|
Recent-case Supplement to Goetz & McChesney, Antitrust Law © All Rights Reserved, 2001 |
|
2001
Per Curiam: Microsoft Corporation appeals from judgments
of the District Court finding the company in violation of §§1 and 2 of the
Sherman Act and ordering various remedies. The action against Microsoft
arose pursuant to a complaint filed by the Microsoft’s appeal contests both the legal conclusions and the resulting remedial order.… First, Microsoft challenges the District Court’s legal conclusions as to all three alleged antitrust violations and also a number of the procedural and factual foundations on which they rest. Second, Microsoft argues that the remedial order must be set aside, because the District Court failed to afford the company an evidentiary hearing on disputed facts and, also, because the substantive provisions of the order are flawed. Finally, Microsoft asserts that the trial judge committed ethical violations by engaging in impermissible ex parte contacts and making inappropriate public comments on the merits of the case while it was pending. Microsoft argues that these ethical violations compromised the District Judge’s appearance of impartiality, thereby necessitating his disqualification and vacatur of his Findings of Fact, Conclusions of Law, and Final Judgment. … [W]e find that some but not all of Microsoft’s liability challenges have merit. Accordingly, we affirm in part and reverse in part the District Court’s judgment that Microsoft violated §2 of the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market; we reverse the District Court’s determination that Microsoft violated §2 of the Sherman Act by illegally attempting to monopolize the Internet browser market; and we remand the District Court’s finding that Microsoft violated §1 of the Sherman Act by unlawfully tying its browser to its operating system. [The circuit court says its ruling extends to the District Court’s adjudications with respect to several states’ pendent antitrust claims brought against Microsoft, which the lower court had found “coterminous” with the federal Sherman Act claims.] We also find merit in Microsoft’s challenge to the Final Judgment embracing the District Court’s remedial order. There are several reasons supporting this conclusion. First, the District Court’s Final Judgment rests on a number of liability determinations that do not survive appellate review; therefore, the remedial order as currently fashioned cannot stand. Furthermore, we would vacate and remand the remedial order even were we to uphold the District Court’s liability determinations in their entirety, because the District Court failed to hold an evidentiary hearing to address remedies-specific factual disputes. Finally, we vacate the Final Judgment on remedies, because the trial judge engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality. Although we find no evidence of actual bias, we hold that the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process. We are therefore constrained to vacate the Final Judgment on remedies, remand the case for reconsideration of the remedial order, and require that the case be assigned to a different trial judge on remand. We believe that this disposition will be adequate to cure the cited improprieties. … We vacate in full the Final Judgment embodying the remedial order and remand the case to a different trial judge for further proceedings consistent with this opinion. I. INTRODUCTION A. Background In July 1994, … the On May 18, 1998, shortly before issuance of the Microsoft II decision, the United States and a group of State plaintiffs filed separate (and soon thereafter consolidated) complaints, asserting antitrust violations by Microsoft and seeking preliminary and permanent injunctions against the company’s allegedly unlawful conduct.… Relying almost exclusively on Microsoft’s varied efforts to unseat Netscape Navigator as the preeminent Internet browser, plaintiffs charged four distinct violations of the Sherman Act: (1) unlawful exclusive dealing arrangements in violation of §1; (2) unlawful tying of IE to Windows 95 and Windows 98 in violation of §1; (3) unlawful maintenance of a monopoly in the PC operating system market in violation of §2; and (4) unlawful attempted monopolization of the Internet browser market in violation of §2.… … After a 76-day bench trial, the District Court issued its
Findings of Fact.… On B. Overview Before turning to the merits of Microsoft’s various arguments, we pause to reflect briefly on two matters of note, one practical and one theoretical.… [I]t is noteworthy that a case of this magnitude and complexity has proceeded from the filing of complaints through trial to appellate decision in a mere three years. See, e.g., United States v. United Shoe Mach. Corp., 110 F. Supp. 295, 298 (D. Mass. 1953) (over five years from filing of complaint to trial court decision). What is somewhat problematic, however, is that just over six years have passed since Microsoft engaged in the first conduct plaintiffs allege to be anticompetitive. As the record in this case indicates, six years seems like an eternity in the computer industry. By the time a court can assess liability, firms, products, and the marketplace are likely to have changed dramatically. This, in turn, threatens enormous practical difficulties for courts considering the appropriate measure of relief in equitable enforcement actions, both in crafting injunctive remedies in the first instance and reviewing those remedies in the second. Conduct remedies may be unavailing in such cases, because innovation to a large degree has already rendered the anticompetitive conduct obsolete (although by no means harmless). And broader structural remedies present their own set of problems, including how a court goes about restoring competition to a dramatically changed, and constantly changing, marketplace.… … The second matter of note is more theoretical in nature. We decide this case against a backdrop of significant debate amongst academics and practitioners over the extent to which “old economy” §2 monopolization doctrines should apply to firms competing in dynamic technological markets characterized by network effects. In markets characterized by network effects, one product or standard tends towards dominance, because “the utility that a user derives from consumption of the good increases with the number of other agents consuming the good.” [Citation.] For example, “an individual consumer’s demand to use (and hence her benefit from) the telephone network…increases with the number of other users on the network whom she can call or from whom she can receive calls.” [Citation.] Once a product or standard achieves wide acceptance, it becomes more or less entrenched. Competition in such industries is “for the field” rather than “within the field.” [Citation.] In technologically dynamic markets, however, such entrenchment may be temporary, because innovation may alter the field altogether. Rapid technological change leads to markets in which “firms compete through innovation for temporary market dominance, from which they may be displaced by the next wave of product advancements.” Microsoft argues that the operating system market is just such a market. Whether or not Microsoft’s characterization of the operating system market is correct does not appreciably alter our mission in assessing the alleged antitrust violations in the present case. As an initial matter, we note that there is no consensus among commentators on the question of whether, and to what extent, current monopolization doctrine should be amended to account for competition in technologically dynamic markets characterized by network effects. [Citations from law reviews omitted.] Moreover, it should be clear that Microsoft makes no claim that anticompetitive conduct should be assessed differently in technologically dynamic markets. It claims only that the measure of monopoly power should be different. For reasons fully discussed below, we reject Microsoft’s monopoly power argument. See infra Section II.A.… II. MONOPOLIZATION Section 2 of the Sherman Act makes it unlawful for a firm to
“monopolize.” The offense of monopolization has two elements: “(1) the
possession of monopoly power in the relevant market and (2) the willful
acquisition or maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business acumen, or
historic accident.” … A. Monopoly Power While merely possessing monopoly power is not itself an
antitrust violation, it is a necessary element of a monopolization charge, see
Grinnell, 384 Microsoft argues that the District Court incorrectly defined the relevant market. It also claims that there is no barrier to entry in that market. Alternatively, Microsoft argues that because the software industry is uniquely dynamic, direct proof, rather than circumstantial evidence, more appropriately indicates whether it possesses monopoly power. Rejecting each argument, we uphold the District Court’s finding of monopoly power in its entirety. 1. Market Structure a. Market definition “Because the ability of consumers to turn to other suppliers restrains a firm from raising prices above the competitive level,” Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986), the relevant market must include all products “reasonably interchangeable by consumers for the same purposes.” du Pont, 351 U.S. at 395. In this case, the District Court defined the market as “the licensing of all Intel-compatible PC operating systems worldwide,” finding that there are “currently no products—and…there are not likely to be any in the near future—that a significant percentage of computer users worldwide could substitute for [these operating systems] without incurring substantial costs.” Calling this market definition “far too narrow,” Microsoft argues that the District Court improperly excluded three types of products: non-Intel compatible operating systems (primarily Apple’s Macintosh operating system, Mac OS), operating systems for non-PC devices (such as handheld computers and portal websites), and “middleware” products, which are not operating systems at all. … Microsoft’s argument that Mac OS should have been included in the relevant market suffers from a flaw that infects many of the company’s monopoly power claims: the company fails to challenge the District Court’s factual findings, or to argue that these findings do not support the court’s conclusions. The District Court found that consumers would not switch from Windows to Mac OS in response to a substantial price increase because of the costs of acquiring the new hardware needed to run Mac OS (an Apple computer and peripherals) and compatible software applications, as well as because of the effort involved in learning the new system and transferring files to its format. The court also found the Apple system less appealing to consumers because it costs considerably more and supports fewer applications. Microsoft responds only by saying: “the district court’s market definition is so narrow that it excludes Apple’s Mac OS, which has competed with Windows for years, simply because the Mac OS runs on a different microprocessor.” This general, conclusory statement falls far short of what is required to challenge findings as clearly erroneous. Microsoft neither points to evidence contradicting the District Court’s findings nor alleges that supporting record evidence is insufficient …. Microsoft’s challenge to the District Court’s exclusion of non-PC based competitors, such as information appliances (handheld devices, etc.) and portal websites that host server-based software applications, suffers from the same defect: the company fails to challenge the District Court’s key factual findings. In particular, the District Court found that because information appliances fall far short of performing all of the functions of a PC, most consumers will buy them only as a supplement to their PCs. ... This brings us to Microsoft’s main challenge to the District Court’s market definition: the exclusion of middleware. Because of the importance of middleware to this case, we pause to explain what it is and how it relates to the issue before us. Operating systems perform many functions, including allocating computer memory and controlling peripherals such as printers and keyboards. Operating systems also function as platforms for software applications. They do this by “exposing”—i.e., making available to software developers—routines or protocols that perform certain widely-used functions. These are known as Application Programming Interfaces, or “APIs.” Software developers wishing to include that function in an application need not duplicate it in their own code. Instead, they can “call”—i.e., use—the Windows API. Windows contains thousands of APIs, controlling everything from data storage to font display. Every operating system has different APIs. Accordingly, a developer who writes an application for one operating system and wishes to sell the application to users of another must modify, or “port,” the application to the second operating system. Findings of Fact P 4. This process is both time-consuming and expensive.. “Middleware” refers to software products that expose their own APIs. Because of this, a middleware product written for Windows could take over some or all of Windows’s valuable platform functions—that is, developers might begin to rely upon APIs exposed by the middleware for basic routines rather than relying upon the API set included in Windows. If middleware were written for multiple operating systems, its impact could be even greater. The more developers could rely upon APIs exposed by such middleware, the less expensive porting to different operating systems would be. Ultimately, if developers could write applications relying exclusively on APIs exposed by middleware, their applications would run on any operating system on which the middleware was also present. Netscape Navigator and Java—both at issue in this case—are middleware products written for multiple operating systems. Microsoft argues that, because middleware could usurp the operating system’s platform function and might eventually take over other operating system functions (for instance, by controlling peripherals), the District Court erred in excluding Navigator and Java from the relevant market. The District Court found, however, that neither Navigator, Java, nor any other middleware product could now, or would soon, expose enough APIs to serve as a platform for popular applications, much less take over all operating system functions. Again, Microsoft fails to challenge these findings, instead simply asserting middleware’s “potential” as a competitor. The test of reasonable interchangeability, however, required the District Court to consider only substitutes that constrain pricing in the reasonably foreseeable future, and only products that can enter the market in a relatively short time can perform this function. See Rothery, 792 F.2d at 218. Whatever middleware’s ultimate potential, the District Court found that consumers could not now abandon their operating systems and switch to middleware in response to a sustained price for Windows above the competitive level. Nor is middleware likely to overtake the operating system as the primary platform for software development any time in the near future. Alternatively, Microsoft argues that the District Court should
not have excluded middleware from the relevant market because the primary focus of the plaintiffs’ §2 charge is on Microsoft’s
attempts to suppress middleware’s threat to its operating system monopoly.
