UNITED STATES OF AMERICA et al v. MICROSOFT CORPORATION

Filing 924

TRANSCRIPT OF PROCEEDINGS before Judge Colleen Kollar-Kotelly held on 1-19-11; Page Numbers: 1-33. Date of Issuance:4-22-11. Court Reporter/Transcriber Lisa Foradori, Telephone number 202-354-3269, Court Reporter Email Address : [e-mail] the first 90 days after this filing date, the transcript may be viewed at the courthouse at a public terminal or purchased from the court reporter referenced above. After 90 days, the transcript may be accessed via PACER. Other transcript formats, (multi-page, condensed, CD or ASCII) may be purchased from the court reporter.NOTICE RE REDACTION OF TRANSCRIPTS: The parties have twenty-one days to file with the court and the court reporter any request to redact personal identifiers from this transcript. If no such requests are filed, the transcript will be made available to the public via PACER without redaction after 90 days. The policy, which includes the five personal identifiers specifically covered, is located on our website at ww.dcd.uscourts.gov. Redaction Request due 5/13/2011. Redacted Transcript Deadline set for 5/23/2011. Release of Transcript Restriction set for 7/21/2011.(Hand, Lisa)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
CA No. 98-1232 (CKK)
Washington, DC
January 19, 2011
10:05 a.m.

vs.
MICROSOFT CORPORATION,
Defendant.
___________________________________
STATE OF NEW YORK, ET AL,
Plaintiff,

CA No. 98-1233 (CKK)
vs.
MICROSOFT CORPORATION,
Defendant.
___________________________________

TRANSCRIPT OF STATUS CONFERENCE
BEFORE THE HONORABLE COLLEEN KOLLAR-KOTELLY
UNITED STATES DISTRICT JUDGE

APPEARANCES:
For Department of Justice:

AARON D. HOAG, ESQUIRE
ADAM T. SEVERT, ESQUIRE
U.S. Department of Justice
600 E Street, NW
Suite 9300
Washington, DC 20530
[phone]

APPEARANCES continued on following page.

APPEARANCES, continued

For Microsoft:

CHARLES F. RULE, ESQUIRE
JONATHAN S. KANTER, ESQUIRE
Cadwalader, Wickersham & Taft
1201 F Street, NW
Washington, DC 20004
[phone]

For Microsoft:

KEVIN KEHOE, ESQUIRE
JUDITH JENNISON
FRED WURDEN
NGOC HULBIG
ROBERT MUGLIA

For the New York Group:

ELLEN S. COOPER, ESQUIRE
Assistant Attorney General
Chief, Antitrust Division
Office of Attorney General
200 St. Paul Place
Baltimore, MD 21202
[phone]

For the California Group:

STEPHEN HOUCK, ESQUIRE
Menaker & Herrmann LLP
10 E. 40th Street
New York, NY 10016

For the California Group:

LAYNE LINDEBAK, ESQUIRE (Iowa)
ADAM MILLER, ESQUIRE (Calif)
CRAIG FARRINGER, ESQUIRE

Court Reporter:

Lisa M. Hand, RPR
Official Court Reporter
U.S. Courthouse, Room 6505
333 Constitution Avenue, N.W.
Washington, DC 20001
[phone]

Proceedings recorded by mechanical stenography; transcript
produced by computer-aided transcription

3

1
2

P R O C E E D I N G S
COURTROOM DEPUTY: Civil case 98-1232, the United

3

States of America versus Microsoft Corporation. Civil case

4

98-1233, State of New York, et al. versus Microsoft

5

Corporation. Counsel, would you please come forward and

6

identify yourself for the record.

7

MR. SEVERT: Good morning, Your Honor. Adam Severt

8

for the United States, with me at counsel table is Aaron Hoag.

9
10

THE COURT: Good morning.
MS. COOPER: Good morning, Your Honor. Ellen

11

Cooper from Maryland for the New York group.

12

THE COURT: All right.

13

MR. HOUCK: Good morning, Your Honor. Steve Houck

14

for the California group, with me at counsel table are Layne

15

Lindebak from Iowa and Adam Miller from California, and

16

sitting behind them is Craig Farringer from the D.C. Attorney

17

General's office.

18

THE COURT: All right.

19

MR. RULE: Good morning, Your Honor.

20

THE COURT: Good morning.

21

MR. RULE: Charles Rule, Cadwalader, for Microsoft.

22

With me at counsel table is Bob Muglia, President of the

23

Server and Tools Division at Microsoft; next to him is Kevin

24

Kehoe in the Legal Department at Microsoft; next to him is

25

Fred Wurden, who is the General Manager of the Technical

4

1

Documentation Project; Judy Jennison from the Microsoft Legal

2

Department; Ngoc Hulbig from Cadwalader; and Jonathan Kanter

3

from Cadwalader.

4

THE COURT: All right. As I've been doing for the

5

last several years, I will summarize the compliance since the

6

last court hearing, based on the reports. I'll then have some

7

comments, some questions, I'll call on counsel. This is a

8

full compliance hearing and the report addressed that.

