Is Boies' Paper Trail Microsoft's Burial Ground? As the trial headed into a recess, Microsoft had one foot in the grave--thanks mostly to its own witnesses and its own documents.
By Joseph Nocera

(FORTUNE Magazine) – TUESDAY, FEB. 23: "It's hard to believe sometimes that this is an antitrust trial," David Boies is saying with a laugh. It's morning, and the government's chief prosecutor has just strolled into Judge Thomas Penfield Jackson's courtroom to begin today's session of the Microsoft trial. Boies seems unusually relaxed, and why not? Yesterday afternoon, he finished his latest cross-examination, of a Microsoft executive named Daniel Rosen--and what a cross it was! In less than four hours, Boies annihilated yet another hapless Microsoft witness. Yesterday was one of those days that simply takes your breath away--the kind of day that does indeed make it hard to believe this is an antitrust trial. Unfortunately for Microsoft, in the five weeks the company has been putting on its defense, such days have been the rule, not the exception.

With witness after witness getting his head handed to him by Boies, there has been a flurry of news stories focusing on the prosecutor's remarkable ability to humiliate America's most valuable company. These articles rightfully highlight the tremendous skill with which Boies grills witnesses; the online magazine Slate (owned by Microsoft) even sent a litigator to the trial to dissect Boies' technique. But the more I watch the trial, the more I'm convinced that his talent is only half the story. The other half has to do with the witnesses themselves: They've made the prosecutor's job much easier than it has any right to be.

Take Rosen, the current witness. He is a 49-year-old, midlevel Microsoft executive who came to the stand yesterday with a simple assignment. His task was to deny one of the government's central charges: that on June 21, 1995, Microsoft tried to induce Netscape to illegally divide the browser market. As the man who planned that meeting, Rosen had the standing to make this denial credible--which was why Microsoft chose him as one of its 12 witnesses.

He had several other things going for him. As Microsoft's ninth witness, Rosen presumably learned from the mistakes of the previous eight. In addition, the evidence itself was not cut and dried. While the Microsoft e-mails leading up to the June 21 meeting included damaging language, nowhere did anyone from Microsoft actually come out and say that the company wanted to divide the market. Thus the "truth" would ultimately come down to the question of who was more believable: Rosen or Netscape CEO James Barksdale, who testified to the allegation during the trial's first week. And because courts demand rock-solid evidence for this kind of allegation, Rosen had the advantage. All he had to do was come away from the witness stand with his credibility moderately intact, and Microsoft was likely to beat back this part of the case.

Yet within the first half-hour yesterday, it was plain that witness No. 9 would fare no better than other Microsoft witnesses. By the time Boies was finished with him, Rosen would wind up humiliated, his credibility in tatters. As usual, the prosecutor was armed with a paper trail of e-mails and documents with which he hoped to bury the Microsoft executive. And as ever, the witness grabbed a shovel and helped dig his own grave. No matter how simple the question he was asked--or how blunt the e-mail evidence he was shown--Rosen simply could not give a straight answer. For the whole of this trial, starting with Bill Gates' video deposition, this wobbling the truth has been Microsoft's Achilles' heel.

It began, in the morning, with Rosen absurdly refusing to use the word "browser." Although Boies quickly forced him to concede that the term was used "regularly" within Microsoft, Rosen claimed he could not recall it ever being uttered by his fellow executives. After making the witness look like a fool on this question, Boies moved to the issue of the browser wars between Netscape and Microsoft. Again, Rosen took a position that defied belief: As far as he was concerned, there was never a browser war. He said that in his view, Netscape was never a potential competitive threat to Microsoft, and he stuck to that even after Boies put up e-mails from top executives, like Paul Maritz, who talked openly about the Netscape threat. When Boies asked about events that took place in the spring of 1995, Rosen asked Boies what he meant by the phrase "in the spring." When Boies showed Rosen an e-mail the witness himself had written--one that flatly contradicted his testimony of the past hour--Rosen claimed it was a "draft" he had never sent. Boies pointed out the line that showed all the people he'd sent it to. Rosen still said he'd never sent it. Boies then read a sentence from the "unsent draft": "The threat of another company (Netscape has been mentioned by many) to use their...browser as an evolution base could threaten a considerable portion of Microsoft's future revenue."

"Did you believe that, sir, at the time you wrote it?" Boies asked.

"No, sir," Rosen replied. The courtroom erupted in laughter.

And that was just the morning! In the afternoon it only got worse. As Boies moved his interrogation toward the climactic June 21 meeting, the courtroom was gripped with a sense of foreboding, even of doom. Again and again Rosen tried to put a benign spin on the rough-and-tumble e-mail trail leading up to the meeting, vainly attempting to redefine words like "wrest" and "ownership." Again and again, his assertions sounded hollow--or worse. At 3:30, as Rosen was trying to explain that the word "client" did not mean "browser"--when everyone in the courtroom could see that it did--Boies simply cut him off. "Your honor, I have no more questions," he said, turning his back on the witness.

