FC: Microsoft's court filing uses "copyright defense"

[Declan McCullagh <declan () wired com>]

***********

Microsoft on Tuesday filed its latest round of legal briefs:
  http://www.microsoft.com/presspass/trial/p-col/02-01sur-reply.asp
  http://www.microsoft.com/presspass/trial/p-col/02-01state-surreply.asp

My article on the briefs:
  http://www.wired.com/news/politics/0,1283,34023,00.html

Microsoft says its copyright to Windows permits its exclusionary contracts 
with OEMs. I asked on the cyberia list for background; forthwith, a response.

-Declan

***********

Date:         Wed, 2 Feb 2000 00:11:36 -0500
> From: Mike Oliver <mikeoliver () HOME COM>
> Subject:      Re: Microsoft reply brief highlights copyright argument
>
> Declan McCullagh wrote:
> > This is the most detailed argument I've seen yet on this issue from MS.
> > Anyone know if this argument been raised by a software company before as an
> > antitrust defense?
>
> It is not a novel argument in antitrust law.  It was discussed at
> length in Data General Corp. v. Grumman Systems Support Corp., 32
> USPQ2d 1385 (1st Cir. 1994), where the copyright infringement
> defendant asserted the refusal to license was an antitrust
> violation.  It has also been discussed tangentially in PREI, INC. v.
> COLUMBIA PICTURES, 508 U.S. 49 (1993), dealing with an alleged 'sham'
> suit by the MPAA asserting its copyright against hotel operators.
> PREI held (simplified) that a plaintiff must prove the claim asserted
> in court is 'objectively baseless' to avoid the Noerr Pennington
> defense (1st amendment privilege).  The 'novel' issue I always
> thought was whether the bad faith assertion of a *valid* right can
> ever be an antitrust violation.  I always believed that it could (as
> argued in my now really outdated Law Review article from 1989,
> available at: http://www.bowie-jensen.com/articles/badfaith.html),
> but PREI held otherwise.  PREI, however, applies directly only when a
> right is asserted in court (i.e. its an access to court/1st amendment
> issue).  It would not be directly applicable where a private party
> asserts a federally protected right in negotiating with another
> private party in a contract.  As discussed below, M$'s arguments on
> this issue are overly simplistic and arrogant (IMO).  If they had
> been 'novel' (IMO), they would have worked in the PREI case to
> explain how their actions have to 'immune' from antitrust liability
> in order to enjoy the rights to enforce those copyrights in court.
> Instead, they made (IMO) pathetically bad arguments.
>
> In the Data General case, the defendant was not successful, but the
> court never said that 'mere' exercise of a federally granted right
> can never be a violation.  Here is a part of the discussion:
>
> "(4)  Harmonizing the Sherman Act and the    Copyright Act
>
> "Since neither the Sherman Act nor the Copyright Act works a partial
> repeal of the other, and since implied repeals are disfavored, e.g.,
> Watt  v.  Alaska, 451 U.S. 259, 267 (1981), we must harmonize the two
> as best we can,  id., mindful of the legislative and judicial
> approaches to similar conflicts created by the patent laws. We must
> not lose sight of the need to preserve the economic incentives fueled
> by the Copyright Act, but neither may  we ignore the tension between
> the two very different policies embodied in the  Copyright Act and
> the Sherman Act, both designed ultimately to improve the welfare of
> consumers in our free market system. Drawing on our discussion
> above, we hold that while exclusionary conduct can include a
> monopolist's  unilateral refusal to license a copyright, an author's
> desire to exclude others from use of its copyrighted work is a
> presumptively valid business justification for any immediate harm to
> consumers."
>
> M$'s arrogance is apparent in its argument:  "...Microsoft need not
> proffer a business justification, or any justification for that
> matter, for engaging in conduct clearly authorized by federal
> copyright law."  I have not read the case they cite (In re Indep.
> Serv. Orgs. Antitrust Litig., 989 F. Supp. at 1141), but this
> sweeping statement is not consistent with the better reasoned cases,
> or the law, so far as I know (but I admit I am not aware of a Supreme
> Court case on this point).  Data General certainly does not support
> this statement.
>
> M$'s argument that the patent/antitrust case law should apply to
> copyrights is also arrogant:  "The patent cases are particularly
> applicable to the realm of computer software where copyrighted works
> reflect an exercise of invention akin to that found in the patent
> context."  In one sentence, they have ignored and misconstrued all of
> the case law, much of it at the Supreme Court level, distinguishing
> patents and copyrights (and trade secrets).  E.g. Kewanee Oil and
> cases cited therein. I join the other posters that believe this
> argument is frightening if accepted.
>
> In Data general the court applied its 'presumptively valid business
> justification' rule of law and upheld the plaintiff's refusal to
> license its copyrighted work.  The court clearly recognized that the
> antitrust law could be violated by mere enjoyment of the protected
> right.
>
> M$ is being overly simplistic in making this argument (at least they
> are in the part you quoted).  A number of courts have had to deal
> with the apparent, or in some cases actual, conflict between the
> Sherman Act and the Copyright Act.  In every instance of which I am
> aware, the courts have never agreed with the over-simplified argument
> propounded by M$.  They have applied traditional antitrust
> principles, such as the misuse doctrine, the Noerr Pennington Sham
> doctrine, traditional refusal to deal analysis, principles of tying
> (argued in Data General), the essential facility doctrine, group
> boycott analysis, and other long-standing antitrust principles to an
> actor's conduct, whether its enjoyment of the bundle of real-property
> rights, personal property rights, IP rights, or any other 'right'
> protected by law.  The point is, if you enjoy monopoly power in a
> relevant market, your property rights, whatever they might be, are
> subject to a higher scrutiny under the antitrust law than if you do
> not enjoy monopoly power.
>
> I admit a bias against M$.  It derives from the arrogance they have
> of how the law should apply to them.  Its one thing to make arguments
> that are novel extensions of existing legal principles, and to
> address the opposing party's arguments intelligently.  But the two
> quotes above (and probably more) are appalling in their arrogance.
> It might be that M$ is correct on this point (i.e. that standing
> alone, refusing to allow distributors to make intermediate derivative
> works is not an unlawful monopolization of the relevant market), but
> any party that can make these arguments is, merely by making them,
> corroborating their original unlawful intent in abusing their market
> power. If this is how M$ conducted itself in court, its no reason
> Judge Jackson was so harsh in his findings.
>
> - mike oliver
> bowie & jensen, llc



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