Testimony of
Professor Lawrence Lessig,
Stanford Law School,
before the
Senate Committee on the Judiciary
at its hearing:
The Microsoft Settlement: A Look to the Future
December 12, 2001
Four years after the United States government initiated legal ac-
tion against the Microsoft Corporation, Microsoft, the federal gov-
ernment, and nine states have agreed upon a consent decree (“the
proposed decree”) to settle the finding of antitrust liability that the
Court of Appeals for the D.C. Circuit has unanimously affirmed.
In my view, that consent decree suffers from a significant, if nar-
row, flaw. While it properly enlists the market as the ultimate
check on Microsoft’s wrongful behavior, it fails to provide an ade-
quate mechanism of enforcement to implement its requirements. If
it is adopted without modification, it will fail to achieve the objec-
tives that the government had when it brought this case.
Yet while it is important that an adequate and effective remedy
be imposed against Microsoft, in my view it equally important that
any remedy not be extreme. Microsoft is no longer the most sig-
nificant threat to innovation on the Internet. Indeed, as I explain
more fully below, under at least one understanding of its current
Internet strategy, Microsoft could well play a crucial role in assur-
ing a strong and neutral platform for innovation in the future. Thus,
rather than retribution, a remedy should aim to steer the company
toward this benign and beneficial strategy. Obviously, this benign
understanding of Microsoft’s current strategy is not the only un-
derstanding. Nor do I believe that anyone should simply trust Mi-
crosoft to adopt it. But its possibility does suggest the importance
of balance in any remedy. The proposed decree does not achieve
that balance, but neither, in my view, does the alternative.
I am a law professor at Stanford Law School and have written
extensively about the interaction between law and technology. My
most recent book addresses directly the effect of law and technol-
ogy on innovation. I have also been involved in the proceedings of
this case. In 1997, I was appointed special master in the action to
enforce the 1995 consent decree. That appointment was vacated by
the Court of Appeals when it concluded that the powers granted
me exceeded the scope of the special master statute. United States
v. Microsoft Corporation, 147 F.3d 935, 953-56 (D.C. Cir 1998)
(“Microsoft II”). I was then invited by the District Court to sub-
mit a brief on the question of using software code to “tie” two
Lessig: Microsoft Testimony
Submitted: December 10, 2001
products together.
1I have subsequently spent a great deal of time
studying the case and its resolution.
In this testimony, I outline the background against which I
draw my conclusions. I then consider the proposed decree, and
some of the strengths and weaknesses of the alternative proposed
to the District Court by the nine remaining states (the “alterna-
tive”). Finally, I consider two particular areas in which this Com-
mittee may usefully consider action in light of the experience in this
case.
In June, 2001, the Court of Appeals for the D.C. Circuit
unanimously affirmed Judge Jackson’s conclusion that Microsoft
used its power over Windows to protect itself against innovation
that threatened its monopoly power. United States v. Microsoft
Corporation, 253 F.3d 54 (D.C. Cir 2001) (Microsoft III). That
behavior, the Court concluded, violated the nation’s antitrust laws.
The Court therefore ordered the District Court to craft a remedy
that would “‘unfetter [the] market from anticompetitive conduct,’
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.’” Microsoft III, 253
F.2d at 103 (citations omitted).
Integral to the Court’s conclusion was its finding that Micro-
soft had “commingled code” in such a way as to interfere with the
ability of competitors to offer equivalent products on an even
playing field. As the District Court found, and the Court of Ap-
peals affirmed, Microsoft had designed its products in such a way
as to inhibit the substitution of certain product functionality. This
design, the district court concluded, served no legitimate business
interest. The Court’s conclusion was therefore that Microsoft had
acted strategically to protect its market power against certain forms
of competition.
In my view, this holding by the Court of Appeals is both cor-
rect and important. It vindicates a crucial principle for the future of
Lessig: Microsoft Testimony
Submitted: December 10, 2001
innovation generally, and in particular, on the Internet. By affirm-
ing the principle that no company with market power may use its
power over a platform to protect itself against competition, the
Court has assured competitors in this and other fields that the ul-
timate test of success for their products is not the decision by a
platform owner, but the choice of consumers using the product. To
the extent that Microsoft’s behavior violated this principle, and
continues to violate this principle, it is appropriate for the District
Court to craft a remedy that will stop that violation.