According to Microsoft, it is “contradictory,” b. Market power Having thus properly defined the relevant market, the District
Court found that Windows accounts for a greater than 95% share. The court also
found that even if Mac OS were included, Microsoft’s share would exceed 80%.
Microsoft challenges neither finding, nor does it argue that such a market
share is not predominant. Instead, Microsoft claims that even a predominant
market share does not by itself indicate monopoly power. Although the
“existence of [monopoly] power ordinarily may be inferred from the predominant
share of the market,” Grinnell, 384 Challenging the existence of the applications barrier to entry, Microsoft observes that software developers do write applications for other operating systems, pointing out that at its peak IBM’s OS/2 supported approximately 2,500 applications. This misses the point. That some developers write applications for other operating systems is not at all inconsistent with the finding that the applications barrier to entry discourages many from writing for these less popular platforms. Indeed, the District Court found that IBM’s difficulty in attracting a larger number of software developers to write for its platform seriously impeded OS/2’s success. Microsoft does not dispute that Windows supports many more applications than any other operating system. It argues instead that “it defies common sense” to suggest that an operating system must support as many applications as Windows does (more than 70,000, according to the District Court, to be competitive. Consumers, Microsoft points out, can only use a very small percentage of these applications. As the District Court explained, however, the applications barrier to entry gives consumers reason to prefer the dominant operating system even if they have no need to use all applications written for it.…. Thus, despite the limited success of its rivals, Microsoft benefits from the applications barrier to entry. Of course, were middleware to succeed, it would erode the
applications barrier to entry. Because applications written for multiple
operating systems could run on any operating system on which the middleware
product was present with little, if any, porting, the operating system market
would become competitive. Microsoft next argues that the applications barrier to entry is not an entry barrier at all, but a reflection of Windows’ popularity. It is certainly true that Windows may have gained its initial dominance in the operating system market competitively—through superior foresight or quality. But this case is not about Microsoft’s initial acquisition of monopoly power. It is about Microsoft’s efforts to maintain this position through means other than competition on the merits. Because the applications barrier to entry protects a dominant operating system irrespective of quality, it gives Microsoft power to stave off even superior new rivals.… Finally, Microsoft argues that the District Court should not have considered the applications barrier to entry because it reflects not a cost borne disproportionately by new entrants, but one borne by all participants in the operating system market. According to Microsoft, it had to make major investments to convince software developers to write for its new operating system, and it continues to “evangelize” the Windows platform today. Whether costs borne by all market participants should be considered entry barriers is the subject of much debate. We need not resolve this issue, however, for even under the more narrow definition it is clear that there are barriers. When Microsoft entered the operating system market with MS-DOS and the first version of Windows, it did not confront a dominant rival operating system with as massive an installed base and as vast an existing array of applications as the Windows operating systems have since enjoyed. Moreover, when Microsoft introduced Windows 95 and 98, it was able to bypass the applications barrier to entry that protected the incumbent Windows by including APIs from the earlier version in the new operating systems. This made porting existing Windows applications to the new version of Windows much less costly than porting them to the operating systems of other entrants who could not freely include APIs from the incumbent Windows with their own. 2. Direct Proof Having sustained the District Court’s conclusion that circumstantial evidence proves that Microsoft possesses monopoly power, we turn to Microsoft’s alternative argument that it does not behave like a monopolist. Claiming that software competition is uniquely “dynamic,” the company suggests a new rule: that monopoly power in the software industry should be proven directly, that is, by examining a company’s actual behavior to determine if it reveals the existence of monopoly power. According to Microsoft, not only does no such proof of its power exist, but record evidence demonstrates the absence of monopoly power.… Microsoft’s argument fails because, even assuming that the software market is uniquely dynamic in the long term, the District Court correctly applied the structural approach to determine if the company faces competition in the short term. Structural market power analyses are meant to determine whether potential substitutes constrain a firm’s ability to raise prices above the competitive level; only threats that are likely to materialize in the relatively near future perform this function to any significant degree.… Microsoft cites no case, nor are we aware of one, requiring direct evidence to show monopoly power in any market. We decline to adopt such a rule now. Even if we were to require direct proof, moreover, Microsoft’s
behavior may well be sufficient to show the existence of monopoly power.
Certainly, none of the conduct Microsoft points to—its investment in R&D
and the relatively low price of Windows—is inconsistent with the possession of
such power.… [E]ven monopolists have reason to invest
in R&D. Microsoft’s pricing behavior is similarly equivocal. The company
claims only that it never charged the short-term profit-maximizing price for
Windows. Faced with conflicting expert testimony, the District Court found that
it could not accurately determine what this price would be. More telling, the District Court found that some aspects of Microsoft’s behavior are difficult to explain unless Windows is a monopoly product. For instance, according to the District Court, the company set the price of Windows without considering rivals’ prices, something a firm without a monopoly would have been unable to do. The District Court also found that Microsoft’s pattern of exclusionary conduct could only be rational “if the firm knew that it possessed monopoly power.” It is to that conduct that we now turn. B. Anticompetitive Conduct … In this case, after concluding that Microsoft had monopoly power, the District Court held that Microsoft had violated §2 by engaging in a variety of exclusionary acts (not including predatory pricing), to maintain its monopoly by preventing the effective distribution and use of products that might threaten that monopoly. Specifically, the District Court held Microsoft liable for: (1) the way in which it integrated IE into Windows; (2) its various dealings with Original Equipment Manufacturers (“OEMs”), Internet Access Providers (“IAPs”), Internet Content Providers (“ICPs”), Independent Software Vendors (“ISVs”), and Apple Computer; (3) its efforts to contain and to subvert Java technologies; and (4) its course of conduct as a whole. Upon appeal, Microsoft argues that it did not engage in any exclusionary conduct. Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern: the means of illicit exclusion, like the means of legitimate competition, are myriad. The challenge for an antitrust court lies in stating a general rule for distinguishing between exclusionary acts, which reduce social welfare, and competitive acts, which increase it. From a century of case law on monopolization under §2, however, several principles do emerge. First, to be condemned as exclusionary, a monopolist’s act must have an “anticompetitive effect.” That is, it must harm the competitive process and thereby harm consumers. In contrast, harm to one or more competitors will not suffice. Second, the plaintiff, on whom the burden of proof of course rests, must demonstrate that the monopolist’s conduct indeed has the requisite anticompetitive effect. Third, if a plaintiff successfully establishes a prima facie case under §2 by demonstrating anticompetitive effect, then the monopolist may proffer a “procompetitive justification” for its conduct.. If the monopolist asserts a procompetitive justification—a nonpretextual claim that its conduct is indeed a form of competition on the merits because it involves, for example, greater efficiency or enhanced consumer appeal—then the burden shifts back to the plaintiff to rebut that claim. Fourth, if the monopolist’s procompetitive justification stands unrebutted, then the plaintiff must demonstrate that the anticompetitive harm of the conduct outweighs the procompetitive benefit. In cases arising under §1 of the Sherman Act, the courts routinely apply a similar balancing approach under the rubric of the “rule of reason.” Finally, in considering whether the monopolist’s conduct on balance harms competition and is therefore condemned as exclusionary for purposes of §2, our focus is upon the effect of that conduct, not upon the intent behind it. Evidence of the intent behind the conduct of a monopolist is relevant only to the extent it helps us understand the likely effect of the monopolist’s conduct. With these principles in mind, we now consider Microsoft’s objections to the District Court’s holding that Microsoft violated §2 of the Sherman Act in a variety of ways. 1. Licenses Issued to Original Equipment Manufacturers The District Court condemned a number of provisions in Microsoft’s agreements licensing Windows to OEMs, because it found that Microsoft’s imposition of those provisions (like many of Microsoft’s other actions at issue in this case) serves to reduce usage share of Netscape’s browser and, hence, protect Microsoft’s operating system monopoly. The reason market share in the browser market affects market power in the operating system market is complex, and warrants some explanation. Browser usage share is important because, as we explained in Section II.A above, a browser (or any middleware product, for that matter) must have a critical mass of users in order to attract software developers to write applications relying upon the APIs it exposes, and away from the APIs exposed by Windows. Applications written to a particular browser’s APIs, however, would run on any computer with that browser, regardless of the underlying operating system. If a consumer could have access to the applications he desired—regardless of the operating system he uses—simply by installing a particular browser on his computer, then he would no longer feel compelled to select Windows in order to have access to those applications; he could select an operating system other than Windows based solely upon its quality and price. In other words, the market for operating systems would be competitive. Therefore, Microsoft’s efforts to gain market share in one market (browsers) served to meet the threat to Microsoft’s monopoly in another market (operating systems) by keeping rival browsers from gaining the critical mass of users necessary to attract developer attention away from Windows as the platform for software development.… a. Anticompetitive effect of the license restrictions The restrictions Microsoft places upon Original Equipment Manufacturers are of particular importance in determining browser usage share because having an OEM pre-install a browser on a computer is one of the two most cost-effective methods by far of distributing browsing software. (The other is bundling the browser with Internet access software distributed by an IAP.) The District Court found that the restrictions Microsoft imposed in licensing Windows to OEMs prevented many OEMs from distributing browsers other than IE. In particular, the District Court condemned the license provisions prohibiting the OEMs from: (1) removing any desktop icons, folders, or “Start” menu entries; (2) altering the initial boot sequence; and (3) otherwise altering the appearance of the Windows desktop. The District Court concluded that the first license
