Bristol: Microsoft unfairly withheld NT code

Microsoft countered that it owns the source code and that the company is under no obligation to enter into new contracts to license it to Bristol. The two sides gave brief outlines of their case during 15-minute-long opening statements Thursday morning in U.S. District Court in Bridgeport Connetticut.

In a lawsuit filed last August, Bristol accused Microsoft of leveraging its dominant position in the operating system market to raise prices and push unfair contracts. The two companies signed a three-year licensing agreement covering Windows NT 3 in 1994. When that deal expired, they failed to negotiate a new agreement for licensing the next two iterations of the operating system.

Bristol claimed Microsoft raised prices on the contracts unfairly and offered only a sliver of the code. But Microsoft said NT 4 and 5 are far more advanced versions of the operating system and should cost more. Bristol makes a product called Wind/U, which lets developers port programs written for Windows to other operating systems such as Unix.

Bristol's arguments touched on a broader canvass than would a simple breach-of-contract dispute. The software maker is essentially alleging that Microsoft leveraged Windows to control the software industry, using pricing and practices that could violate antitrust law. During opening statements, Patrick Lynch, an attorney for O'Melveny & Myers representing Bristol, said the company would show that Microsoft used Bristol to expand into new markets -- by getting more developers to write programs for the Windows platform -- then essentially cut off the company when it had achieved its goal. "Bristol's business may well be destroyed," he said.

Lynch said Bristol will show that "Microsoft has an overwhelming monopoly in the computer operating system business and that it engaged in anti-competitive and unfair behaviour to extend it." But David Tulchin, a lawyer for Sullivan & Cromwell representing Microsoft, argued that the original offer to license Windows NT 4 and 5 is still on the table and Bristol can sign on at anytime. Tulchin said Bristol competitor Mainsoft Corp. had already agreed to a similar contract with Microsoft, and he said he would call witnesses from that company to refute charges the contract is unfair.

"Instead of taking a new contract which was available to it, Bristol chose litigation instead of negotiation," Tulchin told jurors. Furthermore, he said, Microsoft is hardly a monopoly in the server market and trailed companies such as IBM Corp. and Sun Microsystems Inc. when it entered the market in the early 90s. He said Microsoft does not have to license its code to Bristol. "The source code was written by Microsoft, it was created and developed by Microsoft, and it is Microsoft's property," Tulchin said.

Following the opening statements, Ken Blackwell, Bristol CTO and the company's first witness, spent much of the morning explaining the process of computing to jurors. Using slides containing cartoon figures working at computers, Blackwell explained concepts such as operating system extensions, source code, APIs, and compiling. During his testimony, the ruddy-faced Blackwell, turned to face the jury of four women and five men, talking directly to them and gesturing with his hands.

Unlike the U.S. Department of Justice's case against Microsoft, which will be decided by a federal judge, the outcome of the Bristol case rests in the hands of a jury.

During an afternoon session, Blackwell testified that his company had lost customers because it was unable to provide the latest Windows code to them. But under cross examination Microsoft attorney Tulchin implied that Bristol had ridden Microsoft's coattails to its current position, getting Blackwell to acknowledge that Bristol's revenues grew more than fourfold in the first year it began promoting its relationships with Microsoft, and continued to increase after that.

At one point, Tulchin asked Blackwell if he considered his company's Wind/U source code property of Bristol in the same way "the source code Microsoft has developed is Microsoft's property."

"Yes," Blackwell answered.

Court resumes Friday morning, and Bristol plans to show tapes of Bill Gates' deposition after Blackwell finishes testifying.