Apple And Microsoft: Jobs Barefoot Under A Tree

Computergram International, Jan 26, 1999

By Rachel Chalmers The whole courtroom at the Microsoft antitrust trial in Washington perked up when general counsel for the Department of Justice, David Boies started to question Microsoft group vice president, Paul Maritz about a July 1997 meeting between Microsoft CFO Greg Maffei and Apple Computer Inc's interim CEO, Steve Jobs.

In his written testimony, Maritz had reported that Maffei had told him that the meeting took place beneath a tree in Palo Alto. "Do you know what kind of tree it was?" Boies asked sardonically. "He did not go into that level of detail," said Maritz, before adding, to general amusement: "I do recall Mr Maffei told me that Mr Jobs was wearing no shoes." Boies' reason for raising what he then called "the barefoot walk around Palo Alto" was to establish Maritz's view of the Apple deal. Maritz says he believes the primary goal of the August, 1997 agreement between Apple and Microsoft was to resolve a long-running patent dispute. Apple had threatened a several billion dollar lawsuit against Microsoft over some of its multimedia patents, which it said Microsoft had violated. "We were hypersensitive to the damage an Apple in trouble could do," Maritz said. He called Apple's behavior patent terrorism. (Later, outside the courtroom, Microsoft general counsel Bill Neukom pointed out that when an ailing company chooses to attack competitors on patent issues, it's difficult for the victims to use their own patents to fight back, since the attacking company usually has no business left to sue.) Boies, however, produced a number of documents, including emails and memoranda written by Gates and Maffei and dating from as early as 1996. In these documents, the patent issue is hardly touched upon. Instead, Gates and Maffei make it clear that a priority of any deal with Apple would be to have that company ship Internet Explorer as its default browser. The price was Microsoft Office, without which Apple simply could not survive. The final agreement, signed in August 1997, is in three parts: a preferred stock agreement, the patent cross-licensing agreement, and a technology agreement in which Apple promised to make IE its default on condition that Microsoft continued to develop Office for Macintosh. Boies tried portray this "tying" of Office to IE as of a piece with Microsoft's alleged anti-competitive behavior in the browser, Java and multimedia markets, but Maritz wouldn't budge. He said Gates and Maffei never mentioned the patent issue in their email discussing the Apple deal because it was "simply taken for granted" that a settlement of the dispute would be part of any agreement. "It was inconceivable that they would be doing a deal without a patent cross-license," he said.