restriction—the prohibition upon the removal of desktop icons, folders, and
Start menu entries—thwarts the distribution of a rival browser by preventing
OEMs from removing visible means of user access to IE. Microsoft denies the “consumer confusion” story; it observes that some OEMs do install multiple browsers and that executives from two OEMs that do so denied any knowledge of consumers being confused by multiple icons. Other testimony, however, supports the District Court’s finding that fear of such confusion deters many OEMs from pre-installing multiple browsers. [Citations to record.] Most telling, in presentations to OEMs, Microsoft itself represented that having only one icon in a particular category would be “less confusing for end users.” Accordingly, we reject Microsoft’s argument. . Therefore, we conclude that the license restriction at issue is anticompetitive. We defer for the moment the question whether that anticompetitive effect is outweighed by Microsoft’s proffered justifications. The second license provision at issue prohibits OEMs from modifying the initial boot sequence—the process that occurs the first time a consumer turns on the computer.… Microsoft’s prohibition on any alteration of the boot sequence thus prevents OEMs from using that process to promote the services of IAPs, many of which—at least at the time Microsoft imposed the restriction—used Navigator rather than IE in their Internet access software. Microsoft does not deny that the prohibition on modifying the boot sequence has the effect of decreasing competition against IE by preventing OEMs from promoting rivals’ browsers. Because this prohibition has a substantial effect in protecting Microsoft’s market power, and does so through a means other than competition on the merits, it is anticompetitive. Again the question whether the provision is nonetheless justified awaits later treatment. Finally, Microsoft imposes several additional provisions that, like the prohibition on removal of icons, prevent OEMs from making various alterations to the desktop: Microsoft prohibits OEMs from causing any user interface other than the Windows desktop to launch automatically, from adding icons or folders different in size or shape from those supplied by Microsoft, and from using the “Active Desktop” feature to promote third-party brands. These restrictions impose significant costs upon the OEMs; prior to Microsoft’s prohibiting the practice, many OEMs would change the appearance of the desktop in ways they found beneficial. … The anticompetitive effect of the license restrictions is, as Microsoft itself recognizes, that OEMs are not able to promote rival browsers, which keeps developers focused upon the APIs in Windows. This kind of promotion is not a zero-sum game; but for the restrictions in their licenses to use Windows, OEMs could promote multiple IAPs and browsers. By preventing the OEMs from doing so, this type of license restriction, like the first two restrictions, is anticompetitive: Microsoft reduced rival browsers’ usage share not by improving its own product but, rather, by preventing OEMs from taking actions that could increase rivals’ share of usage. b. Microsoft’s justifications for the license restrictions Microsoft argues that the license restrictions are legally
justified because, in imposing them, Microsoft is simply “exercising its rights
as the holder of valid copyrights.” Microsoft also argues that the licenses “do
not unduly restrict the opportunities of Netscape to distribute Navigator in
any event.” Microsoft’s primary copyright argument borders upon the frivolous. The company claims an absolute and unfettered right to use its intellectual property as it wishes: “If intellectual property rights have been lawfully acquired,” it says, then “their subsequent exercise cannot give rise to antitrust liability. That is no more correct than the proposition that use of one’s personal property, such as a baseball bat, cannot give rise to tort liability. As the Federal Circuit succinctly stated: “Intellectual property rights do not confer a privilege to violate the antitrust laws.” In re Indep. Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000). … In the first variation upon its unqualified copyright defense, Microsoft cites two cases indicating that a copyright holder may limit a licensee’s ability to engage in significant and deleterious alterations of a copyrighted work. [Citation to two circuit court opinions.] The relevance of those two cases for the present one is limited, however, both because those cases involved substantial alterations of a copyrighted work, and because in neither case was there any claim that the copyright holder was, in asserting its rights, violating the antitrust laws. … In a second variation upon its copyright defense, Microsoft argues that the license restrictions merely prevent OEMs from taking actions that would reduce substantially the value of Microsoft’s copyrighted work: that is, Microsoft claims each license restriction in question is necessary to prevent OEMs from so altering Windows as to undermine “the principal value of Windows as a stable and consistent platform that supports a broad range of applications and that is familiar to users.” Appellant’s Opening Br. at 102. Microsoft, however, never substantiates this claim, and, because an OEM’s altering the appearance of the desktop or promoting programs in the boot sequence does not affect the code already in the product, the practice does not self-evidently affect either the “stability” or the “consistency” of the platform.… Apart from copyright, Microsoft raises one other defense of the OEM license agreements: It argues that, despite the restrictions in the OEM license, Netscape is not completely blocked from distributing its product. That claim is insufficient to shield Microsoft from liability for those restrictions because, although Microsoft did not bar its rivals from all means of distribution, it did bar them from the cost-efficient ones. In sum, we hold that with the exception of the one restriction prohibiting automatically launched alternative interfaces, all the OEM license restrictions at issue represent uses of Microsoft’s market power to protect its monopoly, unredeemed by any legitimate justification. The restrictions therefore violate §2 of the Sherman Act. 2. Integration of IE and Windows Although Microsoft’s license restrictions have a significant effect in closing rival browsers out of one of the two primary channels of distribution, the District Court found that “Microsoft’s executives believed…its contractual restrictions placed on OEMs would not be sufficient in themselves to reverse the direction of Navigator’s usage share. Consequently, in late 1995 or early 1996, Microsoft set out to bind [IE] more tightly to Windows 95 as a technical matter.” Technologically binding IE to Windows, the District Court found, both prevented OEMs from pre-installing other browsers and deterred consumers from using them. In particular, having the IE software code as an irremovable part of Windows meant that pre-installing a second browser would “increase an OEM’s product testing costs,” because an OEM must test and train its support staff to answer calls related to every software product preinstalled on the machine; moreover, pre-installing a browser in addition to IE would to many OEMs be “a questionable use of the scarce and valuable space on a PC’s hard drive.” Although the District Court, in its Conclusions of Law, broadly condemned Microsoft’s decision to bind “Internet Explorer to Windows with…technological shackles,” Conclusions of Law, at 39, its findings of fact in support of that conclusion center upon three specific actions Microsoft took to weld IE to Windows: excluding IE from the “Add/Remove Programs” utility; designing Windows so as in certain circumstances to override the user’s choice of a default browser other than IE; and commingling code related to browsing and other code in the same files, so that any attempt to delete the files containing IE would, at the same time, cripple the operating system. As with the license restrictions, we consider first whether the suspect actions had an anticompetitive effect, and then whether Microsoft has provided a procompetitive justification for them. a. Anticompetitive effect of integration As a general rule, courts are properly very skeptical about claims that competition has been harmed by a dominant firm’s product design changes. In a competitive market, firms routinely innovate in the hope of appealing to consumers, sometimes in the process making their products incompatible with those of rivals; the imposition of liability when a monopolist does the same thing will inevitably deter a certain amount of innovation. This is all the more true in a market, such as this one, in which the product itself is rapidly changing. Judicial deference to product innovation, however, does not mean that a monopolist’s product design decisions are per se lawful. The District Court first condemned as anticompetitive Microsoft’s decision to exclude IE from the “Add/Remove Programs” utility in Windows 98.… [When Microsoft] modified Windows 95 to produce Windows 98, it took IE out of the Add/Remove Programs utility. This change reduces the usage share of rival browsers not by making Microsoft’s own browser more attractive to consumers but, rather, by discouraging OEMs from distributing rival products. Because Microsoft’s conduct, through something other than competition on the merits, has the effect of significantly reducing usage of rivals’ products and hence protecting its own operating system monopoly, it is anticompetitive. Second, the District Court found that Microsoft designed Windows 98 “so that using Navigator on Windows 98 would have unpleasant consequences for users” by, in some circumstances, overriding the user’s choice of a browser other than IE as his or her default browser.