The Limits Of Credibility

Baldwin Louie — Mon, 23 Jul 2001 18:00:00 -0400

Late last month, the Court of Appeals for the D.C. Circuit found Microsoft guilty of violating the nation's antitrust laws. So far, Microsoft has apparently not noticed.

In an unsigned and unanimous opinion, the court held that the company had used its monopoly power to protect itself against competition. The court also rejected Microsoft's proposed rule for determining whether its bundling of Windows and Internet Explorer was illegal. Microsoft insisted that bundling was legal so long as it had some "plausible benefit," but the court held that bundling would constitute a crime if the government demonstrates it has an anticompetitive effect.

Sometime soon, the world, and even Microsoft, will recognize the significance of these two defeats. Microsoft has insisted from the start it was, in the words of CEO Steve Ballmer, "100 percent innocent" - that there was "as a matter of law, no limit" to the kind of software Microsoft could bundle into its operating system. It based its next-generation operating system, Windows XP, and its framework for Internet computing, .Net, upon the premise that its "freedom to innovate" would be guaranteed once the court of appeals "vindicated" Microsoft. Once the Redmond spin winds down, its executives will have to decide how best to follow the law.

There are some who believe Microsoft already knows how to follow the law. They insist the government's case is based on an outdated view of the company. Microsoft's strategy, these people insist, is no longer the biased game the court found illegal. It is instead a strategy that is fully consistent with the court's rule.

This view gains support from an important new book by Wall Street Journal reporter David Bank. To be published by Free Press this fall, Breaking Windows tells an extraordinary story about the struggle within Microsoft for the company's soul. It turns out that Microsoft is more complicated than the government made it seem. No doubt there is a part keen on preserving and protecting "Windows" - through techniques that the court of appeals found illegal. But there is a part as well that believes the future is best captured through a strategy of neutrality - through products built with neutral code that doesn't strive at every step to tilt the world to Windows.

We can call these the forces of darkness and light (not to bias this too much) that rage within the corporation that is Microsoft. The force of darkness is best captured in a chilling quote that Bank attributes to Bill Gates, who is reported to have "screamed" at a top lieutenant, Paul Maritz, "You're putting us on a level playing field! You're going to kill the company." Gates' strategy was instead to "tax," as Bank describes it, every Microsoft product to benefit Windows. Every implementation would make it harder for non-Microsoft products to compete.

The forces of light have a different vision of how Microsoft will best succeed. This vision is captured in one reading of the company's framework for the next generation of the Internet, .Net, which will enable a range of "Web services" that today don't really exist. They will be implemented upon a "common language runtime" that Microsoft promises it won't game. And indeed, Microsoft is backing up these promises with a commitment to submit CLR to a standards body so that anyone can build to CLR without giving control to Microsoft.

In Bank's account, at least at the time he finished his book, the forces of light had prevailed. They had convinced the powers that be the best strategy was neutrality; the best future for Microsoft would be played on a level playing field.

It will be hard for most in this business to believe this view about what Microsoft has become. So deep is the skepticism about this company that it can't announce any innovation without someone claiming Darth Vader the father. The recent flap over Microsoft's "smart tags" is a good example. Smart tags were designed to allow people to click on a word on a Web page and be taken to a set of links related to that word that Microsoft selected. The idea is genius, and depending on how it's implemented, completely harmless. There was nothing to indicate that others couldn't deploy similar technologies easily. And there is nothing wrong with a company - even a monopolist - enabling people to easily see a set of "related" links. Yet the world quickly condemned this innovation as conspiracy, and Microsoft was forced to retreat.

There is an important lesson here that the company must learn if it is to survive. Microsoft is filled with people who believe they are doing God's work; many of them no doubt are. But the challenge for Microsoft - in addition to not breaking the law - is to make itself believable. The world does not buy what this company says, even if it must buy what it makes. It cannot believe that its future will be any different from its (now declared to be illegal) past. The question is what this company can do to convince the world that the forces of light have prevailed; that the lessons of the court of appeals have been learned; and hence that the future will be different from the practice of the now-familiar past.

This is a make-or-break moment for the company, yet the first signs are not good. I had naively believed that once Microsoft lost its appeal, the company's leaders would honestly and directly acknowledge this truth, and signal clearly how they would move on. These last weeks have proved me wrong. (Naivete, of course, is nothing new for me - I'm the one who predicted the Supreme Court would decide Bush v. Gore without a whiff of politics.)

The company has announced tiny, insignificant changes to its licensing policies that completely fail to acknowledge the principle of the court of appeals' decision. It has blasted the world with a grotesquely distorted spin about the meaning of the court's decision, suggesting it's going about business as usual. And it has filled the airwaves with an unseemly image of perhaps the greatest businessman of our time showing the world that he is no longer able to talk straight. The message from this mix is not that Microsoft understands the law and will follow it. The message instead is that Mr. Gates went to Washington and learned its lessons well.

Believability doesn't come from the pen of spin masters. It doesn't grow on a field of newspeak. Credibility will not return to this company until the world sees that Microsoft is not only not above the law, but also not above the truth. Microsoft must find a way to establish credibly that its vision of the future is no different from the court's vision of the law. Harry Truman, not The Truman Show, should become its ideal; honesty, not lawyer-speak, its mantra; and neutral code, not the tilted field of "Windows everywhere," its future.

Lawrence Lessig is a professor of law at Stanford Law School.

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The Limits Of Credibility