9

Understandably, the focus at this point is Section III.E, the

10

technical documentation.

11

We're only four months away from expiration of the

12

Final Judgments, May 12, 2011. So, obviously the progress on

13

the TDIs is very key. We were here last for an interim

14

compliance hearing on October 13th, and we've set dates moving

15

up -- not every month, but close to -- as we've come moving to

16

the end.

17

Microsoft has filed two supplemental status

18

reports, one in November, one in December, and then

19

January 14th there was one filed, which was the joint status

20

report in the two cases, which indicates the full compliance

21

at this point. Obviously there's Section III.E, there's the

22

middleware related issues, but I think frankly, Section III.E

23

is key, and then the issues relating to, I think the

24

complaint, is the only other thing that I would focus on

25

particularly today.

5

1

And obviously when we talk about the technical

2

committee, we're also including Mr. Hunt who has been with the

3

California group has been working with us -- with the TC. So,

4

let me start with the technical documentation. I'm only going

5

to talk about where we were since the last report, I won't go

6

back over all the dates, et cetera, in terms of the earlier

7

milestones. We had set a series of milestones relating to

8

resolving the TDIs, both in the context of less than 90 days,

9

over 90 days, and a particular timing of it.

10

Microsoft evidently met the January 1st, 2011

11

milestone. In other words, to reduce the number of TDIs older

12

than 90 days to 15 percent of the level of April 30th.

13

Microsoft did this by December 5th, so that was nearly a month

14

ahead of schedule. So, that was very good on the one hand.

15

On the other hand, because Microsoft met the January 1st

16

milestone early and because we had set up that the TC would be

17

stopping submitting new TDIs as of January 1, and then would

18

shift its focus from correcting identified TDIs to identifying

19

new TDIs, this would be their last time that they would

20

identify any new TDIs.

21

So, we evidently had an enormous amount of TDIs, at

22

least from my perspective looking at it, than expected.

23

Significant increase is the way you worded it. New TDIs

24

identified in December, more than the parties evidently

25

expected. Now, my understanding is the plaintiff's view is

6

1

that the increase shouldn't be viewed as an indication that

2

the technical documentation is an indication that there's a

3

decline in the quality, but really a result of a Herculean

4

effort, I guess, on the part of the TC before it shifted its

5

focus to maximize their final review of new TDIs.

6

Evidently you agreed to several process changes, to

7

address and mitigate the impact of these changes. They seem

8

to be mostly communication issues, although I'd like to hear a

9

little more about that. The parties agree that the spike in

10

TDIs identified in December is going to affect the March 15th

11

milestones and whether Microsoft will be able to meet them.

12

Microsoft indicates that it is devoting substantial

13

resources to address the remaining TDIs, and that at least

14

early indications, which include the closing, I believe in

15

January, of over 2,087 TDIs that were active on December 31st.

16

It's their view that Microsoft and the TC are well-equipped to

17

address those TDIs. Both plaintiffs and Microsoft report that

18

even with these process changes that have been put into place,

19

as I've indicated, that the milestones for March 15 are

20

unlikely to be met. However, both parties seem to think that

21

they're not concerned as they expect Microsoft will be able to

22

meet the April 15th milestones.

23

And at the end I'll raise a couple of issues that I

24

have about that. In terms of the TC's prototype

25

implementation activity, as of December 31st -- so the end of

7

1

the year -- there were a total of 7,071 outstanding TDIs, of

2

which 2,242 were Priority 1. And those were submitted by the

3

TC. 201 were self-identified by Microsoft. Of the 7,071 that

4

are still, quote, outstanding, 828 have actually been resolved

5

to the TC's satisfaction, but we have the system of they

6

remain pending until there's publication of verification. So

7

that the active TDIs that actually have to be worked on, as I

8

understand, is 6,243.

9

And Microsoft also reports that as of the end of

10

December, 5,979 of the active TDIs have been open to less than

11

90 days, while 39 have been open for greater than 90 days.

12

So, at least we're getting some of the older TDIs taken care

13

of. Microsoft reports it continues to test the MCPP

14

documentation that has been released since Windows 7. They've

15

continued with their interoperability lab plug-fest events.

16

Microsoft is going to be hosting an active

17

directory and exchange plug-fest on January 24th through the

18

28th, seven companies are registered to come. They are also

19

going to host an interoperability lab for the Oracle file

20

services development team the week of January 31st. And then

21

various other resources have also been made available.

22

In terms of the MCPP status, as of the last report

23

there were a total of 51 companies licensing patents for

24

communication protocols through the MCPP program. Microsoft

25

now reports there are a total of 49 companies licensing

8

1

patents. I don't know whether there was a drop of companies

2

in here or I misunderstood what the report said, in terms of

3

the 51 versus the 49. Twenty-eight have royalty bearing

4

licenses, eight have fixed fee licenses, 13 have royalty free

5

licenses, and 24 licensees are currently shipping products.

