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January 24, 2000


The opinion of the court was delivered by: Whyte, U.S. District Judge.


[Re Docket No. 1658]

Sun Microsystems, Inc.'s Motion to Reinstate November 17, 1998 Preliminary Injunction Order Under Cal. Bus. & Prof. Code §§ 17200 et seq. was heard on October 15, 1999. The court has read the moving and responding papers, heard the oral argument of counsel, and consulted with the neutral expert appointed in the present case. For the reasons set forth below, the court grants in part Sun's motion to reinstate the November 17, 1998 Preliminary Injunction Order based upon Microsoft Corporation's alleged unfair competition.



In its May 12, 1998 motions for preliminary injunctive relief, Sun Microsystems, Inc. ("Sun") sought to enjoin Microsoft Corporation ("Microsoft") from distributing incompatible versions of Sun's Java Technology based on theories of copyright infringement and unfair competition. On November 17, 1998, the court, based on Sun's showing of likely success as to its claim for copyright infringement, granted preliminary injunctive relief to Sun restricting Microsoft's distribution of software products incorporating Sun's Java Technology. Since Sun's claim for copyright infringement supported much of the relief it sought, the court did not decide whether Sun's claim for unfair competition warranted the same relief. See Sun Microsystems, Inc. v. Microsoft Corp., 21 F. Supp.2d 1109, 1126 (N.D.Cal. 1998). However, the court did address Sun's motion for preliminary injunctive relief based on its claim of unfair competition to the extent it sought to enjoin certain of Microsoft's licensing practices and alleged false and misleading statements to software developers. Id.

On August 23, 1999, the Ninth Circuit issued an order vacating and remanding the November 17, 1998 Preliminary Injunction Order. As to Sun's claim for copyright infringement, this court, according to the Ninth Circuit, failed to adequately address whether the compatibility terms of the TLDA limited the scope of Microsoft's license or whether they constituted covenants independent of the license grants, breach of which only supports claims for breach of contract. See Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121 (9th Cir. 1999). In addition, the Ninth Circuit vacated that portion of the November 17, 1998 Order based on Sun's claim of unfair competition. It reasoned that, under California law, a plaintiff is not entitled to an injunction for a defendant's past conduct, unless it shows that such conduct is likely to recur. Id. at 1123 (citing People v. Toomey, 157 Cal.App.3d 1, 20, 203 Cal.Rptr. 642 (1984)). However, the Ninth Circuit recognized that on remand Sun, even if not entitled to an injunction based upon copyright infringement, might be able to demonstrate entitlement under the "traditional standard for preliminary injunctions" for recurring unfair business practices. Id.

Sun now moves to reinstate the November 17, 1998 Preliminary Injunction Order based on Microsoft's alleged unfair competition.*fn1 In addition, Sun asks the court to expand the injunction to cover new acts of alleged unfair competition by Microsoft. Specifically, Sun seeks additional provisions enjoining Microsoft from:

(1) promoting Microsoft's proprietary "@com" compiler directives as adhering to Sun's JAVATM specifications or as otherwise being approved by Sun in any respect; and (2) negotiating, entering into, or enforcing any agreement by which a third party implements and/or distributes Microsoft's unauthorized and incompatible language extensions unless such products comply with the same restrictions imposed on Microsoft's distribution of similar products.

Sun's Motion for Reinstatement re: Unfair Competition at 1.