An appropriate remedy, however, must take into account the
competitive context at the time the remedy is imposed. And in my
view, it is crucially important to see that Microsoft does not repre-
sent the only, or even the most significant, threat to innovation on
the Internet. If the exercise of power over a platform to protect
that platform owner from competition is a threat to innovation (as
I believe the Court of Appeals has found), then there are other ac-
tors who also have significant power over aspects of the Internet
platform who could also pose a similarly dangerous threat to the
neutral platform for innovation that the Internet as has been. For
example, broadband cable could become a similar threat to innova-
tion, if access to the Internet through cable is architected so as to
give cable the power to discriminate among applications and con-
tent. Similarly, as Chairman Michael Powell suggested in a recent
speech about broadband technology, overly protective intellectual
property laws could well present a threat to broadband deploy-
ment.2
Microsoft could play a significant role in resisting this kind of
corruption of the Internet’s basic values, and could therefore play
an important role in preserving the environment for innovation on
the net. In particular, under one understanding of Microsoft’s cur-
rent Internet strategy (which I will refer to generally as the “.NET
strategy”), Microsoft’s architecture would push computing power
and network control to the “edge” or “ends” of the network, and
away from the network’s core. This is consistent with a founding
design principle of the early network — what network architects
Lessig: Microsoft Testimony
Submitted: December 10, 2001
Jerome Saltzer, David Clark, and David Reed call “the end-to-end
argument.”3 .NET’s possible support of this principle would
compete with pressures that now encourage a compromise of the
end-to-end design. To the extent Microsoft’s strategy resists that
compromise, it could become a crucial force in preserving the inno-
vation of the early network.
This is not to say that this benign, pro-competitive design is
the only way that Microsoft could implement its .NET strategy.
There are other implementations that could certainly continue Mi-
crosoft’s present threat to competition. And obviously, I am not
arguing that anyone should trust Microsoft’s representation that it
intends one kind of implementation over another. Trust alone is not
an adequate remedy to the current antitrust trial.
My point instead is that there is little reason to vilify a com-
pany with a strong and powerful interest in a strategy that might
well reinforce competition on the Internet — especially when, ex-
cepting the open source and free software companies presently
competing with Microsoft, few of the other major actors have re-
vealed a similarly pro-Internet strategy. Thus, rather than adopting
a remedy that is focused exclusively on the “last war,” a proper
remedy to the current antitrust case should be sufficient to steer
Microsoft towards its benign strategy, while assuring an adequate
response if it fails to follow this pro-competitive lead.
Such a remedy must be strong but also effectively and effi-
ciently enforceable. The fatal weakness in the proposed decree is
not so much the extent of the restrictions on Microsoft’s behavior,
as it is the weaknesses in the proposed mechanisms for enforce-
ment. Fixing that flaw is no doubt necessary to assure an adequate
decree. In my view, it may also be sufficient.
While the proposed decree is not a model of clarity, the essence
of its strategy is simply stated: To use the market to police Micro-
soft’s monopoly. The decree does this by assuring that computer
manufacturers and software vendors remain free to bundle and
Lessig: Microsoft Testimony
Submitted: December 10, 2001
support non-Microsoft software without fear of punishment by
Microsoft. Dell or Compaq are thus guaranteed the right to bundle
browsers from Netscape or media players from Apple regardless of
the mix that Microsoft has built into Windows. Autonomy from
Microsoft is thus the essence of the plan — the freedom to include
any “middleware” software with an operating system regardless of
whether or not it benefits Microsoft.
If this plan could be made to work, it would be the ideal rem-
edy to this four year struggle. Government regulators can’t know
what should or should not be in an operating system. The market
should make that choice. And if competitors and computer manu-
facturers could be assured that they can respond to the demands of
the market without fear of retaliation by Microsoft, then in my
view they would play a sufficient role in checking any misbehavior
by Microsoft.
The weakness in the proposed decree, however, is its failure to
specify any effective mechanism for assuring that Microsoft com-
plies. The central lesson that regulators should have learned from
this case is the inability of the judicial system to respond quickly
enough to violations of the law.
Thus the first problem that any proposed decree should have
resolved is a more efficient way to assure that Microsoft complies
with the decree’s requirements. Under the existing system for en-
forcement, by the time a wrong is adjudicated, the harm of the
wrong is complete.