6

Twenty-three licensees have elected to receive free technical

7

account manager support from Microsoft, and six licensees have

8

access to the Windows source code.

9

In terms of downloads in terms of Microsoft's

10

protocols that are available. Now that we've corrected, in

11

terms of what the figure is, it's 533,000 times, which is

12

still quite a substantial amount that have been accessed. So,

13

in terms of my observations, questions, I'm happy you met the

14

January 1st milestone. I am concerned about the March 15th,

15

the larger grouping. How confident the parties are that

16

you're going to get this all reduced by April 15th.

17

We're getting very close to the expiration date,

18

although we set a very tight schedule, we knew that there

19

might be some slippage or things moving around. But are we

20

really confident that this is going to happen, since May 12th

21

is looming?

22

You've also indicated some process changes. I

23

don't know that I necessarily need to know them, but it would

24

be -- I would be interested in knowing what you're doing to

25

make sure that this happens. And plaintiffs evidently

9

1

indicate that they are not concerned about the quality of the

2

documentation, even though there's been an increase in TDIs.

3

I would be interested in knowing that. Is that because it was

4

more compact? If there's an increase, the natural assumption

5

would be that there's potentially a problem. So, I would like

6

an explanation why you're not concerned about this. Is it

7

because they have actually looked at it and it's not a

8

problem, or what is the reason for it?

9

Overall, I have some concerns, we never expected to

10

have zero TDIs, and I understand that. But I wanted some

11

period before the expiration where it would be a modest number

12

so that we would be able to gauge the efficacy. And we're,

13

frankly, moving up very close. And I expressed my concerns

14

last time, but I am a little more concerned at this point, but

15

I'll leave it to counsel for both sides to discuss this.

16

As I said, we're moving forward, and I do know that

17

we set a very tight schedule in terms of doing this. And,

18

frankly, I have to say that in general you all have been

19

pretty much meeting it. So, to have one where there's some

20

slippage, but you feel you can make up for it, gives me some

21

confidence, but I still have some questions.

22

Really, the rest, nobody has raised any other

23

issues, so I think in terms of hitting any of the other

24

sections, they seem to be, you know, nothing seems to be going

25

on there. I did want to raise the two complaints, one was one

10

1

that was made back in August and it concerned the marketing

2

and technical management of toolbars and Internet Explorer 9,

3

which gets to the Internet browser add-on, allowing the users

4

to extend the functionality of their browser.

5

Now, the state plaintiffs and the TC were --

6

because I believe that was where the complaint was being

7

looked at -- were engaged in discussions with Microsoft and

8

the complainant. The state plaintiffs now report they haven't

9

completed the marketing component, but they have completed the

10

technical management one. Microsoft has agreed to make the

11

changes relating to this. And, so, subject to the TC looking

12

to make sure that the implementation -- these changes have

13

been done, then at least the technical aspect would be

14

completed.

15

As I understood in reading it, the technical aspect

16

related to new functionality that Microsoft added to Internet

17

Explorer 9, which measures how long add-ons take to load. If

18

I'm wrong about that, let me know. I guess the other question

19

is, you know, how much longer will it take to resolve the

20

marketing, are we well towards getting it finished.

21

As of January 10th Microsoft had received 68

22

complaints or inquiries since the last period. There's only

23

one that Microsoft has indicated relates to their compliance

24

obligations and represents that the products in question are

25

not Microsoft middleware under the Final Judgment. And that

11

1

even if they were, there's no undocumented APIs that are used

2

by the products in question. And I understand plaintiffs have

3

been provided details as to the complaint.

4

Now, I realize I'm usually out of the loop unless

5

there's a problem, and so far you've been able to resolve it.

6

But another question is, is this something that is going to

7

get resolved prior to the end? So, part of it was just to get

8

some sense of whether this would -- the state plaintiffs'

9

investigation is moving along such that that will hopefully be

10

done the next time we're in here, and does anybody have any

11

concerns about the most recently received complaint?

12

In terms of compliance and resources, I didn't see

13

anything that indicates that Microsoft is not devoting the

14

resources that need to be devoted to it. And, certainly, the

15

compliance officers -- there's new ones -- and they have been

16

following through, as they have for quite some time, with what

17

they need to do under the judgment. So, there's really no

18

issues with that.

19

So we're really back to the TDI, as far as I can

20

tell, and the issue of the complaint. So, let me call on

21

counsel, and it's more the States, at least for the one

22

complaint. So, let me hear from the Government first.

23

MR. SEVERT: Thank you, Your Honor. Let me start

24

with your first question on how confident we are on the

25

March -- sorry, the April 15th milestone. I think it's fair

12

1

to say that given the large number of TDIs there, there

2

certainly is some concern. But I also think it's fair to say

3

that since the end of the year that Microsoft has closed and

4

resolved a very large number of TDIs.