But that was yesterday. Today, Michael Lacovara, the young Sullivan & Cromwell litigator working for the defense, has an opportunity to bring Rosen back from the grave via redirect examination. No one has much hope, however--not even the judge. When the flashy Lacovara rises to begin, Judge Jackson gives him a sly smile. "Mr. Lacovara," he says, "it is always inspiring to watch young people embark on heroic endeavors."

Yet Lacovara nearly pulls it off. In less than 90 minutes, the lawyer elicits from Rosen a series of crisp, reasonable-sounding answers to his crisp, reasonable-sounding questions. When he has finished, the notion that Microsoft was not, in fact, trying to "wrest ownership" of the browser from Netscape doesn't seem quite so preposterous. During the midmorning recess, the Microsoft troops are pumped. "That's the best rehabilitation of a witness--ever," exults William Neukom, Microsoft's general counsel.

But after the break, Boies begins a short re-cross examination of Rosen. He asks the witness when he first saw Netscape's browser code. Rosen says July 1995. He adds that another Microsoft executive got an early version of the code in May, and says he distinctly remembers that executive telling him about getting the code after returning from a May meeting at Netscape.

Without missing a beat, Boies says, "You don't remember that, do you, sir? You're just making that up, aren't you?" All over the courtroom, heads jerk up. "No," Rosen insists weakly, "I remember it." Boies then hands him a document that shows not only that Netscape gave the code to Microsoft in April--not May--but also that Rosen himself had been at the meeting in which it was turned over! After seeing the document, Rosen doesn't even wait for Boies. "I stand corrected," he says, shamefaced.

I look over at the Microsoft defense table. William Neukom's jaw is clenched. The other lawyers are staring into their legal pads. A cross-examination is not just a test of wills; it's a test of character. For two straight days, Daniel Rosen has failed that test. And everyone in the courtroom knows it.

WEDNESDAY, FEB. 24: All of a sudden, there's a mad rush to finish this portion of the trial. Originally scheduled to last two months, this thing has now gone on for more than four. And though the judge said all along that he wanted the trial to proceed quickly, he nonetheless established a pace that was, shall we say, leisurely: Court never started before ten, rarely went past four-thirty, and had plenty of long breaks in between. Not anymore. A few days ago the judge announced that he wanted Microsoft's defense finished by Friday. The new work schedule suggests he's not kidding. This week the breaks are fewer, the lunch recesses shorter, and the court sessions longer.

The new urgency has come about partly because the end is in sight, at least for this segment of the trial. (The next portion, in which each side can present up to three "rebuttal witnesses," should start in mid-April.) But it's also come about because the long trial has begun to make a mess of everyone's life. Jackson, for instance, needs to try a big cocaine-ring murder case, and he sees a window of opportunity. Boies has a short trial in Philadelphia set for mid-March, before a judge who has no intention of delaying in deference to the Microsoft trial. The Sullivan & Cromwell lawyers leading the Microsoft defense, John Warden and Richard Urowsky, have their own pressing agenda: Months ago they had planned a vacation in the Bahamas, figuring that the Microsoft trial would be over. They're scheduled to fly on Saturday.

Yet with the long recess supposedly only two days away, Microsoft is only on its tenth witness. There are still two to go. In fact, No. 11, a senior executive named Joachim Kempin, is so important that he could conceivably be on the stand for days. The reporters, most of whom also are looking forward to a long break, are skeptical that the Friday deadline will be met. But Boies is sanguine. "It is not even a question," he says at the midmorning break. "We have a common purpose here," he adds (meaning himself, Warden, and Jackson). "We're the oldest guys here, and we're totally united. There is no way we're not going to be done by Friday."

Not more than ten minutes later, we see what Boies means. At around 11:40, witness No. 10 is excused. Last week the judge would have stopped for lunch and sworn in the new witness when court reconvened at 2 P.M. But when Jackson makes noises about adjourning now, Warden leaps to his feet. "Mr. Kempin, I see, has just arrived. His direct examination will begin with a video. If we could use some time now..."

"Right now?" asks Jackson.

"Yes, that would be helpful," replies Warden, with as much passion as he's shown during the entire trial. Judge Jackson, who was halfway out of his seat, sits back down. Warden returns to the defense table. As the video starts to roll, the Microsoft lawyer emits an audible sigh of relief.