Yet the proposed decree does nothing to address this central
problem. The decree does not include provision for a special mas-
ter, or panel of masters, to assure that disagreements about applica-
tion could be quickly resolved. Nor does it provide an alternative
fast-track enforcement mechanism to guarantee compliance.
Instead the decree envisions the creation of a committee of
technical experts, trained in computer programming, who will over-
see Microsoft’s compliance. But while such expertise is necessary
in the ongoing enforcement of the decree, equally important will be
the interpretation and application of the decree to facts as they
arise. This role cannot be played by technical experts, and yet in
Lessig: Microsoft Testimony
Submitted: December 10, 2001
my view, this is the most important role in the ongoing enforce-
ment of the decree.
For example, the decree requires that Microsoft not retaliate
against an independent software vendor because that vendor devel-
ops or supports products that compete with Microsoft’s. Pro-
posed Decree, §III.B. By implication, this means Microsoft would
be free to retaliate for other reasons unrelated to the vendor’s com-
peting software. Whether a particular act was “retaliation” for an
improper purpose is not a technical question. It is an interpretive
question calling upon the skills of a lawyer. To resolve that ques-
tion would therefore require a different set of skills from those held
by members of the technical committee.
The remedy for this weakness is a better enforcement mecha-
nism. As the nine remaining states have suggested, a special master
with the authority to interpret and apply the decree would assure a
rapid and effective check on Microsoft’s improper behavior. While
I suggest some potential problems with the appointment of a spe-
cial master in the final section of this testimony, this arrangement
would assure effective monitoring of Microsoft, subject to appeal
to the District Court.
The failure to include an effective enforcement mechanism is, in
my view, the fatal weakness in the proposed decree. And while I
agree with the nine remaining states that there are other weaknesses
as well, in my view these other weaknesses are less important than
this single flaw. More specifically, in my view, were the decree
modified to assure an effective enforcement mechanism, then it
may well suffice to assure the decree’s success. Without this modi-
fication, there is little more than faith to assure that this decree will
work. With this modification, even an incompletely specified de-
cree may suffice.
The reason, in my view, is that even a partial, yet effectively
enforced decree, could be sufficient to steer Microsoft away from
strategic behavior harmful to competition. Even if every loophole is
not closed, if the decree can be effectively enforced, then it could
suffice to push Microsoft towards a benign, pro-competitive strat-
egy. The proposed decree has certainly targeted the most impor-
tant opportunity for strategic, or anti-competitive, behavior. If the
chance to act on these without consequence is removed, then in my
Lessig: Microsoft Testimony
Submitted: December 10, 2001
view, Microsoft has a strong incentive to focus its future behavior
towards an implementation of its .NET strategy that would rein-
force rather than weaken the competitive field. An effective, if in-
complete, decree could, in other words, suffice to drive Microsoft
away from the pattern of strategic behavior that has been proven
against it in the Court of Appeals.
There are those who believe Microsoft will adopt this benign
strategy whether or not there is a remedy imposed against them.
Indeed, some within Microsoft apparently believe that supporting
a neutral open platform is in the best interests of the company. 4
Given the significant findings of liability affirmed by the Court of
Appeals, I do not believe it is appropriate to leave these matters to
faith. But I do believe that a remedy can tilt Microsoft towards this
better strategy, at least if the remedy can be efficiently enforced.
THE NINE STATES’ ALTERNATIVE
On Friday, December 7, 2001, the nine states that have not
agreed to the proposed consent decree outlined an alternative rem-
edy to the one proposed by the Justice Department. In many
ways, I believe this alternative is superior to the Justice Depart-
ment’s proposed decree. This alternative more effectively protects
against a core strategy attacked in the District Court — the com-
mingling of code designed to protect Microsoft’s monopoly power.
It has an effective enforcement provision, envisioning the appoint-
ment of a special master. The alternative has a much stronger
mechanism for adding competition to the market — by requiring
that Microsoft continue to market older versions of its operating
system in competition with new versions. And finally, the alterna-
tive requires that Microsoft continue to distribute Java technolo-
gies as its has in prior Windows versions.
The alternative, however, goes beyond what in my view is nec-
essary. And while in light of the past, erring on the side of overly
protective remedies might make sense, I will describe a few areas
where the alternative may have gone too far, after a brief descrip-
Lessig: Microsoft Testimony
Submitted: December 10, 2001
tion of a few of the differences that I believe are genuine improve-
ments.