… Microsoft does not deny, of course, that overriding the user’s preference prevents some people from using other browsers. Because the override reduces rivals’ usage share and protects Microsoft’s monopoly, it too is anticompetitive. Finally, the District Court condemned Microsoft’s decision to bind IE to Windows 98 “by placing code specific to Web browsing in the same files as code that provided operating system functions.” Putting code supplying browsing functionality into a file with code supplying operating system functionality “ensures that the deletion of any file containing browsing-specific routines would also delete vital operating system routines and thus cripple Windows....” As noted above, preventing an OEM from removing IE deters it from installing a second browser because doing so increases the OEM’s product testing and support costs; by contrast, had OEMs been able to remove IE, they might have chosen to pre-install Navigator alone. Microsoft denies, as a factual matter, that it commingled browsing and non-browsing code, and it maintains the District Court’s findings to the contrary are clearly erroneous. According to Microsoft, its expert “testified without contradiction that ‘the very same code in Windows 98 that provides Web browsing functionality’ also performs essential operating system functions—not code in the same files, but the very same software code Microsoft’s expert did not testify to that effect “without contradiction,” however. [Citations to the record.] In view of the contradictory testimony in the record, some of which supports the District Court’s finding that Microsoft commingled browsing and non-browsing code, we cannot conclude that the finding was clearly erroneous.… [W]e conclude that such commingling has an anticompetitive effect; as noted above, the commingling deters OEMs from pre-installing rival browsers, thereby reducing the rivals’ usage share and, hence, developers’ interest in rivals’ APIs as an alternative to the API set exposed by Microsoft’s operating system. b. Microsoft’s justifications for integration Microsoft proffers no justification for two of the three challenged actions that it took in integrating IE into Windows—excluding IE from the Add/Remove Programs utility and commingling browser and operating system code. Although Microsoft does make some general claims regarding the benefits of integrating the browser and the operating system, it neither specifies nor substantiates those claims.… Accordingly, we hold that Microsoft’s exclusion of IE from the Add/Remove Programs utility and its commingling of browser and operating system code constitute exclusionary conduct, in violation of §2. As for the other challenged act that Microsoft took in integrating IE into Windows—causing Windows to override the user’s choice of a default browser in certain circumstances—Microsoft argues that it has “valid technical reasons.” Specifically, Microsoft claims that it was necessary to design Windows to override the user’s preferences when he or she invokes one of “a few” out “of the nearly 30 means of accessing the Internet.” … The plaintiff bears the burden not only of rebutting a proffered justification but also of demonstrating that the anticompetitive effect of the challenged action outweighs it. In the District Court, plaintiffs appear to have done neither, let alone both; in any event, upon appeal, plaintiffs offer no rebuttal whatsoever. Accordingly, Microsoft may not be held liable for this aspect of its product design. 3. Agreements with Internet Access Providers The District Court also condemned as exclusionary Microsoft’s agreements with various IAPs. The IAPs include both Internet Service Providers, which offer consumers Internet access, and Online Services (“OLSs”) such as America Online (“AOL”), which offer proprietary content in addition to Internet access and other services.… The District Court condemned Microsoft’s actions in (1) offering IE free of charge to IAPs and (2) offering IAPs a bounty for each customer the IAP signs up for service using the IE browser. In effect, the court concluded that Microsoft is acting to preserve its monopoly by offering IE to IAPs at an attractive price. Similarly, the District Court held Microsoft liable for (3) developing the IE Access Kit (“IEAK”), a software package that allows an IAP to “create a distinctive identity for its service in as little as a few hours by customizing the [IE] title bar, icon, start and search pages,” and (4) offering the IEAK to IAPs free of charge, on the ground that those acts, too, helped Microsoft preserve its monopoly. Finally, the District Court found that (5) Microsoft agreed to provide easy access to IAPs’ services from the Windows desktop in return for the IAPs’ agreement to promote IE exclusively and to keep shipments of Internet access software using Navigator under a specific percentage, typically 25%. We address the first four items—Microsoft’s inducements—and then its exclusive agreements with IAPs. Although offering a customer an attractive deal is the
hallmark of competition, the Supreme Court has indicated that in very rare
circumstances a price may be unlawfully low, or “predatory.” See generally
Brooke Group, 509 The rare case of price predation aside, the antitrust laws do not condemn even a monopolist for offering its product at an attractive price, and we therefore have no warrant to condemn Microsoft for offering either IE or the IEAK free of charge or even at a negative price. Likewise, as we said above, a monopolist does not violate the Sherman Act simply by developing an attractive product. Therefore, Microsoft’s development of the IEAK does not violate the Sherman Act. We turn now to Microsoft’s deals with IAPs concerning desktop placement. Microsoft concluded these exclusive agreements with all “the leading IAPs,” including the major OLSs. The most significant of the OLS deals is with AOL, which, when the deal was reached, “accounted for a substantial portion of all existing Internet access subscriptions and ... attracted a very large percentage of new IAP subscribers.” Under that agreement Microsoft puts the AOL icon in the OLS folder on the Windows desktop and AOL does not promote any non-Microsoft browser, nor provide software using any non-Microsoft browser except at the customer’s request, and even then AOL will not supply more than 15% of its subscribers with a browser other than IE. The Supreme Court most recently considered an antitrust challenge to an exclusive contract in Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961). That case [involved] , which involved a challenge to a requirements contract [under] §3 of the Clayton Act and §§1 and 2 of the Sherman Act. The Court held that an exclusive contract does not violate the Clayton Act unless its probable effect is to “foreclose competition in a substantial share of the line of commerce affected.” The share of the market foreclosed is important because, for the contract to have an adverse effect upon competition, “the opportunities for other traders to enter into or remain in that market must be significantly limited.” Although “neither the Court of Appeals nor the District Court [had] considered in detail the question of the relevant market,” the Court in Tampa Electric examined the record and, after defining the relevant market, determined that the contract affected less than one percent of that market. After concluding, under the Clayton Act, that this share was “conservatively speaking, quite insubstantial,” the Court went on summarily to reject the Sherman Act claims. Following Tampa Electric, courts considering antitrust challenges to exclusive contracts have taken care to identify the share of the market foreclosed. Some courts have indicated that §3 of the Clayton Act and §1 of the Sherman Act require an equal degree of foreclosure before prohibiting exclusive contracts. See, e.g., Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 393 (7th Cir. 1984) (Posner, J.). Other courts, however, have held that a higher market share must be foreclosed in order to establish a violation of the Sherman Act as compared to the Clayton Act. 11 Herbert Hovenkamp, Antitrust Law P 1800c4 (1998) (“The cases are divided, with a likely majority stating that the Clayton Act requires a smaller showing of anticompetitive effects.”). Though what is “significant” may vary depending upon the antitrust provision under which an exclusive deal is challenged, it is clear that in all cases the plaintiff must both define the relevant market and prove the degree of foreclosure.… In this case, plaintiffs challenged Microsoft’s exclusive dealing arrangements with the IAPs under both §§1 and 2 of the Sherman Act. The District Court, in analyzing the §1 claim, stated, “unless the evidence demonstrates that Microsoft’s agreements excluded Netscape altogether from access to roughly forty percent of the browser market, the Court should decline to find such agreements in violation of §1.… Turning to §2, the court stated: “the fact that Microsoft’s arrangements with various [IAPs and other] firms did not foreclose enough of the relevant market to constitute a §1 violation in no way detracts from the Court’s assignment of liability for the same arrangements under §2.... All of Microsoft’s agreements, including the non-exclusive ones, severely restricted Netscape’s access to those distribution channels leading most efficiently to the acquisition of browser usage share.” On appeal Microsoft argues that “courts have applied the same standard to alleged exclusive dealing agreements under both Section 1 and Section 2,” Appellant’s Opening Br. at 109, and it argues that the District Court’s holding of no liability under §1 necessarily precludes holding it liable under §2.… [W]e reject Microsoft’s contention. … [E]xclusive contracts are commonplace-particularly in the field of distribution—in our competitive, market economy, and imposing upon a firm with market power the risk of an antitrust suit every time it enters into such a contract, no matter how small the effect, would create an unacceptable and unjustified burden upon any such firm. At the same time, however, we agree with plaintiffs that a monopolist’s use of exclusive contracts, in certain circumstances, may give rise to a §2 violation even though the contracts foreclose less than the roughly 40% or 50% share usually required in order to establish a §1 violation. In this case, plaintiffs allege that, by closing to rivals a
substantial percentage of the available opportunities for browser distribution,
Microsoft managed to preserve its monopoly in the market for operating systems.