5

I think Your Honor is correct that as of the end of

6

the year there were over 6,000 active TDIs that Microsoft and

7

the TC were working on. Since that time, it's only been 18

8

days or so, they have closed 2500 of those. So, that's a very

9

large number in a very short amount of time. So, I think

10

Microsoft has shown that it has the ability to close a large

11

number of TDIs quickly and the TC is now focused only on

12

closing TDIs.

13

So, I think a large number of those will be closed

14

in the ordinary course. There will, of course, be some that

15

are more difficult than others that may take more time, but I

16

think a large number will be closed relatively quickly. So,

17

while there is some concern, to answer your question, on the

18

April 15th deadline, just because -- you know, as you put it,

19

it's an enormous number of TDIs that were found in December, I

20

think that we believe that Microsoft working with the TC will

21

be able to meet that deadline.

22

And part of it is because of the process changes

23

that you alluded to. I can give you a little bit of an

24

outline of the types of changes that we -- that the TC and

25

Microsoft have made, and there are three of them. The first

13

1

enables sort of faster turnarounds on TDIs between Microsoft

2

and the technical committee so that it enables more back and

3

forth between them. So that I think will certainly help

4

identify TDIs that might be problematic a little bit more

5

quickly.

6
7
8

THE COURT: So, you have like a time line in which
there's supposed to -MR. SEVERT: Exactly. Sort of targets at which

9

they're supposed to respond. The second is that there is more

10

rapid member and Microsoft executive involvement in TDIs that

11

have been back and forth a few times that used to -- in the

12

past that had happened sort of at a later stage, and we moved

13

it up a little bit to make sure that if there are issues that

14

would be helpful to get senior level involvement in that can

15

happen more quickly.

16

And the third is that there are a couple of process

17

tools that have changed to enable more direct communication

18

between Microsoft engineers and TC engineers so that if there

19

are issues that might be better dealt with through just more

20

direct communication, there are tools that that can happen a

21

little more easily now. So, those are the nature of the

22

process changes.

23

THE COURT: Okay.

24

MR. SEVERT: And your last question regarding the

25

TDIs is, why aren't plaintiffs or the United States concerned

14

1

about the quality based on the large number of TDIs? And I

2

think it's largely due to -- we've been tracking -- the TC has

3

been tracking for a long time the number of TDIs per page that

4

they're finding, and those numbers have been relatively

5

constant. What changed in December is that the TC, one,

6

because it was the last month, and two, because Microsoft met

7

their milestone very early in the month, really focused their

8

attention even more on identifying new TDIs before the end of

9

the year, simply got through many, many, many more pages than

10
11

anticipated.
I think it's fair to say that all parties,

12

Microsoft, the United States, and the state plaintiffs and the

13

TC, were very surprised at the large number of TDIs, but it

14

was really a function of the TC getting through more pages --

15

far more pages, in fact, than expected. And I think from the

16

United States' perspective, that's good news. The more the

17

technical documentation has been looked at very carefully,

18

more issues have been resolved or identified so they can be

19

resolved before the end of the Final Judgments.

20

THE COURT: Okay. I guess the question that I

21

would have is, at least on this issue, is -- understanding

22

that they have looked at a greater volume, I guess, is maybe

23

the way to look at it. But is this indicative of sort of a

24

constant that's going to be -- even if the Final Judgment

25

expires, a constant that's going to be there going out?

15

1

My understanding is, as I said, that it would never

2

be zero, but I expected a fairly modest number and we would

3

get it down to a really -- I'm not sure what the modest number

4

would be, but it certainly isn't what I've seen in the report.

5

So, is there an expectation that once this is reviewed that we

6

should see small -- a smaller number of TDIs as we move

7

towards the March date, or is this going to be sort of a

8

constant, taking into account you did a greater volume of

9

review.

10

But even if you move back to what we had set out as

11

a norm -- what we'll call a normal review -- is this pretty

12

much what the numbers are going to be? In other words, is

13

this what the expectation would be at the end of the judgment,

14

that that's the number that's still going to be out there --

15

if I make any sense?

16

MR. SEVERT: Let me try it. So, my expectation --

17

the United States' expectation is that Microsoft is going to

18

hit the milestones, and the large number of TDIs will be

19

significantly reduced to the numbers in the milestones. In

20

terms of -- is Your Honor asking about if the TC were to

21

continue looking at documents?

22

THE COURT: Well, you know, at some point -- not at

23

some point, we know we have a date that it's finished, the

24

expiration date. And we've all accepted, as I've indicated,

25

that it's -- we're never going to have it so there are zero

16

1

TDIs and there's nothing, there's always going to be

2

something, and I'm willing to accept that.

3

My question was -- is that I had expected that once

4

we got through these milestones that what would be left would

5

be a fairly small number going forward with the expectation

6

that that would be probably sort of maybe a constant number

7

going.

8

MR. SEVERT: Sure. No, I --

9

THE COURT: This gives me an abrupt jolt of feeling

10

that maybe that's not the way it's going to happen, and I have

11

some concerns that at the end of the May 12th date that we

12

still will have a fairly large group going forward even though

13

it's expiring.

