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Weekly Column

Check and Mate?: How Microsoft Just Might Beat the DOJ After All

Status: [CLOSED]
By Robert X. Cringely

After the holiday break in Washington, the Department of Justice's antitrust case against Microsoft rolls on. A trial that was supposed to end before Christmas looks like it will drag on until February or March. The government calls its witnesses and Microsoft tries to grind them down in cross-examination. It is a war of attrition and the defense — Microsoft's chance to do its thing — hasn't even started. When it does, the machinery of justice will run in reverse, and the government will do the grinding. That's why lawyers charge by the hour.

It hasn't looked good lately for Microsoft. The e-mail trail has been damning and the government's star witness — Bill Gates — has looked particularly dopey on videotape. I predicted that long ago. So far Microsoft seems to be leaning on a mixture of legal foot-dragging, libertarian claims that the world no longer requires antitrust legislation, and a Hail Mary defense that sounds to me like, "The dog ate my homework." Judge Penfield Jackson doesn't seem to be buying Microsoft's digital logic, either. Even a week ago, I would have predicted that Microsoft would lose this time around and hope to reverse on appeal. But now I have changed my mind.

It looks likely to me that the antitrust case against Microsoft will be over before Christmas, with Redmond the effective victor. And remember Sun's case against Microsoft over Java? That one will be gone, too — also in Microsoft's favor. Only Caldera v. Microsoft will survive, and little Caldera might win after all, though by then it will hardly matter.

Mighty Microsoft is about to strike back.

What could so change the legal landscape in such a short amount of time? And if such amazing legal footwork is even possible, why hasn't it happened before now? Why did Microsoft even allow this case to go to trial? Because Microsoft's lump of green kryptonite didn't exist before November 17th.

How will Microsoft beat this rap? Certainly not in court. The DOJ is wiping the floor with Microsoft, troubled only by that little problem of proving that consumers have been hurt by Bill Gates' success. It will take a backroom deal to save Microsoft, and just such a deal is in the works. But forget about consent decrees and voluntary corporate dismemberment. This deal isn't between Microsoft and the Feds, but between Microsoft and a little startup company in Chicago called Eolas Development Corporation.

On November 17th, little Eolas came into effective control of U.S. patent number 5,838,906 for an invention described as "a distributed hypermedia method for automatically invoking external application providing interaction and display of embedded objects within a hypermedia document." Say that fast three times. The patent is held by The University of California in the name of inventors Michael Doyle, David Martin and Cheong Ang. Doyle is the CEO of Eolas, which is the exclusive licensee of the patent.

Read the patent, and you'll see it covers the use of embedded program objects, or applets within Web documents. The patent also covers the use of any algorithm that implements dynamic, bi-directional communications between Web browsers and external applications. Every Web browser you can name currently supports embedded applets, and is therefore in violation of the Eolas patent. But wait, there's more! The Eolas patent covers the whole concept of executable content, which is at the very foundation of Java. So it looks like Java, too, is in violation of the patent. For that matter, so is Microsoft's Internet Explorer and ActiveX.

The patent stems from work done in 1993 by Doyle and Co. at the University of California at San Francisco, where they built an interactive 3-D medical visualization. These guys showed working applets and plug-ins in their enhanced version of Mosaic to NCSA, Microsoft and Sun a couple of years before any similar products like Navigator 2.0 or Java appeared on the market. It's not like these outfits can claim to have developed their products ignorant of Eolas' work.

What does this have to do with the various Microsoft legal cases?

In the case of Sun versus Microsoft, it looks like Eolas is in a position to put Java out of business, if it likes, not to mention big parts of Netscape and AOL.

Now I am definitely NOT a lawyer, but there seem to be a couple important legal principles at work here. One has to do with the apparent conflict between patent law and antitrust law. Patent law is intended to encourage the development of intellectual property by granting to its developer a time-limited monopoly on the use of that property. Antitrust law is intended to protect the public against illegal monopolies. But a patent is a legal monopoly and apparently exempt from antitrust control. Even further, the government cannot induce infringement of a U.S. patent even if it is to correct an antitrust problem.

The other issue is control of technology and, by extension, control of industry. Microsoft doesn't control Eolas, so it can't effectively control the technology that is encompassed by the Eolas patent. And little Eolas is hardly going to be accused of antitrust. So Microsoft needs Eolas, but needs it to remain independent.

What's missing in all this is the inevitable licensing deal between Microsoft an Eolas. There is always the prospect, of course, that Eolas could license its patent broadly to all comers, but it is worth much more on a more exclusive basis. Or Eolas could license its patent just to Sun or AOL, but that's unlikely, too. The simple fact is that Microsoft has more money than any of these other companies and Microsoft will pay ANYTHING for this license. This is an instance, I believe, where having deeper pockets is not, in itself, illegal.

Congress could take action to change the playing field, but a Republican Congress likes Microsoft, and is unlikely to do anything.

So I would expect a sweetheart licensing deal to be announced soon between Microsoft and Eolas, after which Eolas will take legal action against AOL and Sun. Microsoft, hiding behind Eolas, will file for a dismissal of at least the Sun suit and probably the DOJ suit, too. And it will probably work.

Eolas shareholders will rejoice, as will the University of California. The rest of us, I'm not so sure about.

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