The IAPs constitute one of the two major channels by
which browsers can be distributed. Microsoft has exclusive deals with “fourteen
of the top fifteen access providers in Plaintiffs having demonstrated a harm to competition, the burden falls upon Microsoft to defend its exclusive dealing contracts with IAPs by providing a procompetitive justification for them. Significantly, Microsoft’s only explanation for its exclusive dealing is that it wants to keep developers focused upon its APIs—which is to say, it wants to preserve its power in the operating system market. That is not an unlawful end, but neither is it a procompetitive justification for the specific means here in question, namely exclusive dealing contracts with IAPs. Accordingly, we affirm the District Court’s decision holding that Microsoft’s exclusive contracts with IAPs are exclusionary devices, in violation of §2 of the Sherman Act. 4. Dealings with Internet Content Providers, Independent Software Vendors, and Apple Computer The District Court held that Microsoft engages in exclusionary conduct in its dealings with ICPs, which develop websites; ISVs, which develop software; and Apple, which is both an OEM and a software developer. The District Court condemned Microsoft’s deals with ICPs and ISVs, stating: “By granting ICPs and ISVs free licenses to bundle [IE] with their offerings, and by exchanging other valuable inducements for their agreement to distribute, promote and rely on [IE] rather than Navigator, Microsoft directly induced developers to focus on its own APIs rather than ones exposed by Navigator.” With respect to the deals with ICPs, the District Court’s findings do not support liability. After reviewing the ICP agreements, the District Court specifically stated that “there is not sufficient evidence to support a finding that Microsoft’s promotional restrictions actually had a substantial, deleterious impact on Navigator’s usage share.” Because plaintiffs failed to demonstrate that Microsoft’s deals with the ICPs have a substantial effect upon competition, they have not proved the violation of the Sherman Act. As for Microsoft’s ISV agreements, however, the District Court did not enter a similar finding of no substantial effect. The District Court described Microsoft’s deals with ISVs as follows: In dozens of “First Wave” agreements signed between the fall of 1997 and the spring of 1998, Microsoft has promised to give preferential support, in the form of early Windows 98 and Windows NT betas, other technical information, and the right to use certain Microsoft seals of approval, to important ISVs that agree to certain conditions. One of these conditions is that the ISVs use Internet Explorer as the default browsing software for any software they develop with a hypertext-based user interface. Another condition is that the ISVs use Microsoft’s “HTML Help,” which is accessible only with Internet Explorer, to implement their applications’ help systems. The District Court further found that the effect of these deals is to “ensure [ ] that many of the most popular Web-centric applications will rely on browsing technologies found only in Windows,” and that Microsoft’s deals with ISVs therefore “increase[ ] the likelihood that the millions of consumers using [applications designed by ISVs that entered into agreements with Microsoft] will use Internet Explorer rather than Navigator.” The District Court did not specifically identify what share of the market for browser distribution the exclusive deals with the ISVs foreclose. Although the ISVs are a relatively small channel for browser distribution, they take on greater significance because, as discussed above, Microsoft had largely foreclosed the two primary channels to its rivals. In that light, one can tell from the record that by affecting the applications used by “millions” of consumers, Microsoft’s exclusive deals with the ISVs had a substantial effect in further foreclosing rival browsers from the market.… [W]e hold that plaintiffs have made a prima facie showing that the deals have an anticompetitive effect. Of course, that Microsoft’s exclusive deals have the anticompetitive effect of preserving Microsoft’s monopoly does not, in itself, make them unlawful. A monopolist, like a competitive firm, may have a perfectly legitimate reason for wanting an exclusive arrangement with its distributors. Accordingly, Microsoft had an opportunity to, but did not, present the District Court with evidence demonstrating that the exclusivity provisions have some such procompetitive justification. On appeal Microsoft likewise does not claim that the exclusivity required by the deals serves any legitimate purpose; instead, it states only that its ISV agreements reflect an attempt “to persuade ISVs to utilize Internet-related system services in Windows rather than Navigator.” As we explained before, however, keeping developers focused upon Windows—that is, preserving the Windows monopoly-is a competitively neutral goal. Microsoft having offered no procompetitive justification for its exclusive dealing arrangements with the ISVs, we hold that those arrangements violate §2 of the Sherman Act. Finally, the District Court held that Microsoft’s dealings with Apple violated the Sherman Act. Apple is vertically integrated: it makes both software (including an operating system, Mac OS), and hardware (the Macintosh line of computers). Microsoft primarily makes software, including, in addition to its operating system, a number of popular applications. One, called “Office,” is a suite of business productivity applications that Microsoft has ported to Mac OS. The District Court found that “ninety percent of Mac OS users running a suite of office productivity applications [use] Microsoft’s Mac Office.” Further, the District Court found that: In 1997, Apple’s business was in steep decline, and many doubted that the company would survive much longer.... Many ISVs questioned the wisdom of continuing to spend time and money developing applications for the Mac OS. Had Microsoft announced in the midst of this atmosphere that it was ceasing to develop new versions of Mac Office, a great number of ISVs, customers, developers, and investors would have interpreted the announcement as Apple’s death notice. Microsoft recognized the importance to Apple of its continued support of Mac Office. In June 1997 Microsoft Chairman Bill Gates determined that the company’s negotiations with Apple “‘have not been going well at all.... Apple let us down on the browser by making Netscape the standard install.’ Gates then reported that he had already called Apple’s CEO ... to ask ‘how we should announce the cancellation of Mac Office....’” The District Court further found that, within a month of Gates’ call, Apple and Microsoft had reached an agreement pursuant to which Microsoft’s primary obligation is to continue releasing up-to-date versions of Mac Office for at least five years ... [and] Apple has agreed ... to “bundle the most current version of [IE] ... with [Mac OS]”... [and to] “make [IE] the default [browser]”.... Navigator is not installed on the computer hard drive during the default installation, which is the type of installation most users elect to employ.... [The] Agreement further provides that ... Apple may not position icons for non-Microsoft browsing software on the desktop of new Macintosh PC systems or Mac OS upgrades. The agreement also prohibits Apple from encouraging users to substitute another browser for IE, and states that Apple will “encourage its employees to use [IE].” This exclusive deal between Microsoft and Apple has a substantial effect upon the distribution of rival browsers. If a browser developer ports its product to a second operating system, such as the Mac OS, it can continue to display a common set of APIs. Thus, usage share, not the underlying operating system, is the primary determinant of the platform challenge a browser may pose. Pre-installation of a browser (which can be accomplished either by including the browser with the operating system or by the OEM installing the browser) is one of the two most important methods of browser distribution, and Apple had a not insignificant share of worldwide sales of operating systems. [Citation to record showing Microsoft has 95% of the market not counting Apple and “well above” 80% with Apple included in the relevant market.] Because Microsoft’s exclusive contract with Apple has a substantial effect in restricting distribution of rival browsers, and because (as we have described several times above) reducing usage share of rival browsers serves to protect Microsoft’s monopoly, its deal with Apple must be regarded as anticompetitive. Microsoft offers no procompetitive justification for the exclusive dealing arrangement. It makes only the irrelevant claim that the IE-for-Mac Office deal is part of a multifaceted set of agreements between itself and Apple; that does not mean it has any procompetitive justification. Accordingly, we hold that the exclusive deal with Apple is exclusionary, in violation of §2 of the Sherman Act. 5. Java Java, a set of technologies developed by Sun Microsystems, is another type of middleware posing a potential threat to Windows’ position as the ubiquitous platform for software development. The Java technologies include: (1) a programming language; (2) a set of programs written in that language, called the “Java class libraries,” which expose APIs; (3) a compiler, which translates code written by a developer into “bytecode”; and (4) a Java Virtual Machine (“JVM”), which translates bytecode into instructions to the operating system. Programs calling upon the Java APIs will run on any machine with a “Java runtime environment,” that is, Java class libraries and a JVM. In May 1995 Netscape agreed with Sun to distribute a copy of the Java runtime environment with every copy of Navigator, and “Navigator quickly became the principal vehicle by which Sun placed copies of its Java runtime environment on the PC systems of Windows users.” Microsoft, too, agreed to promote the Java technologies—or so it seemed. For at the same time, Microsoft took steps “to maximize the difficulty with which applications written in Java could be ported from Windows to other platforms, and vice versa.” Specifically, the District Court found that Microsoft took four steps to exclude Java from developing as a viable cross-platform threat: (a) designing a JVM incompatible with the one developed by Sun; (b) entering into contracts, the so-called “First Wave Agreements,” requiring major ISVs to promote Microsoft’s JVM exclusively; (c) deceiving Java developers about the Windows-specific nature of the tools it distributed to them; and (d) coercing Intel to stop aiding Sun in improving the Java technologies. a. The incompatible JVM The District Court held that Microsoft engaged in exclusionary conduct by developing and promoting its own JVM. Sun had