Both the proposed decree and the alternative agree on a com-
mon set of strategies for restoring competition in the market place.
Both seek to assure autonomy for computer manufacturers and
software vendors to bundle products on the Microsoft platform
differently according to consumer demand. Both decrees aim at that
end by guaranteeing nondiscriminatory licensing practices, and re-
strictions on retaliation against providers who bundle or support
non-Microsoft products. The alternative specifies this strategy
more cleanly than the proposed decree. It is also more comprehen-
sive. But both are aiming rightly at the same common end: to em-
power competitors to check Microsoft’s power.
Improvements of the Alternative
The alternative remedy adds features to the proposed decree
that are in my view beneficial. Central among these is the more ef-
fective enforcement mechanism. The alternative proposes the es-
tablishment of a special master, with sufficient authority to oversee
compliance. This, as I’ve indicated, is a necessary condition of any
successful decree, and may also be sufficient.
Beyond this significant change, however, there are a number of
valuable additions in the states’ alternative. By targeting the
“binding” of middleware to the operating system, the alternative
more effectively addresses a primary concern of the Court of Ap-
peals. This restriction assures that Microsoft does not architect its
software in a way that enables it strategically to protect itself
against competition. Such binding was found by the courts to make
it costly for users to select competing functionality, without any
compensating pro-competitive benefit.
The alternative also assures much greater competition with new
versions of the Windows operating system by requiring that prior
versions continue to be licensed by Microsoft. This competition
would make it harder for Microsoft to use its monopoly power to
push users to adopt new versions of the operating system that ad-
Lessig: Microsoft Testimony
Submitted: December 10, 2001
vance Microsoft’s strategic objectives, but not consumer prefer-
ences.
Finally, the alternative addresses a troubling decision by Mi-
crosoft to refuse to distribute Java technologies with Windows XP.
This decision by Microsoft raises a significant concern that Micro-
soft is determined to continue to play strategically to strengthen
the applications barrier to entry.
Concerns about the proposed alternative
While I believe the alternative represents a significant im-
provement over the proposed consent decree, I am concerned that
the alternative may go beyond the proper scope of the remedy.
Open Sourcing Internet Explorer : While I am a strong sup-
porter of the free and open source software movements, and be-
lieve software of both varieties is unlikely ever to pose any of the
same strategic threats that closed source software does, I am not
convinced the requirement of open sourcing Internet Explorer is yet
required, or even effective. Both proposed remedies have a strong
requirement that application interfaces be disclosed, and until that
remedy proves incomplete, I don’t believe the much more extreme
requirement of full disclosure of source code is merited.
The definition of Middleware Products: The central target of the
litigation was Microsoft’s behavior with respect to middleware
software. Understood in terms relevant to this case, middleware
software is software that lowers the applications barrier to entry
by reducing the cost of cross-platform compatibility. Java tied to the
Netscape browser is an example of middleware so understood; had
it been successfully and adequately deployed, it would have made
it easier for application program developers to develop applica-
tions that were operating system agnostic, and therefore would
have increased the demand for other competing operating systems.
This definition is consistent with the alternative definition of
“middleware.” But the specification of “middleware products”
reaches, in my view, beyond the target of “middleware.” Middle-
ware is not properly understood as software that increases the
number of cross-platform applications; middleware is software that
increases the ease with which cross-platform programs can be writ-
Lessig: Microsoft Testimony
Submitted: December 10, 2001
ten. Thus, for example, Office is not middleware simply because it
is a cross-platform program. It would only qualify as middleware if
it made it easier for programmers to write platform-agnostic code.
The requirement that Office be ported: For a similar reason, I am
not convinced of the propriety of requiring that Office be ported.
While Office for the Macintosh is certainly a crucial application for
the continued viability of the Macintosh OS, having Office on
many platforms does not significantly affect the applications bar-
rier to entry. No doubt if Microsoft strategically pulled the devel-
opment of Office in order to defeat another operating system, or if
it aggressively resisted applications that were designed to be com-
patible with Office (such as Sun’s Star Office), that could raise an-
titrust concerns. But the failure simply to develop office for an-
other platform would not itself respond to the concerns of the
Court of Appeals.
No doubt, each of these additional remedies might be conceived
of as necessary prophylactics given a judgment that Microsoft is
resolved to continue its strategic anticompetitive behavior. And
after a fair and adequate hearing in the District Court, such a pro-
phylactic may well prove justified. At this stage, however, I am
not convinced these have been proven necessary.
