has set it all down...
—New York Times Book Review

Adam Liptak

The author, a media critic for The New Yorker, provides a minutely detailed description of the case that is enlivened byu his remarkable personal access to the combatants, including Gates, as we follow them negotiating the legal land mines of the Sherman Antitrust Act.
—Christian Science Monitor

Christian Science Monitor