This memorandum and order is the response of the Hon. Thomas Penfield Jackson in response to the Justice Department's claim that Microsoft Corporation (Microsoft) was in violation of the 1995 Consent Decree.  In this memorandum, he must determine either that Microsoft is in violation of the Decree, that they are clearly not in violation of the Decree, or whether at present there is not enough information to make such a determination.  In the latter case, the involved partied would enter into a discovery phase, in which they would gather more evidence for a court trial.

The Judge outlines the basis for the case and gives a brief summary of each side's position.  He then gives his decision that Microsoft cannot, based on the evidence presented by the government, be currently found in contempt of the Consent Decree.  He does however believe that the Government can and should pursue a broader antitrust case against Microsoft.  He finally gives his rationale for imposing a Preliminary Injunction against Microsoft to preserve the status quo.
 

Text of the actual Memorandum and Order

Summary of Government's case

The government begins by pointing out the Microsoft, holding approximately 80% of market shares, has enjoyed a monopoly in the PC Operating System business for quite a while.  Monopolies do not a priori harm competition and consumer choice.  Microsoft, however, leverages their monopoly power, by requiring OEMs (original equipment manufacturers) to include Microsoft's Web Browser, Internet Explorer (IE), when instaling Microsoft's OS.  This sort of "Tying" arrangement, while being generally anticompetitive, is in specific violation of Section IV(E)(i) of the Consent Decree,which prohibhits licensing of the OS conditioned on the licensing of a separate product.  The government's case, then is to prove that IE is indeed a separate product.

Summary of Microsoft's case

Microsoft refutes the government's case by appealing to the parenthetical addition to Section IV(E)(i), that the government shall not "prohibit Microsoft from developing integrated products."  Microsoft claims that IE is an architypical integrated product, as it simply extends the capabilities of the OS across the Internet.  Because most integral features of Operating Systems were at one point separate products, the fact that IE was at one time sold separately is not a valid reason why it is not integrateable.  They claim that at the time of the drafting of the Consent Decree, the government was well aware that Microsoft planned to integrate IE with its OS.  They finally claim that the inclusion of the integration clause was a vital precondition of their entering into the Consent Decree.

The Judge's ruling

The decision that the court must make is whether at this point to find Microsoft in Civil Contempt of the US - Microsoft Consent Decree.  Judge Jackson claims that the Court cannot conclude that Microsoft has clearly violated an unambiguous  prohibition in the Decree.  Following from precedent, in the face of ambiguities, the Court must rule in favor of Microsoft.  Microsoft provided a reasonable definition of "integrated product" so that they were protected by the ambiguous parenthetical clause of Section IV(E)(i).  However, though the government did not provide enough evidence to prove that Microsoft was in contempt of court, this does not mean that Microsoft is in compliance with the licensing terms of the Consent Decree.  Judge Jackson states that further evidence is necessary to decide whether consumers view IE and the OS as separate products, a condition for non integration in several previous cases.  The Judge therefore makes two orders: the first denies the petition of the US finding Microsoft in civil contempt of the consent decree, and the second calls for further discovery under the supervision of Special Master (appointed by a separate order that day).

Preliminary Injunction

During this period of further discovery, the Judge must ensure the preservation of the status quo.  There are four conditions he must consider: "(1) whether
petitioner has a substantial likelihood of success on the merits; (2) whether the petitioner will suffer irreparable injury if injunctive relief is denied: (3) whether the respondent will suffer a disproportionate injury if injunctive relief is granted; and (4) whether the public interest favors the entry of the injunction." (Memorandum and Order)  The Judge determined that the government had a "substantial likelihood of success" by showing that IE was indeed a separate product from the OS.  In addition, the balance of harms indicated that Microsoft would suffer less under the strict imposition of the terms of the Consent Decree than the government would suffer without the Consent Decree.  Finally the Judge claimed that the public would most benefit from the imposition of the terms of the Consent Decree on Microsoft.  The Judges third order, therefore, was  that Microsoft, during the discovery period, would not license their OS to OEMs under the condition that the OEM also license IE.

Non-Disclosure Agreements

A final portion of the government's case against Microsoft was that their Non-Disclosure Agreements were unfair.  The Judge found no substantial evidence supporting the Government's claim.  Therefore, his final order was that the government's request to strike certain language from Microsoft's NDA contracts was denied.