THURSDAY, FEB. 25: The biggest missing piece in the government's case has always been the lack of a witness from one of the major computer manufacturers. Companies such as Dell, IBM, Gateway, and Compaq are utterly dependent on their access to the Windows operating system. If any group of customers should feel abused by the power of Microsoft, it should be they. Yet Compaq--which was once threatened with the cancellation of its Windows license because it was removing Microsoft's Internet icon from Compaq desktops--testified for Microsoft, not against it. And IBM, which had eagerly egged on the government back when the feds were building their case, got cold feet. While an IBM executive did testify against Microsoft, the official was in the division that marketed OS/2, IBM's operating system, rather than the division that manufactured PCs, which would have been far more significant. To add insult to injury, the IBM guy was a terrible witness.

That's why Joachim Kempin matters so much. He is the Microsoft executive who is in charge of dealing with OEMs (original equipment manufacturers), as the computer manufacturers are called. He negotiates the licenses for Windows. He sets the price. He ensures that the terms are carried out to Microsoft's satisfaction. And when an OEM has a complaint or a request, he is the court of last resort. In Silicon Valley, only Bill Gates generates more fear and loathing than Joachim Kempin. He is widely known as Microsoft's enforcer.

Kempin, 55, is a native of Germany. His English is thickly accented and often difficult to follow. He carries himself like someone who expects to be in control of the situation--which of course is not the case here. And every once in while, he snaps off an answer that shows his irritation with the fact that he's on the witness stand and that his company is on trial. "Why do you play these word games?" he scoffs at Boies this morning. At another point, when Boies is trying to get him to respond to questions about the initial Windows boot-up sequence, he says, "Is that all this is about? Ten minutes that only happens the first time someone turns on a computer?"

Boies is just as irritated. Feeling that Kempin is taking advantage of his less-than-perfect English to give purposely muddy answers, he asks Kempin how long he has lived in the U.S. and whether English is the language he uses when he conducts business at Microsoft.

But these are just skirmishes. Only this afternoon, during a marathon session that begins at 2 P.M., is the real battle engaged. It is, in fact, the last great battle of the Microsoft trial.

Here's what's at stake. Boies needs to use Microsoft's own witness--Kempin--to show what he has been unable to prove through his own witnesses: that Microsoft has consistently used its monopoly power to bully OEMs, awarding price breaks and other favors to those who toe the line and punishing those who don't. In particular, he needs to show that Microsoft tightened its license restrictions in order to tilt the playing field in favor of its browser. Kempin, for his part, wants to demonstrate the opposite: that Microsoft gives OEMs enormous leeway over what they can and cannot put on their desktops and offer to consumers.

All afternoon they slug it out, two heavyweights who refuse to give so much as an inch. Boies shows that Microsoft tightened its licensing requirements for Windows right at the time Netscape was emerging as a threat. Over and over, he phrases questions that suggest that this is no coincidence. Kempin responds that the restrictions were tightened because the OEMs were, in his words, "butchering Windows." Comparing the operating system with a book, Kempin said that the OEMs had been "ripping out the first chapter" when they tried to alter Microsoft's boot-up sequence and that this had to be stopped. Boies shows Kempin a letter from a Hewlett-Packard official, a missive that was first read during the government's opening argument: "If we had a choice of suppliers," reads the angry note, "you would not be our supplier of choice." Kempin dismisses this as an ordinary business dispute between partners.

Kempin points out that many of these restrictions have since been loosened to give OEMs greater freedom--but Boies hits right back. He notes that this loosening has only come about since the government filed its suit--and only because Microsoft has chosen to waive portions of the license. His implication is clear: Microsoft has retained the right to end the waivers, and could do so the minute the case ends. By midafternoon they're onto the subject of pricing, with Boies showing that the key Microsoft allies, Compaq and Dell, get better deals on Windows than Gateway, which has had fights with Microsoft over Gateway's desire to promote Netscape. Kempin says that has nothing to do with the price differential. Boies begins to read from sworn answers by Gateway to interrogatories from the Department of Justice: "After Gateway began offering Netscape Navigator, a competitive browser product," he reads, "Microsoft representatives repeatedly told Gateway representatives that Microsoft considers Gateway's offer of the competitive product a 'serious' issue that could 'affect our working relationship.' " "I am totally confused by that statement," replies Kempin--so Boies reads another excerpt, with another harsh allegation. And another. And another. Finally Judge Jackson jumps in. "Are you saying [these things] never happened?" "I mean," replies Kempin, "I have no knowledge of that."

As the afternoon progresses, I sense that we are, finally, in the belly of the beast. This is the case, right here. Does Microsoft have monopoly power? Does it abuse that power? That is what Boies and Kempin are arguing about. There are none of the fireworks or theatrics that have characterized so much of this trial. Yet we're riveted; we know how important this is. Boies shows Kempin his deposition, taken months earlier, in which the Microsoft executive testified that in deciding how to price Windows 98, the only other operating system he compared it with was Windows 95. Boies will later trumpet this as a Microsoft admission that it has monopoly power.

