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Will The Watchdogs Keep Barking At Windows?

Cover Story


Windows 95 is finally passing Microsoft's quality-control tests. But can it pass muster with Assistant Attorney General Anne K. Bingaman?

Bingaman's antitrust troops are looking into whether, as rivals and PC makers allege, the software giant is using anticompetitive tactics with Win95. The most high-profile investigation involves plans to "bundle" instant access to Microsoft Network (MSN) in Windows 95. In early June, Justice subpoenaed scores of Microsoft's online rivals and partners, as well as industry analysts, seeking information on MSN. On June 21, the department served Microsoft with a sweeping request for information, to which Microsoft responded on June 23 by challenging the subpoena in federal court. In its petition, Microsoft characterized the request as the "latest salvo in what increasingly appears to be a campaign of harassment." Justice, which moved to strike the petition, called it a "tempest in a teapot."

Justice is also looking into Microsoft's proposed licensing contract with PC makers. Clause 12d in the Win95 license agreement, PC makers say, would bar them from suing Microsoft or any of its licensees for infringing patents that relate to Windows 95 or other Microsoft programs. Microsoft says it is simply trying to protect itself from becoming a third party in patent and copyright suits. But PC makers argue that if they sign 12d, they can't protect their intellectual property--the enhancements they make to their Windows 95 systems, for example--from Microsoft or any PC maker. Says AST Research Inc. attorney Jonathan B. Orlick: "Microsoft would be able to include anything we develop that has to do with software without paying royalties."

Microsoft has proposed such language since 1990, and many companies without patent portfolios have signed. But as Microsoft began insisting that even its biggest customers sign pacts with 12d for Win95, Justice got wind of the controversy. The department is now investigating language in contracts for Win95, Microsoft Office, and Microsoft Network.

STICKY PROBE. In the end, PC makers won't risk missing the Win95 wave. Most likely, they'll negotiate compromise language, making the investigation moot. The Justice probe of MSN, however, could be stickier. Worst case: It could push back Microsoft's Aug. 24 launch date. "We're doing everything in our power to make our launch time," says William H. Neukom, Microsoft's senior vice-president for law and corporate affairs. It looks like somebody's going to have to give. Will it be Gates or Bingaman?By Amy Cortese in New York, with Peter Burrows in San Francisco and Catherine Yang in Washington

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