already developed a JVM for the Windows operating system when Microsoft began work on its version. The JVM developed by Microsoft allows Java applications to run faster on Windows than does Sun’s JVM, but a Java application designed to work with Microsoft’s JVM does not work with Sun’s JVM and vice versa. The District Court found that Microsoft “made a large investment of engineering resources to develop a high-performance Windows JVM,” and, “by bundling its…JVM with every copy of [IE]…Microsoft endowed its Java runtime environment with the unique attribute of guaranteed, enduring ubiquity across the enormous Windows installed base.” As explained above, however, a monopolist does not violate the antitrust laws simply by developing a product that is incompatible with those of its rivals. See supra Section II.B.1. In order to violate the antitrust laws, the incompatible product must have an anticompetitive effect that outweighs any procompetitive justification for the design. Microsoft’s JVM is not only incompatible with Sun’s, it allows Java applications to run faster on Windows than does Sun’s JVM. Microsoft’s faster JVM lured Java developers into using Microsoft’s developer tools, and Microsoft offered those tools deceptively, as we discuss below. The JVM, however, does allow applications to run more swiftly and does not itself have any anticompetitive effect. Therefore, we reverse the District Court’s imposition of liability for Microsoft’s development and promotion of its JVM. b. The First Wave Agreements The District Court also found that Microsoft entered into First Wave Agreements with dozens of ISVs to use Microsoft’s JVM. Again, we reject the District Court’s condemnation of low but non-predatory pricing by Microsoft. To the extent Microsoft’s First Wave Agreements with the ISVs conditioned receipt of Windows technical information upon the ISVs’ agreement to promote Microsoft’s JVM exclusively, they raise a different competitive concern. The District Court found that, although not literally exclusive, the deals were exclusive in practice because they required developers to make Microsoft’s JVM the default in the software they developed. While the District Court did not enter precise findings as to the effect of the First Wave Agreements upon the overall distribution of rival JVMs, the record indicates that Microsoft’s deals with the major ISVs had a significant effect upon JVM promotion. As discussed above, the products of First Wave ISVs reached millions of consumers. The First Wave ISVs included such prominent developers as Rational Software, “a world leader” in software development tools, which, according to Microsoft itself, is “the leading supplier of utilities such as anti-virus software. Moreover, Microsoft’s exclusive deals with the leading ISVs took place against a backdrop of foreclosure: the District Court found that “when Netscape announced in May 1995 [prior to Microsoft’s execution of the First Wave Agreements] that it would include with every copy of Navigator a copy of a Windows JVM that complied with Sun’s standards, it appeared that Sun’s Java implementation would achieve the necessary ubiquity on Windows.” As discussed above, however, Microsoft undertook a number of anticompetitive actions that seriously reduced the distribution of Navigator, and the District Court found that those actions thereby seriously impeded distribution of Sun’s JVM. Because Microsoft’s agreements foreclosed a substantial portion of the field for JVM distribution and because, in so doing, they protected Microsoft’s monopoly from a middleware threat, they are anticompetitive. Microsoft offered no procompetitive justification for the default clause that made the First Wave Agreements exclusive as a practical matter. Because the cumulative effect of the deals is anticompetitive and because Microsoft has no procompetitive justification for them, we hold that the provisions in the First Wave Agreements requiring use of Microsoft’s JVM as the default are exclusionary, in violation of the Sherman Act. c. Deception of Java developers Microsoft’s “Java implementation” included, in addition to a JVM, a set of software development tools it created to assist ISVs in designing Java applications. The District Court found that, not only were these tools incompatible with Sun’s cross-platform aspirations for Java—no violation, to be sure-but Microsoft deceived Java developers regarding the Windows-specific nature of the tools. Microsoft’s tools included “certain ‘keywords’ and ‘compiler directives’ that could only be executed properly by Microsoft’s version of the Java runtime environment for Windows.” As a result, even Java “developers who were opting for portability over performance…unwittingly [wrote] Java applications that [ran] only on Windows.” That is, developers who relied upon Microsoft’s public commitment to cooperate with Sun and who used Microsoft’s tools to develop what Microsoft led them to believe were cross-platform applications ended up producing applications that would run only on the Windows operating system. … Finally, other Microsoft documents confirm that Microsoft intended to deceive Java developers, and predicted that the effect of its actions would be to generate Windows-dependent Java applications that their developers believed would be cross-platform; these documents also indicate that Microsoft’s ultimate objective was to thwart Java’s threat to Microsoft’s monopoly in the market for operating systems. One Microsoft document, for example, states as a strategic goal: “Kill cross-platform Java by growing the polluted Java market Microsoft’s conduct related to its Java developer tools served to protect its monopoly of the operating system in a manner not attributable either to the superiority of the operating system or to the acumen of its makers, and therefore was anticompetitive. Unsurprisingly, Microsoft offers no procompetitive explanation for its campaign to deceive developers. Accordingly, we conclude this conduct is exclusionary, in violation of §2 of the Sherman Act. d. The threat to Intel The District Court held that Microsoft also acted unlawfully with respect to Java by using its “monopoly power to prevent firms such as Intel from aiding in the creation of cross-platform interfaces.” In 1995 Intel was in the process of developing a high-performance, Windows-compatible JVM. Microsoft wanted Intel to abandon that effort because a fast, cross-platform JVM would threaten Microsoft’s monopoly in the operating system market. At an August 1995 meeting, Microsoft’s Gates told Intel that its “cooperation with Sun and Netscape to develop a Java runtime environment…was one of the issues threatening to undermine cooperation between Intel and Microsoft.” Three months later, “Microsoft’s Paul Maritz told a senior Intel executive that Intel’s [adaptation of its multimedia software to comply with] Sun’s Java standards was as inimical to Microsoft as Microsoft’s support for non-Intel microprocessors would be to Intel.” Intel nonetheless continued to undertake initiatives related to Java. By 1996 “Intel had developed a JVM designed to run well…while complying with Sun’s cross-platform standards.” In April of that year, Microsoft again urged Intel not to help Sun by distributing Intel’s fast, Sun-compliant JVM. And Microsoft threatened Intel that if it did not stop aiding Sun on the multimedia front, then Microsoft would refuse to distribute Intel technologies bundled with Windows. Intel finally capitulated in 1997, after Microsoft delivered the coup de grace. One of Intel’s competitors, called AMD, solicited support from Microsoft for its “3DX” technology.... Microsoft’s Allchin asked Gates whether Microsoft should support 3DX, despite the fact that Intel would oppose it. Gates responded: “If Intel has a real problem with us supporting this then they will have to stop supporting Java Multimedia the way they are. I would gladly give up supporting this if they would back off from their work on JAVA.” Findings of Fact, p. 406. Microsoft’s internal documents and deposition testimony confirm both the anticompetitive effect and intent of its actions. Microsoft does not deny the facts found by the District Court, nor does it offer any procompetitive justification for pressuring Intel not to support cross-platform Java. Microsoft lamely characterizes its threat to Intel as “advice.” The District Court, however, found that Microsoft’s “advice” to Intel to stop aiding cross-platform Java was backed by the threat of retaliation, and this conclusion is supported by the evidence cited above. Therefore we affirm the conclusion that Microsoft’s threats to Intel were exclusionary, in violation of §2 of the Sherman Act. … V. TRIAL PROCEEDINGS AND REMEDY Microsoft additionally challenges the District Court’s procedural rulings on two fronts. First, with respect to the trial phase, Microsoft proposes that the court mismanaged its docket by adopting an expedited trial schedule and receiving evidence through summary witnesses. Second, with respect to the remedies decree, Microsoft argues that the court improperly ordered that it be divided into two separate companies. Only the latter claim will long detain us. The District Court’s trial-phase procedures were comfortably within the bounds of its broad discretion to conduct trials as it sees fit. We conclude, however, that the District Court’s remedies decree must be vacated for three independent reasons: (1) the court failed to hold a remedies-specific evidentiary hearing when there were disputed facts; (2) the court failed to provide adequate reasons for its decreed remedies; and (3) this Court has revised the scope of Microsoft’s liability and it is impossible to determine to what extent that should affect the remedies provisions. A. Factual Background On On After the District Court revealed during a May 24 hearing that it was prepared to enter a decree without conducting “any further process,” Microsoft renewed its argument that the underlying factual disputes between the parties necessitated a remedies-specific evidentiary hearing. In two separate offers of proof, Microsoft offered to produce a number of pieces of evidence, including the following: [Proffered testimony of economists, Microsoft officials (including Bill Gates) and others summarized.] Over Microsoft’s objections, the District Court proceeded to
consider the merits of the remedy and on The substance of the District Court’s remedies order is nearly
identical to plaintiffs’ proposal. The decree’s centerpiece is the requirement
that Microsoft submit a proposed plan of divestiture, with the company to be
split into an “Operating Systems Business,” or “OpsCo,”
and an “Applications Business,” or “AppsCo.” OpsCo would receive all of Microsoft’s operating systems,
such as Windows 98 and Windows 2000, while AppsCo
would receive the remainder of Microsoft’s businesses, including IE and Office.