14

MR. SEVERT: So, let me try to answer that. So, I

15

think that Your Honor is correct that there will always be

16

some number of -- within the latent TDIs in the documentation,

17

that's -- it would be --

18
19
20

THE COURT: And I've accepted that. Zero would be
nice, but I don't think that's going to happen.
MR. SEVERT: Sure. So, when we set out the

21

schedule of the milestones, the TC put together a schedule for

22

itself to guide its review as to what the order and the

23

documents it was going to review, and based upon how

24

significant the particular documents or sections of the TDI

25

were, the TC, because it had so much time in December to focus

17

1

on finding TDIs met and further exceeded its schedule, looked

2

at far more of the technical documentation very carefully than

3

it expected to.

4

So, I think that if the TC -- that to the extent

5

that there are TDIs after the expiration of the Final

6

Judgments, I think that there will be, they are far less

7

significant because the TC has gotten through its schedule and

8

given -- and gotten past its schedule, gone beyond what it

9

originally planned to do.

10

THE COURT: Okay. And it's really the TC that's

11

going to inform me for this, is whether they view that as they

12

proceed, and to their credit, they really made evidently a

13

Herculean effort in December to go through all this. Are they

14

going to be satisfied? Because one thing I would want to

15

know, as we get here, say in April and March, evidently there

16

may be still a problem as we get to April, which is roughly a

17

month beforehand. Are they satisfied that this is an

18

acceptable number, whatever it is, as we move towards the

19

expiration?

20

Maybe they can't predict it now, but I certainly

21

would have -- the milestones would set up that we would reach

22

that point, and I must say that it concerns me a little bit

23

that that isn't going to happen.

24
25

MR. SEVERT: Sure. What I can say is that our
level of satisfaction, as least speaking for the United

18

1

States, is a result of our interactions and conversations with

2

the TC members and managers, and I think it is fair to say

3

that they are satisfied that the quality level of the

4

technical documents has not declined, it's in fact been

5

improving.

6

They've gotten through their schedule, which they

7

created trying to identify the areas that are, one, most

8

useful for licensees and potentially users, and two, most

9

difficult likely to have issues. And they've gone -- been

10

able to do more than they expected, and the documents are --

11

will be in good shape after the identified TDIs are resolved.

12

THE COURT: Okay. Because the new ones -- we did

13

these priority things, so presumably -- and the Priority 1's

14

seem to be in the larger groupings. So, that's why it seemed

15

to me it wasn't just something that -- you know, small little

16

things, because you've put them as a Priority 1. Okay. All

17

right.

18

MR. SEVERT: Thank you.

19

THE COURT: Anything else? No? Okay. Ms. Cooper.

20

I always think of you as addressing the TC issues. So,

21

perhaps you can add on if there's particular issues for me.

22

MS. COOPER: Yes, Your Honor, that is my job. What

23

I want to add is that the completion bonus program is still

24

working well, and that at this point all but one of the TC

25

engineer slots is still filled. And that means that they're

19

1

all working on TDIs, they are all meeting their own targeted

2

deadlines. And, in fact, the TC staff will be working

3

overtime to ensure that Microsoft's responses to the TDIs are

4

turned around quickly. And as Mr. Severt discussed, they're

5

on a new accelerated turnround schedule.

6

So, because of this and because of Microsoft's

7

strong efforts throughout the month of January, as Mr. Severt

8

indicated, the New York group also believes that with

9

additional strong effort that we can get very close to the

10

milestones at least by April. I'm not sure that we will be at

11

exactly the number that we had indicated early on, but I think

12

we will be close.

13

THE COURT: Okay. All right.

14

MS. COOPER: Your Honor, I think, had some

15

questions about the middleware --

16

THE COURT: Right.

17

MS. COOPER: -- complaint? And your questions were

18
19

about the -THE COURT: One was the one in August, and one

20

issue seems to have been resolved, the technical issue, the

21

rest was a marketing issue that was left.

22

MS. COOPER: There were two complaints that came in

23

at the same time. The first, the technical part, has in fact

24

been resolved satisfactorily. And so long as the TC is able

25

to verify that Microsoft has done what it has agreed to do,

20

1

and I think that's probable. That complaint will be closed.

2

The other complaint, the marketing complaint, required some

3

discovery as did the technical complaint, and that production

4

was a rolling production, it has just been completed

5

yesterday.

6

And so it has taken a little bit longer than

7

anticipated to get all the documents that we need to review,

8

but we are hopeful that by the next time we meet we'll be able

9

to have a resolution for you. It really just depends on what

10

we see in the documents.

11

THE COURT: Okay. There was another one that I

12

think that came to Microsoft that Microsoft had identified

13

itself. Is that one that you all are working on or what? I

14

believe I'm correct, Microsoft -- as of January 10th there are

15

68 complaints, there was only one of them that related to some

16

degree with the compliance obligations. And my understanding

17

is you have been provided details, is that something you're

18

working out, too?

19

MS. COOPER: Microsoft has informed us about this

20

complaint. I can't say, in all honesty, that we have focused

21

on it as yet, but we will do so.