APPROPRIATE CONGRESSIONAL ACTION
It is obviously inappropriate for Congress to intervene in an
ongoing legal dispute with the intent to alter the ultimate judgment
of the judicial process. Thus while I believe it is extremely helpful
and important that this Committee review the matters at stake at
this time, there is a limit to what this Committee can properly do.
In a system of separated powers, Congress does not sit in judg-
ment over decisions by Courts.
Yet there are two aspects to this case that do justify a greater
concern by Congress. Both aspects are intimately tied to earlier
decisions by the Court of Appeals. First, in light of the Court of
Appeals’ judgment in the 1995 Microsoft litigation, United States
v. Microsoft Corporation, 56 F.3d 1448 (D.C. Cir. 1995) (Micro-
soft I), it is clear that the Tunney Act proceedings before the Dis-
trict Court are extraordinarily narrow. Second, in light of the Court
of Appeals’ judgment in 1998 Microsoft litigation, Microsoft II, it
Lessig: Microsoft Testimony
Submitted: December 10, 2001
is not clear that, absent consent of the parties, the District Court
has the power to appoint a special master with the necessary
authority to assure enforcement of any proposed remedy. Both
concerns may justify this Committee taking an especially active
role to assure a proper judgment can be reached — in the first case
through its consultation with the executive, and the second, possi-
bly with clearer legislative authority.
The Tunney Act Proceedings
In Microsoft I, the Court of Appeals for the D.C. Circuit held
that the District Court’s authority under the Tunney Act to ques-
tion a consent decree proposed by the government was exception-
ally narrow. Though that statute requires that the District Court
assure that any consent decree is “within the public interest,” the
Court read that standard to be extremely narrow. If the decree can
be said to be within “the reaches of the public interest,” Microsoft
I, 56 F.3d at 1461, then it is to be upheld.
The consequence of this holding is that it will be especially
hard for the District Court to question the government’s proposed
decree. Absent a showing of corruption, the decree must be af-
firmed. It is hard for me to imagine that the proposed decree would
fail this extremely deferential standard. Thus any weaknesses in the
proposed decree would have to be resolved in the parallel pro-
ceedings being pursued by the nine states.
This deference may be a reason for Congress in the future to
revisit the standard under the Tunney Act. Such a review could not
properly affect this case, but concerns about this case may well
suggest the value in future contexts.
But the concern about this decree may well be relevant to this
Committee’s view about the appropriateness of the government’s
cooperation with any ongoing prosecution by the nine states. The
federal government may well have decided its remedy is enough; it
wouldn’t follow from that determination that the federal govern-
ment has a reason to oppose the stronger remedies sought by the
states. At a minimum, the government should free advisors or con-
sultants it has worked with to aid the continuing states as they
may desire.
Lessig: Microsoft Testimony
Submitted: December 10, 2001
The power to appoint a “special master”
In Microsoft II, the Court of Appeals interpreted a District
Court’s power to appoint a special master quite narrowly. While
the Court acknowledged the strong tradition of using special mas-
ters to enforce judgments, it raised doubt about the power of the
special master to act beyond essentially ministerial tasks. In par-
ticular, the task of interpreting and applying a consent decree to
contested facts was held by the Court of Appeals to be beyond the
statute’s power — at least where the District Court did not reserve
to itself de novo review of the special master’s determination. Mi-
crosoft II, 147 F.3d at 953-56.
This narrow view of a special master’s power was a surprise to
many. It may well interfere with the ability of District Courts to
utilize masters in highly technical or complex cases. This Commit-
tee may well need to consider whether more expansive authority
should be granted the District Courts. Especially in the context of
highly technical cases, a properly appointed master can provide
invaluable assistance to the District Court judge.
These limitations would not, of course, restrict the appoint-
ment of a master in any case to which the parties agreed. And it
may well be that the simplest way for Microsoft to achieve credi-
bility in the context of this case would be for it to agree to the ap-
pointment of a master with substantial authority to interpret and
apply the decree, subject to de novo review by the District Court.
Such a master should be well trained in the law, but also possess a
significant degree of technical knowledge. But beyond the particu-
lars of this case, it may well be better if the District Court had
greater power to call upon such assistance if such the Court
deemed such assistance necessary.