The District Court identified four reasons for its “reluctant[
]” conclusion that “a structural remedy has become imperative.” First,
Microsoft “does not yet concede that any of its business practices violated the
Sherman Act.” B. Trial Proceedings Microsoft’s first contention—that the District Court erred by adopting an expedited trial schedule and receiving evidence through summary witnesses—is easily disposed of. Trial courts have extraordinarily broad discretion to determine the manner in which they will conduct trials. “This is particularly true in a case such as the one at bar where the proceedings are being tried to the court without a jury.” Eli Lilly & Co., Inc. v. Generix Drug Sales, Inc., 460 F.2d 1096, 1105 (5th Cir. 1972). In such cases, “an appellate court will not interfere with the trial court’s exercise of its discretion to control its docket and dispatch its business…except upon the clearest showing that the procedures have resulted in actual and substantial prejudice to the complaining litigant.” Id. Microsoft fails to clear this high hurdle.… C. Failure to Hold an Evidentiary Hearing The District Court’s remedies-phase proceedings are a different matter. It is a cardinal principle of our system of justice that factual disputes must be heard in open court and resolved through trial-like evidentiary proceedings.… A party has the right to judicial resolution of disputed facts not just as to the liability phase, but also as to appropriate relief.… A hearing on the merits—i.e., a trial on liability—does not substitute for a relief-specific evidentiary hearing unless the matter of relief was part of the trial on liability, or unless there are no disputed factual issues regarding the matter of relief.… This rule is no less applicable in antitrust cases.… Despite plaintiffs’ protestations, there can be no serious doubt that the parties disputed a number of facts during the remedies phase. In two separate offers of proof, Microsoft identified 23 witnesses who, had they been permitted to testify, would have challenged a wide range of plaintiffs’ factual representations, including the feasibility of dividing Microsoft, the likely impact on consumers, and the effect of divestiture on shareholders. To take but two examples, where plaintiffs’ economists testified that splitting Microsoft in two would be socially beneficial, the company offered to prove that the proposed remedy would “cause substantial social harm by raising software prices, lowering rates of innovation and disrupting the evolution of Windows as a software development platform.” And where plaintiffs’ investment banking experts proposed that divestiture might actually increase shareholder value, Microsoft proffered evidence that structural relief “would inevitably result in a significant loss of shareholder value,” a loss that could reach “tens—possibly hundreds—of billions of dollars.” Indeed, the District Court itself appears to have conceded the existence of acute factual disagreements between Microsoft and plaintiffs. The court acknowledged that the parties were “sharply divided” and held “divergent opinions” on the likely results of its remedies decree. Final Judgment, at 62.… Trial courts are not excused from their obligation to resolve such matters through evidentiary hearings simply because they consider the bedrock procedures of our justice system to be “of little use.” Final Judgment, at 62. … Plaintiffs further argue—and the District Court held—that no evidentiary hearing was necessary given that Microsoft long had been on notice that structural relief was a distinct possibility. It is difficult to see why this matters. Whether Microsoft had advance notice that dissolution was in the works is immaterial to whether the District Court violated the company’s procedural rights by ordering it without an evidentiary hearing.… We therefore vacate the District Court’s final judgment, and remand with instructions to conduct a remedies-specific evidentiary hearing. D. Failure to Provide an Adequate Explanation We vacate the District Court’s remedies decree for the additional reason that the court has failed to provide an adequate explanation for the relief it ordered. The Supreme Court has explained that a remedies decree in an antitrust case must seek to “unfetter a market from anticompetitive conduct,” Ford Motor Co., 405 U.S. at 577, to “terminate the illegal monopoly, deny to the defendant the fruits of its statutory violation, and ensure that there remain no practices likely to result in monopolization in the future,” The District Court has not explained how its remedies decree would accomplish those objectives. Indeed, the court devoted a mere four paragraphs of its order to explaining its reasons for the remedy. They are: (1) Microsoft “does not yet concede that any of its business practices violated the Sherman Act”; (2) Microsoft “continues to do business as it has in the past”; (3) Microsoft “has proved untrustworthy in the past”; and (4) the Government, whose officials “are by reason of office obliged and expected to consider—and to act in—the public interest,” won the case, “and for that reason alone have some entitlement to a remedy of their choice.” Nowhere did the District Court discuss the objectives the Supreme Court deems relevant. E. Modification of Liability Quite apart from its procedural difficulties, we vacate the District Court’s final judgment in its entirety for the additional, independent reason that we have modified the underlying bases of liability. Of the three antitrust violations originally identified by the District Court, one is no longer viable: attempted monopolization of the browser market in violation of Sherman Act §2. One will be remanded for liability proceedings under a different legal standard: unlawful tying in violation of §1. Only liability for the §2 monopoly maintenance violation has been affirmed—and even that we have revised. Ordinarily, of course, we review the grant or denial of equitable relief under the abuse of discretion standard. For obvious reasons, the application of that standard is not sufficient to sustain the remedy in the case before us. We cannot determine whether the District Court has abused its discretion in remedying a wrong where the court did not exercise that discretion in order to remedy the properly determined wrong. That is, the District Court determined that the conduct restrictions and the pervasive structural remedy were together appropriate to remedy the three antitrust violations set forth above. The court did not exercise its discretion to determine whether all, or for that matter, any, of those equitable remedies were required to rectify a §2 monopoly maintenance violation taken alone. We therefore cannot sustain an exercise of discretion not yet made. … In short, we must vacate the remedies decree in its entirety and remand the case for a new determination. This court has drastically altered the District Court’s conclusions on liability. On remand, the District Court, after affording the parties a proper opportunity to be heard, can fashion an appropriate remedy for Microsoft’s antitrust violations. In particular, the court should consider which of the decree’s conduct restrictions remain viable in light of our modification of the original liability decision. While the task of drafting the remedies decree is for the District Court in the first instance, because of the unusually convoluted nature of the proceedings thus far, and a desire to advance the ultimate resolution of this important controversy, we offer some further guidance for the exercise of that discretion. F. On Remand … On remand, the District Court must reconsider whether the use
of the structural remedy of divestiture is appropriate with respect to
Microsoft, which argues that it is a unitary company. By and large, cases upon
which plaintiffs rely in arguing for the split of Microsoft have involved the
dissolution of entities formed by mergers and acquisitions. On the contrary,
the Supreme Court has clarified that divestiture “has traditionally been the
remedy for Sherman Act violations whose heart is intercorporate
combination and control,” du Pont,
366 One apparent reason why courts have not ordered the dissolution of unitary companies is logistical difficulty. As the court explained in United States v. ALCOA, 91 F. Supp. 333, 416 (S.D.N.Y. 1950), a “corporation, designed to operate effectively as a single entity, cannot readily be dismembered of parts of its various operations without a marked loss of efficiency.” A corporation that has expanded by acquiring its competitors often has preexisting internal lines of division along which it may more easily be split than a corporation that has expanded from natural growth.… With reference to those corporations that are not acquired by merger and acquisition, Judge Wyzanski accurately opined in United Shoe: United conducts all machine manufacture at one plant in Beverly, with one set of jigs and tools, one foundry, one laboratory for machinery problems, one managerial staff, and one labor force. It takes no Solomon to see that this organism cannot be cut into three equal and viable parts. Depending upon the evidence, the District Court may find in a remedies proceeding that it would be no easier to split Microsoft in two than United Shoe in three.… If indeed Microsoft is a unitary company, division might very well require Microsoft to reproduce each of these departments in each new entity rather than simply allocate the differing departments among them. … G. Conclusion In sum, we vacate the District Court’s remedies decree for three reasons. First, the District Court failed to hold an evidentiary hearing despite the presence of remedies-specific factual disputes. Second, the court did not provide adequate reasons for its decreed remedies. Finally, we have drastically altered the scope of Microsoft’s liability, and it is for the District Court in the first instance to determine the propriety of a specific remedy for the limited ground of liability which we have upheld. VI. JUDICIAL MISCONDUCT Canon 3A(6) of the Code of Conduct for United States Judges requires federal judges to “avoid public comment on the merits of [ ] pending or impending” cases. Canon 2 tells judges to “avoid impropriety and the appearance of impropriety in all activities,” on the bench and off. Canon 3A(4) forbids judges to initiate or consider ex parte communications on the merits of pending or impending proceedings. Section 455(a) of the Judicial Code requires judges to recuse themselves when their “impartiality might reasonably be questioned.” 28 U.S.C. §455(a). All indications are that the District Judge violated each of these ethical precepts by talking about the case with reporters. The violations were deliberate, repeated, egregious, and flagrant. The only serious question is what consequences should follow. Microsoft urges us to disqualify the District Judge, vacate the judgment in its entirety and toss out the findings of fact, and remand for a new trial before a different District Judge. At the other extreme, plaintiffs ask us to do nothing. We agree with neither position. A. The District Judge’s Communications with the Press Immediately after the District Judge entered final judgment on
Before we recount the statements attributed to the District
Judge, we need to say a few words about the state of the record. All we have
are the published accounts and what the reporters say the Judge said. Those accounts
were not admitted in evidence. They may be hearsay. See Fed. R. Evid. 801(c); Metro.