Sun and Microsoft entered into a Technology Licensing and Distribution Agreement ("TLDA") on March 12, 1996. Pursuant to the TLDA, Sun granted to Microsoft a nonexclusive development license "under the Intellectual Property Rights of SUN to make, access, use, copy, view, display, modify, adapt, and create Derivative Works of the Technology in Source Code form for the purposes of developing, compiling to binary form and supporting Products." TLDA § 2.1(a).*fn2 Sun also granted Microsoft a limited distribution license to "make, use, import, reproduce, license, rent, lease, offer to sell, sell or otherwise distribute to end users as part of a Product or an upgrade to a Product, the Technology and Derivative Works thereof in binary form" TLDA § 2.2(a)(iii). However, the TLDA also places compatibility requirements on Microsoft's commercially distributed implementations of the Java Technology. See TLDA § 2.6(a)(vi) ("Licensee agrees that any new version of a Product that Licensee makes commercially available to the public after the most recent Compatibility Date shall only include the corresponding Compatible Implementation (subject to Licensee's right to exclude the Supplemental Java Classes pursuant to Section 2.7); provided, that any version of a Product which, as of such Compatibility Date, is being beta tested by third parties, shall be exempt from such requirement."). The TLDA also places similar compatibility obligations on any Java Compiler that Microsoft develops and distributes. See TLDA § 2.6(b)(iv) ("any new version of a Product that includes the Java Language compilation function that Licensee makes commercially available to the public after the most recent Compatibility Date shall include a mode which a Tool Customer may use to permit such Product to pass the Java Language Test Suite*fn3 that accompanied the Significant Upgrade.").

As to the Java Virtual Machine, section 2.6(a) sets forth a compliance validation scheme resulting in Microsoft's development and eventual delivery of a "Compatible Implementation." According to the TLDA, Sun may develop and deliver Upgrades to the Java Technology. See TLDA § 2.6 (a)(iii), 3.1. Sun may designate two such Upgrades per year as "Significant Upgrades" and, subject to the backwards compatibility obligations of section 2.6(a)(iii), require Microsoft to deliver a "Java Reference Implementation" that is compatible with the Significant Upgrade. TLDA §§ 2.6(a)(iv), 2.6(a)(v). Compatibility under the TLDA hinges on passing the test suite accompanying the Significant Upgrade. See TLDA § 2.6(a)(iv) ("[Microsoft] shall deliver to SUN . . . an upgrade to the Java Reference Implementation (each, a "Compatible Implementation' that passes the test suite that accompanied the Significant Upgrade.")). The TLDA marks the date that Microsoft delivers the Compatible Implementation*fn4 in response to a Significant Upgrade as the "Compatibility Date." Id. Microsoft agreed to limit commercial distribution to Products including the Compatible Implementation corresponding to the most recent Compatibility Date. TLDA § 2.6 (a)(vi).


1. Distribution of Non-Compliant Java Technology

Sun bases its claim of unfair competition, in part, on Microsoft's allegedly illegal efforts to squash the competitive threat posed by Sun's Java Technology in order to maintain its monopoly in desktop operating systems. Sun labels Microsoft's allegedly anti-competitive conduct as an "embrace and extend" strategy. First, Microsoft "embraced" the Java Technology by licensing from Sun the right to use its Java Technology to develop and distribute compatible Products. Second, Microsoft "extended" the Java platform by developing strategic incompatibilities into its Java runtime and development tools products. According to Sun, these incompatibilities tied applications using Microsoft's Java development tools to Microsoft's virtual machine and the Windows platform. Third, Microsoft used its distribution channels to flood the market with its version of the Java Technology in an attempt to "hijack the Java Technology and transform it into a Microsoft proprietary programming and runtime environment." Sun's Reply at 8.

According to Sun, Microsoft's strategic incompatibilities were designed to exploit its market power and the economic and technical constraints imposed on software developers. These strategic incompatibilities included unauthorized extensions to the java.* class libraries, which ensured that applications created with Microsoft's Java development tools were tied to its virtual machine and operating system.*fn5 Second, Microsoft's refusal to implement JNI in its Java runtime or development tools products, says Sun, prevented developers from writing a Java/native application for all virtual machines running on a given platform. The exclusion of JNI, therefore, forced developers to write one Java/native application for Microsoft's virtual machine and another version for other implementations. Microsoft's use of its dominant market power in operating systems to flood the market with its Java runtime products, contends Sun, ensured that developers would write Java/native applications for Microsoft's implementation before any other. In addition, the cost of porting, says Sun, discouraged developers from also creating the same Java/native application for compliant Java implementations. Moreover, Microsoft's substitution of the RNI and J/Direct native method interfaces in place of Sun's JNI, according to Sun, ensured that developers wanting to develop hybrid Java/native applications that would run on Microsoft's virtual machine had no choice but to use Microsoft's Java development tools products.*fn6