22

THE COURT: Okay. All right, Mr. Houck.

23

MS. COOPER: Thank you, Your Honor.

24

MR. HOUCK: I wanted to talk mainly today about the

25

three issues, because as Your Honor points out, this is a very

21

1

important subject as we are getting close to the expiration of

2

the Final Judgment. I'm sure I'm going to repeat some of what

3

you heard, but I'll undertake that risk. With respect to the

4

middleware complaints, I agree with what Ms. Cooper said, we

5

have finished looking at the technical, IE-9, aspect of the

6

complaint and reached a resolution with Microsoft.

7

The other portion has taken a little bit longer,

8

there's actually a glitch in Microsoft's document production

9

efforts and their document production software, so the

10

production was delayed a little bit, but it's now complete and

11

we will be looking at it shortly, and certainly anticipate

12

being able to report to Your Honor, and hopefully have it

13

resolved one way or the other by the next time we see Your

14

Honor.

15

I believe the other complaint you're referring to

16

is one that Microsoft called to our attention. We have looked

17

at it just briefly, it does not on its surface look like it's

18

going to be that significant, so it shouldn't delay the

19

termination of the Final Judgment, if that's Your Honor's

20

concern, that we will be looking at that more carefully, it

21

just came to our attention in the last week or so.

22

THE COURT: Okay.

23

MR. HOUCK: With respect to III.E issues, the last

24

six weeks, December through mid-January, have probably been

25

the most extraordinary six weeks in the history of the entire

22

1

program. We had seemed to be on a fairly even glide path down

2

to resolution. And, in fact, in September, October and

3

November, the three prior months, the TC had opened an average

4

of 619 TDIs a month, and that soared in December to 5,469,

5

which is nine times the average in the prior three months.

6

So, as the others have said, we're all -- all the

7

plaintiff groups and Microsoft were greatly surprised at that.

8

And just to reiterate again, it's our view as well that the

9

cause of that is not a decline in quality because the number

10

of TDIs per page looked at seems to be pretty consistent.

11

From our perspective, the surge in TDIs is due to

12

two things. One is the complete focus of the TC staff on

13

looking for TDIs, rather than assisting Microsoft in closing

14

them. And probably more important, as Your Honor pointed

15

out -- I'm not sure I'm going to say this right -- Herculean

16

effort -- an all out effort by the TC staff, a lot of

17

overtime, to finish the program the TC had set up to review

18

the documents before year end when their status as TDI hunters

19

expired.

20

And so what happened was the TC had a set of

21

documents that they had planned for review, and I guess it got

22

a little behind that because of the earlier effort to assist

23

Microsoft in meeting earlier milestones. So, what happened is

24

that you're really concentrating a lot of efforts in meeting

25

the TC's goals to assure that the documentation is good

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quality. And they, as I understand it, met those or came very

2

close to those goals. So, they finished the planned program,

3

and the result being this very large number of TDIs.

4

As Mr. Severt said, the good thing about that is,

5

if it identified issues in the documents which have corrected,

6

will greatly improve the documentation. The potential

7

downside, which is of concern to Your Honor and was very much

8

of concern to us, is the jeopardy it might put the termination

9

of the Final Judgment in May.

10

So, we're all very concerned about that. And all

11

of us being the plaintiffs, and Microsoft and Microsoft's

12

inside counsel, Mr. Kehoe and Ms. Jennison, were good enough

13

to fly here to Washington, D.C. last week to meet with us to

14

talk about that issue and see how we could overcome it. And

15

one of the things that we agreed on were some of these process

16

changes that Mr. Severt outlined.

17

So, hopefully, Your Honor had asked if we were

18

really confident that we would meet the end date in May. And

19

one thing I've learned in this case is not to be confident

20

about anything, but I think it's fair to say that the

21

California group is reasonably confident. That

22

notwithstanding the very large number of TDIs in December, we

23

still are very hopeful of making the May date, and as getting

24

the TDIs down to, if not zero, a modest number, I don't know

25

what that number is either. We haven't really come to a

24

1

determination about what that is, but hopefully it will be

2

fairly low.

3

And the reasons I say that we are reasonably

4

confident are several, one is the change in procedures that

5

have been outlined, but that's probably the least of the

6

reasons. Another reason is the fact that the TC's only

7

priority now really is helping Microsoft fix already

8

identified TDIs, not to continue to look for others.

9

So, there will be no additional TDIs in the coming

10

months. Another reason we feel reasonably confident is we've

11

been told all along, I assume it's still true by Microsoft,

12

that closing TDIs is priority number one for them. And one

13

would hope and think that as the finish line comes into view,

14

they have even a greater incentive to get to that finish line.

15

And indeed, as has been pointed out, they have been

16

closing TDIs at a record number. As remarkable as December

17

was for finding TDIs, January was equally remarkable for

18

closing TDIs. In fact, through yesterday the average -- if

19

you do it by weekly, they have closed an average of 900 per

20

week.