It's early evening now. The federal courthouse is nearly empty except for Judge Jackson's courtroom. Even here, the audience has gradually thinned, as reporters have left to meet their deadlines. Nobody is whispering, as we so often do. Nobody is making eye contact. Nobody is doing anything except listening to and watching David Boies and Joachim Kempin. Suddenly I feel as though we're cut off from the rest of the world. It's as if nothing else in the world matters more than this--this momentous struggle to define what Microsoft is and how it does its business.

When Boies says, "I have no further questions," I am startled to see it is after six.

FRIDAY, FEB. 26: It's the last lunchtime spin session before the trial goes on hiatus, and you know what it feels like? It feels like that last day of school before summer vacation. I look around at the reporters and the lawyers and spinmeisters for both sides, and I see people who have become my friends. Last night, we threw ourselves a little end-of-trial party, and just about everyone showed up; people who have battled each other in court, day after day, stood side by side and chatted amiably. "We've all got Stockholm Syndrome," Michael Lacovara likes to say, and he's probably right. Now, as I listen to the spin, I think: The trial hasn't even ended, and I miss it already.

Of course, this last spin session is more than just an exercise in nostalgia. It is also an opportunity for each side to sum up. Boies, as has been his style since the trial began, offers a crisp encapsulation of what he thinks the government has accomplished. "We made our case from their witnesses and their documents," he says. "Microsoft has raised prices, stifled innovation, and deprived consumers of choice." In response to a reporter's question, Boies explains why he felt it necessary to attack the credibility of so many defense witnesses. "Microsoft said, 'Trust us,'" he says--and its testimony has turned out to be untrustworthy.

The software giant, of course, insists that it will win despite the almost daily embarrassments. "The government has failed to show harm to consumers," says general counsel Neukom, making what is still Microsoft's strongest argument. "Their case never got out of the starting blocks." When the Microsoft team is asked about the credibility question, John Warden steps up to the microphone. "There is an old adage in our business," he replies. "When you don't have the law or the facts, you go after credibility. We have the law and the facts. Our credibility hasn't been injured, and at the end of the day it doesn't matter anyway."

Maybe Warden will be right. Maybe the government's inability to show that Microsoft's actions seriously harmed consumers will carry the case, and the credibility issue will be rendered moot. But I have my doubts. After all, this case is filled with serious factual disputes, and Judge Jackson is going to resolve those disputes based on whom he believes: the government witness making an allegation or the Microsoft witness denying it. No matter how much antitrust law may favor Microsoft, it is not going to win the case--at least not at this level--if Jackson concludes that the facts are uniformly as the government describes them. That's why, Warden notwithstanding, credibility matters. And that's why, after four months of testimony, Microsoft is now facing an uphill fight.

One last witness: Robert Muglia, 39, the Microsoft executive in charge of the company's Java efforts. He comes to the stand this afternoon knowing that he'll be done at the end of the day, no matter what. "The luckiest guy at the Microsoft trial," we're calling him.

Except that now that he's being cross-examined, he doesn't look so lucky. He's hemming and hawing, denying knowledge of certain Microsoft actions outlined in some e-mails, and attempting to soften the blunt language contained in other e-mails. He sounds just like most of the Microsoft witnesses who have come before him. Boies shows him Microsoft e-mails that talk about "polluting" or "fragmenting" Java--actions that would plainly hurt Sun Microsystems, which created the Java language. The word "fragment," explains Muglia, really means "giving [software] developers more choice." Judge Jackson rolls his eyes.

Then it happens: one final bit of fireworks. Midafternoon, Boies throws up an e-mail from Bill Gates. It contains the following sentence: "I am hard core about NOT supporting JDK 1.2." (JDK 1.2 is a technology developed by Sun Microsystems.) Muglia replies, "Exactly what Bill meant by the word 'support' isn't really clear." Astonishingly, he attempts to explain that Gates actually supported the Sun technology.

This is too much for Judge Jackson, who has become increasingly irritated with Muglia. "I read it as saying he doesn't like the idea of supporting it," the Judge interrupts. "I don't think it could be read any other way."

What Muglia should do at this point is shut up. But he can't help himself. Turning to the judge, he begins a rambling, almost incomprehensible speech justifying his previous answer. Suddenly, Jackson loses it. "No!" he shouts. "Stop!" He has one hand covering his face, and the other making a "stop" gesture at the witness. When he takes his hand away from his face, we can see he is crimson with anger. He is almost shaking with fury. He calls a ten-minute recess to compose himself, and storms out of the courtroom.

Did someone say credibility doesn't matter?