Council of NAACP Branches v. FCC, 310 … [T]he circumstances of this case are most unusual. By placing an embargo on the interviews, the District Judge ensured that the full extent of his actions would not be revealed until this case was on appeal. Plaintiffs, in defending the judgment, do not dispute the statements attributed to him in the press; they do not request an evidentiary hearing; and they do not argue that Microsoft should have filed a motion in the District Court before raising the matter on appeal. At oral argument, plaintiffs all but conceded that the Judge violated ethical restrictions by discussing the case in public: … We must consider too that the federal disqualification provisions reflect a strong federal policy to preserve the actual and apparent impartiality of the federal judiciary.… The published accounts indicate that the District Judge discussed numerous topics relating to the case. Among them was his distaste for the defense of technological integration-one of the central issues in the lawsuit. [Discussion of those interviews.] In September 1999, two months before his Findings of Fact and six months before his Conclusions of Law, and in remarks that were kept secret until after the Final Judgment, the Judge told reporters from the New York Times that he questioned Microsoft’s integration of a web browser into Windows. Stating that he was “not a fan of integration,” he drew an analogy to a 35millimeter camera with an integrated light meter that in his view should also be offered separately: “You like the convenience of having a light meter built in, integrated, so all you have to do is press a button to get a reading. But do you think camera makers should also serve photographers who want to use a separate light meter, so they can hold it up, move it around?” [Citation] In other remarks, the Judge commented on the integration at the heart of the case: “It was quite clear to me that the motive of Microsoft in bundling the Internet browser was not one of consumer convenience. The evidence that this was done for the consumer was not credible.... The evidence was so compelling that there was an ulterior motive.… Reports of the interviews have the District Judge describing Microsoft’s conduct, with particular emphasis on what he regarded as the company’s prevarication, hubris, and impenitence. In some of his secret meetings with reporters, the Judge offered his contemporaneous impressions of testimony. He permitted at least one reporter to see an entry concerning Bill Gates in his “oversized green notebook.” [Citation] He also provided numerous after-the-fact credibility assessments. He told reporters that Bill Gates’ “testimony is inherently without credibility” and “if you can’t believe this guy, who else can you believe?” [Citation] As for the company’s other witnesses, the Judge is reported as saying that there “were times when I became impatient with Microsoft witnesses who were giving speeches.” “They were telling me things I just flatly could not credit.” [Citation.] In an interview given the day he entered the break-up order, he summed things up: “Falsus in uno, falsus in omnibus”: “Untrue in one thing, untrue in everything.” “I don’t subscribe to that as absolutely true. But it does lead one to suspicion. It’s a universal human experience. If someone lies to you once, how much else can you credit as the truth?” [Citation.]. According to reporter Auletta, the District Judge told him in private that, “I thought they [Microsoft and its executives] didn’t think they were regarded as adult members of the community. I thought they would learn. [Citation.] The Judge told a college audience that “Bill Gates is an ingenious engineer, but I don’t think he is that adept at business ethics. He has not yet come to realise things he did (when Microsoft was smaller) he should not have done when he became a monopoly.” [Citation.]. Characterizing Gates’ and his company’s “crime” as hubris, the Judge stated that “if I were able to propose a remedy of my devising, I’d require Mr. Gates to write a book report” on Napoleon Bonaparte, “because I think [Gates] has a Napoleonic concept of himself and his company, an arrogance that derives from power and unalloyed success, with no leavening hard experience, no reverses.” [Citation.] The Judge apparently became, in Auletta’s words, “increasingly troubled by what he learned about Bill Gates and couldn’t get out of his mind the group picture he had seen of Bill Gates and Paul Allen and their shaggy-haired first employees at Microsoft.” The reporter wrote that the Judge said he saw in the picture “a smart-mouthed young kid who has extraordinary ability and needs a little discipline. I’ve often said to colleagues that Gates would be better off if he had finished Harvard.” [Citation.] The District Judge likened Microsoft’s writing of incriminating documents to drug traffickers who “never figure out that they shouldn’t be saying certain things on the phone.” [Citation.] He invoked the drug trafficker analogy again to denounce Microsoft’s protestations of innocence, this time with a reference to the notorious Newton Street Crew that terrorized parts of Washington, D.C. Reporter Auletta wrote in The New Yorker that the Judge went as
far as to compare the company’s declaration of innocence to the protestations
of gangland killers. He was referring to five gang members in a racketeering, drug-dealing, and murder trial that he had
presided over four years earlier. In that case, the three victims had had their
heads bound with duct tape before they were riddled with bullets from
semi-automatic weapons. “On the day of the sentencing, the gang members
maintained that they had done nothing wrong, saying that the whole case was a
conspiracy by the white power structure to destroy them,” The District Judge also secretly divulged to reporters his
views on the remedy for Microsoft’s antitrust violations. On the question
whether Microsoft was entitled to any process at the remedy stage, the Judge
told reporters in May 2000 that he was “not aware of any case authority that
says I have to give them any due process at all. The case is over. They lost.” [Citation.] Another reporter has the Judge asking “were the
Japanese allowed to propose terms of their surrender?” [Citation.]
… In February 2000, four months before his final order
splitting the company in two, the District Judge reportedly told New York
Times reporters that he was “not at all comfortable with restructuring the
company,” because he was unsure whether he was “competent to do that.”
[Citation] A few months later, he had a change of heart. He told the same
reporters that “with what looks like Microsoft intransigence, a breakup is
inevitable.” [Citation.] The Judge recited a “ B. Violations of the Code of Conduct for The Code of Conduct for … In addition to violating the rule prohibiting public comment, the District Judge’s reported conduct raises serious questions under Canon 3A(4). That Canon states that a “judge should accord to every person who is legally interested in a proceeding, or the person’s lawyer, full right to be heard according to law, and, except as authorized by law, neither initiate nor consider ex parte communications on the merits, or procedures affecting the merits, of a pending or impending proceeding.” Code Of Conduct Canon 3A(4).… [W]e think it safe to assume that these interviews were not monologues. Interviews often become conversations. When reporters pose questions or make assertions, they may be furnishing information, information that may reflect their personal views of the case. The published accounts indicate this happened on at least one occasion.… . The District Judge’s repeated violations of Canons 3A(6) and 3A(4) also violated Canon 2, which provides that “a judge should avoid impropriety and the appearance of impropriety in all activities.” Canon 2A requires federal judges to “respect and comply with the law” and to “act at all times in a manner that promotes public confidence in the integrity and impartiality of the judiciary.” The Code of Conduct is the law with respect to the ethical obligations of federal judges, and it is clear the District Judge violated it on multiple occasions in this case. The rampant disregard for the judiciary’s ethical obligations that the public witnessed in this case undoubtedly jeopardizes “public confidence in the integrity” of the District Court proceedings. … C. Appearance of Partiality The Code of Conduct contains no enforcement mechanism.… Microsoft urges the District Judge’s disqualification under 28 U.S.C. §455(a): a judge “shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned.” The standard for disqualification under §455(a) is an objective one. The question is whether a reasonable and informed observer would question the judge’s impartiality. … In this case, … we believe the line has been crossed. The public comments were not only improper, but also would lead a reasonable, informed observer to question the District Judge’s impartiality.… The problem here is not just what the District Judge said, but to whom he said it and when. His crude characterizations of Microsoft, his frequent denigrations of Bill Gates, his mule trainer analogy as a reason for his remedy—all of these remarks and others might not have given rise to a violation of the Canons or of §455(a) had he uttered them from the bench. But then Microsoft would have had an opportunity to object, perhaps even to persuade, and the Judge would have made a record for review on appeal. It is an altogether different matter when the statements are made outside the courtroom, in private meetings unknown to the parties, in anticipation that ultimately the Judge’s remarks would be reported. Rather than manifesting neutrality and impartiality, the reports of the interviews with the District Judge convey the impression of a judge posturing for posterity, trying to please the reporters with colorful analogies and observations bound to wind up in the stories they write. Members of the public may reasonably question whether the District Judge’s desire for press coverage influenced his judgments, indeed whether a publicity-seeking judge might consciously or subconsciously seek the publicity-maximizing outcome. We believe, therefore, that the District Judge’s interviews with reporters created an appearance that he was not acting impartially, as the Code of Conduct and §455(a) require. D. Remedies for Judicial Misconduct and Appearance of Partiality 1. Disqualification … At a minimum, §455(a) requires prospective disqualification of the offending judge, that is, disqualification from the judge’s hearing any further proceedings in the case. Microsoft urges retroactive disqualification of the District Judge, which would entail disqualification antedated to an earlier part of the proceedings and vacatur of all subsequent acts.… [W]e conclude that the appropriate remedy for the violations of §455(a) is disqualification of the District Judge retroactive only to the date he entered the order breaking up Microsoft. We therefore will vacate that order in its entirety and remand this case to a different District Judge, but will not set aside the existing Findings of Fact or Conclusions of Law (except insofar as specific findings are clearly erroneous or legal conclusions are incorrect).…[Full retroactive disqualification] would unduly penalize plaintiffs, who were innocent and unaware of the misconduct, and would have only slight marginal deterrent effect. Most important, full retroactive disqualification is unnecessary to protect Microsoft’s right to an impartial adjudication. The District Judge’s conduct destroyed the appearance of impartiality. Microsoft neither alleged nor demonstrated that it rose to the level of actual bias or prejudice. There is no reason to presume that everything the District Judge did is suspect. Although Microsoft challenged very few of the findings as clearly erroneous, we have carefully reviewed the entire record and discern no basis to suppose that actual bias infected his factual findings. The most serious judicial misconduct occurred near or during the remedial stage. It is therefore commensurate that our remedy focus on that stage of the case. The District Judge’s impatience with what he viewed as intransigence on the part of the company; his refusal to allow an evidentiary hearing; his analogizing Microsoft to Japan at the end of World War II; his story about the mule—all of these out-of-court remarks and others, plus the Judge’s evident efforts to please the press, would give a reasonable, informed observer cause to question his impartiality in ordering the company split in two. … 2. Review of Findings of Fact and Conclusions of Law Given the limited scope of our disqualification of the
District Judge, we have let stand for review his Findings of Fact and
Conclusions of Law.…[T]he District Judge’s factual findings both warrant
deference under the clear error standard of review and, though exceedingly sparing
in citations to the record, permit meaningful appellate review. In reaching
these conclusions, we have not ignored the District Judge’s reported intention
to craft his factfindings and Conclusions of Law to
minimize the breadth of our review. The Judge reportedly told Ken Auletta that “what I want to do is confront the Court of
Appeals with an established factual record which is a fait accompli.” [Citation.] He explained: “part of the inspiration for doing
that is that I take mild offense at their reversal of my preliminary injunction
in the consent-decree case, where they went ahead and made up about ninety
percent of the facts on their own.” VII. CONCLUSION The judgment of the District Court is affirmed in part, reversed in part, and remanded in part. We vacate in full the Final Judgment embodying the remedial order, and remand the case to the District Court for reassignment to a different trial judge for further proceedings consistent with this opinion. |