21

And if one contemplates the fact that there are 14

22

weeks left between the beginning of next week and May 1st to

23

the end of the Final Judgment or to May 1st, and there are

24

currently 3,632 TDIs left open as of yesterday, Microsoft

25

needs to close 260 a week to get down to zero. As we said,

25

1
2

maybe not zero, but some modest number.
Now, certainly, one would presume that they are

3

closing the easiest TDIs first, so I'm not sure the California

4

group expects them to continue at a rate of 900 a week, but it

5

seems like there is enough of a margin built in. So, they

6

really should, by working hard, be able to get the number down

7

to a number that would be acceptable to the plaintiffs and the

8

technical committee and to Your Honor.

9

In closing, I would just observe an irony here,

10

which is that now it seems like we've finally learned how to

11

make good sausage -- good quality sausage, and to do it

12

efficiently, but it looks like we may well have to close down

13

the sausage factory in May. And we're hopeful that's going to

14

happen, and we will be working very closely with Microsoft to

15

assure that end as the best we can. That's all I have to say,

16

Your Honor. Any questions?

17

THE COURT: No, I think that answered my question.

18

MR. HOUCK: Thank you.

19

THE COURT: All right. Mr. Rule.

20

MR. RULE: Good morning, Your Honor.

21

THE COURT: Good morning.

22

MR. RULE: Let me try to briefly address a couple

23

of the issues that you raised. First off, you asked the

24

question of the 49 licensees --

25

THE COURT: Unless I didn't read this correctly.

26

1

MR. RULE: I think you did read it correctly. The

2

number does fluctuate over time. Over this period I

3

understand there were three terminations, I don't have the

4

identity of the licensees.

5

THE COURT: That's okay.

6

MR. RULE: One new one. So there was a net change

7

of two. But, you know, from time to time some of these

8

companies go out of business, some of them merge and that sort

9

of thing, and so you did read it correctly, there was a net

10

change.

11

Let me also, before turning to the III.E issues,

12

you asked about the complaints, I think the plaintiffs have

13

addressed the toolbar issues, but I'll be happy to answer any

14

questions about that. The other complaint was one that came

15

in to Microsoft, it had to do with the question, as Your Honor

16

I think noted, of documentation of APIs. The products that

17

were involved were not middleware, nevertheless we did confirm

18

that they are -- that product is calling on documented APIs.

19

We have disclosed this and the information

20

surrounding it to the plaintiffs, and I think, as the

21

plaintiffs indicated, if they have any issues, we're ready and

22

willing to listen to them.

23

THE COURT: Okay.

24

MR. RULE: But we believe that it is not -- should

25

not be a concern. That then takes me to III.E. I think the

27

1

plaintiffs have all addressed the nature of this unusual spike

2

in December and how it's being followed up by an unusual spike

3

in resolution. I think, though, rather than me trying to

4

address it, since Mr. Muglia has joined us today, it's a good

5

idea to have him come up and assure the Court, as the

6

plaintiffs have noted, that this is priority number one.

7

I should also say, you may have read over the last

8

few weeks, Mr. Muglia announced that he is going to be leaving

9

Microsoft later this year. However, he --

10

THE COURT: But not before the end of this.

11

MR. RULE: That's what I wanted to --

12

THE COURT: I did note that.

13

MR. RULE: -- that's what I want to assure the

14

Court. He is going to stay through May and this is an

15

important priority in his remaining days at Microsoft.

16

THE COURT: Okay.

17

MR. MUGLIA: Good morning, Your Honor.

18

THE COURT: Good morning. I noted, with interest,

19

but I didn't want to bring it up, but since you have I was

20

happy to see it was not going to affect our effort together

21

here.

22

MR. MUGLIA: Thank you, Your Honor. In fact, it's

23

good to be back here. And the primary reason I'm back here

24

today is because Mr. Wurden and his team are fully capable of

25

working the issues that are on the table with regard to III.E,

28

1

but the primary reason I'm back here was really to assure you

2

that I would stay focused on this project through the

3

termination and the finish of the consent decree.

4

My plan is to leave the company later this summer,

5

which should, we all hope, be well after the consent decree is

6

finished. And I'll continue to oversee it from an executive

7

perspective. With regard to your question that you asked

8

about -- boy, there's a lot of TDIs that came in, what does

9

this really mean? The questions have really been answered to

10

a large sense from the plaintiffs, so I won't go through the

11

specific details and repeat what they said because they were

12

quite clear and I thought did a great job of answering those

13

questions.

14

But what I did want to sort of describe is what I

15

think you can -- one way to really look at this, which is sort

16

of taking you back to the first time I had the honor to be in

17

front of you to talk about the fact that this is an

18

engineering project. And what we are doing here is

19

effectively building a product, a product for a set of

20

customers. In this case the customers are licensees, and now

21

in fact the broad community of developers that wish to build

22

products that interoperate with Microsoft software.