Lastly, Sun contends that, in an effort to further fragment the Java programming environment, Microsoft extended the Java language to ensure that applications developed with its Java tools products were tied to Microsoft's implementation of the Java virtual machine. Microsoft's keyword extensions and compiler directives, says Sun, replaced the contractual lock-in Microsoft initially employed. Specifically, Microsoft once required certain licensees to exclusively distribute Microsoft's virtual machine and to use Microsoft's native code interfaces as the sole method of calling native code. Microsoft's exclusion of JNI and its Java language extensions embedded in its Java development tools products allegedly provided a technical lock-in that forced developers to use Microsoft's native code interfaces and distribute Microsoft's implementation of the Java virtual machine.

Sun also decries Microsoft's more recent efforts to license the technology embodying Microsoft's non-compliant language extensions to software developers, tools vendors, and entities in the business of cloning the Java technology. Beyond their distribution in Microsoft's own software products, Microsoft makes available its windows-specific extensions to the Java Technology in a variety of ways. For example, it has paid Tower Technology Corporation ("Tower") to develop a modified version of IBM's Jikes Compiler that supports Microsoft's language extensions. See Howard, 9/24/99 Decl. ¶ 3. The Tower agreement also allows Tower to incorporate Microsoft's language extensions into its "Tower" high performance deployment system." Id. ¶ 4. According to Tower, neither the IBM's Jikes compiler nor its own technology incorporates any Sun copyrighted program code. Id. ¶¶ 8, 9. Microsoft similarly paid Transvirtual Technologies, a "cloner" of the Java Technology, to include Microsoft's language extensions in its independently developed implementations. See Day 9/3/99 Decl. Exs. 34, 35. Microsoft also grants royalty-free licenses to its Developer Tools Interoperability Kit ("DTIK"*fn7), which assists tools vendors in the implementation and support of Microsoft's extensions. See Day 9/3/99 Decl. Ex. 37. Sun also cites a draft agreement relating to Microsoft's Windows Foundation Classes*fn8 ("WFC"), which requires licensees, if any exist, to implement the "J/Direct and Delegates Specification" in distributed virtual machine implementations. See Day 9/3/99 Decl. Ex. 28.

2. False and Misleading Advertising

Sun also claims that Microsoft has made certain misrepresentations about its software products and technologies relating to the Java Technology in an effort to confuse and induce developers to create applications using Microsoft's extended Java programming environment. See 5/12/98 Unfair Comp. Motion at 19. In its May 12, 1998 motion, Sun alleged that Microsoft misleadingly advertised its implementation of the Java Technology as the "official reference implementation" for Win32-based systems. More recently, Microsoft has falsely promoted, says Sun, its @com compiler directive technology as complying with Sun's specifications for the Java Technology and being approved by Sun. See Day 9/3/99 Decl. Exs. 24, 25.


In its appeal to the Ninth Circuit of this court's November 17, 1998 Order, Microsoft argued for the first time that this court's previous construction of section 11.2 of the TLDA conditioned the availability of injunctive relief on Sun's showing that a Microsoft senior management official wilfully and intentionally breached the compatibility provisions of the TLDA. See Sun Microsystems, Inc. v. Microsoft Corp., 999 F. Supp. 1301, 1306-07 (N.D.Cal. 1998). However, as the court's concurrently issued Order Re Sun's Motion to Reinstate November 17, 1998 Preliminary Injunction Under 17 U.S.C. § 502 (" § 502 Order") indicates, the remedies limitations set ...

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