23

The goal always has been to do a top notch, A-plus

24

quality job on building documentation that enables that level

25

of interoperability. And as has been stated, the

29

1

documentation in its current form is quite capable of doing

2

that, and in fact, there's a lot of demonstration in the

3

industry that that is exactly happens.

4

Over 550,000 downloads of the documentation -- we

5

are actually seeing people using the documentation broadly and

6

reporting a very, very small number of TDIs against it. Those

7

outside of Microsoft and the TC are reporting, I believe, an

8

average of about 15 TDIs a month, and that has remained

9

constant. And I think you can just see in the industry today

10

the kinds of many, many products that are interoperating with

11

Microsoft software, be it in the consumer space or in the

12

business space.

13

So, the goal of what we attempted to achieve so

14

many years ago I think has in many ways already been achieved,

15

but of course, we need to go through the process and validate,

16

and that's why this is an engineering project, and that's the

17

purpose of the work that Microsoft's teams together with the

18

TC are doing.

19

And in terms of the large number of TDIs that were

20

reported in December, while it was not expected, as has been

21

said, I will say that it is not the first time I've seen a

22

spike of issues raised in the process of a product. We often,

23

as we are building products and we reach a point where we're

24

nearing conclusion, not at conclusion but close to conclusion,

25

take our engineering teams, and instead of having them develop

30

1

new things, have them all work for a period of time on

2

assessing the quality of the software and report what we would

3

term as bugs in a product.

4

And it is not unusual to see a large spike when an

5

entire team is able to focus on that for a brief period of

6

time. And very typically it's possible to work through that

7

at a fairly rapid pace and to get those number of, in this

8

case, TDIs down.

9

Now, if you look at the trajectory of the TDIs when

10

we had originally anticipated this as the schedule was laid

11

out last year, we had done some on the expectation that the

12

number of TDIs reported by the TC would remain roughly

13

constant. Obviously, it went up in December. So, we will --

14

the slope of the curve will actually be steeper, but as we

15

looked at the time it will take for us to work together with

16

the TC to close those TDIs, we did not feel comfortable

17

feeling we could meet the March milestones as originally set

18

out, but we have a high degree of comfort in our ability to

19

meet the April milestone.

20

Nothing is ever assured -- as Mr. Houck said,

21

nothing is ever assured, but we have a very high degree of

22

comfort that we can do it. And I can tell you, having talked

23

to a number of the engineering leaders within the organization

24

that are working on this, that they have shifted considerable

25

resource and considerable time on to resolving those, as has

31

1

been demonstrated in the last two weeks where 2500 have been

2

closed.

3

You know, finally, the most important thing that

4

will help get it closed is the fact that Microsoft and the TC

5

are now both focused together on closing the existing TDIs,

6

and there will be no new ones coming in. So, that provides us

7

with a higher degree of assurance that we'll be able to

8

numerically meet the objectives that we set. At the same time

9

remembering that all of this is just an indicater of what we

10

really care about, which is making high quality documentation

11

available to the industry.

12

THE COURT: All right. Thank you. That was

13

actually very helpful in terms of getting a -- from a

14

different perspective.

15

MR. MUGLIA: Thank you very much, Your Honor.

16

THE COURT: All right. Thank you. I had a few

17

concerns when I came in, I think I'm assured that we're on the

18

right track and that I shouldn't be as concerned as I was

19

originally when I looked at this. In terms of the increase,

20

although, I must say that the close-out has been -- Microsoft

21

has been very responsible, along with the TC, in terms of

22

really putting the effort in and closing out a large number of

23

the -- with the spike -- also closing out a large number.

24

So, I think at this point I will wait -- we have a

25

hearing I believe in March that we have already set, so we'll

32

1

proceed with that date. I don't think that needs to be moved.

2

I think we had set it around -- after the March thing, so

3

we'll have a much better idea of how close you will have been

4

able to reach the March one and probably a better projection

5

of how this is going to look for April than we are here now in

6

January.

7

But I think we seem to be on track. And as this

8

has moved towards its closing, we're narrowing down in terms

9

of the number of issues that we have to discuss, certainly I

10

went back and I keep these reports over the years and I was

11

flipping through some of the earlier ones where we have far

12

greater issues with the other sections. We're now really down

13

to III.E and occasionally, you know, an issue with a

14

complaint, but even the complaints are a much smaller number

15

than we had originally.

16

So, I think we're successfully moving, I hope, to

17

having this closed. I won't use success because that probably

18

depends on how you want to define it, but at least meeting the

19

goals that we've set out, which I think was in combination of

20

the plaintiffs and what they wanted and the TC, which is

21

technically indicated to them what they view as an appropriate

22

end to the consent judgment, and Microsoft in terms of the

23

their efforts on their end.

24
25

All right. So, I will see you in March. Take care.
END OF PROCEEDINGS AT 10:53 A.M.

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C E R T I F I C A T E
I, Lisa M. Hand, RPR, certify that the

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foregoing is a correct transcript from the record of

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proceedings in the above-titled matter.

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_____________________________

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Lisa M. Hand, RPR

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