Microsoft and deCSS -- two pivotal trials

In recent months, we have seen two spectacular trials, each of which is going to have a profound impact upon the evolution of technology and the global economy. These are the Microsoft Trial and the DVD Trial.

The Microsoft Trial. Microsoft is widely viewed as a great technology company by people who see its market capitalisation. People who have had a closer look at the company tell a very different story.

Microsoft has always been weak on innovation. This gives a highly insecure reaction every time technical change takes place. When you are the incumbent monopolist earning the highest profit margin in the world, every change that might rock the boat is a threat. In addition, the corporate culture that grew up at Microsoft was shaped by the strong-arm tactics that they could get away with through the 1980s and 1990s by virtue of being the monopoly.

These ingredients led to an explosive reaction when the Internet burst upon the public consciousness in the late 1990s. In a tribute to the low skills at Microsoft, the Internet was completely created by the Unix community. None of the components of Internet technology today has been designed at Microsoft. Unix is the main competitor to Microsoft today, and with the rise of the Internet, Microsoft was out in the cold.

The corporate culture at Microsoft reacted to these developments in a hysterical way. Bill Gates led his troops into the holy war of "winning the Internet". This effort gave Microsoft a 50% market share in web browsers and 25% market share in web servers.

To laymen, Microsoft did a remarkable job by coming in from behind to this "significant presence". However, the events that led up to this included numerous illegal acts by Microsoft. For instance, the trial has revealed how Microsoft threatened to stop sales of Windows to Compaq unless they stopped pre-installing Netscape on their computers. A memorable sound-bite from the trial is Bill Gates asking Steve Case (of AOL) "What do we need to pay you to screw Netscape?".

In most countries, a company as powerful as Microsoft would have been able to get away with a variety of illegal acts. It's useful to try to imagine an important lawsuit against the most profitable company in India: the State would just not embark on such a prosecution seriously. In contrast, in the US, the Justice department embarked on a courtroom drama focusing on the illegal acts that Microsoft had engaged in after the Internet revolution.

The trial was a disaster for Microsoft. Microsoft's weak grip on technology led to a complete failure in appreciating how email transforms the nature of evidence in court. Numerous top executives of Microsoft were asked by their legal team to go up and lie under oath. The prosecution was able to repeatedly nail these lies by referring to internal email from Microsoft's own archives. Again and again, the prosecutor would ask a Microsoft executive about an event, setup for the person to clearly state an untruth, and then pull out a horrific email -- written by that very person -- which showed that the person was lying on the stand.

The judge, Thomas Penfield Jackson, has come out with a document titled "Findings of Fact". This remarkable 230-page document instantly went into reading lists of courses on technology and economics all over the world.

From an Indian perspective, I admire the institutions that are on display in the trial. In India, I would have worried about political pressures on the prosecution and on the judge. Many individuals would have been afraid to testify against a powerful company. I would have worried about the intellectual calibre of the judge and the prosecution. Judge Jackson has clearly spent many years in studying the technological issues in this trial, and his "Findings of Fact" is a masterpiece. Building institutions of this calibre is the central problem that we, in India, face today.

The trial comes along with several other important technological changes, all of which imply that we will see a lot less of Microsoft in the years to come. These changes are: (a) the rise of the Palm Pilot in handheld space (in competition against Microsoft's Windows CE), (b) the rise of the free "Linux" operating system, (c) the continuing shift to Internet standards instead of Microsoft standards, (d) the success of Sun's Java programming language, and (e) the continued domination of Unix on the Internet and in the IT systems used at the enterprise level. All these changes matter; over the last one year, Sun's stock rose 200% while Microsoft rose by 10% or so. However, the trial will remain in our memory for decades to come as the decisive break.

The DVD Trial. DVD's are the best modern technology for distributing video content; they are replacing video-tapes and video-CDs all over the world. The entertainment industry wanted to have price discrimination - where a DVD could be sold at different prices in different countries. They wanted to prevent users from buying a DVD in one country and using it in another. Hence, they included an encryption scheme into DVDs.

This encryption has nothing to do with copying or piracy; it has to do with geographical control. A copy of the DVD can be made, and it will work in the same DVD player. It just won't work in a DVD player sold in another country.

When computers started displaying movies from DVDs, programs were written which had the same decryption capabilities. However, a DVD player program was not available for Linux, the new free operating system. In late 1999, Jon Johansson, a Norwegian student, understood how the encryption works, wrote a program which breaks this encryption, and released this program on the Internet.

The program spread like wildfire, and at one stroke, the ability of the entertainment industry to sell the same DVD at different prices in different countries was broken. Nothing can be done today to make that encryption scheme a secret again.

The entertainment industry knew that the horse had bolted; however they tried to make an example by trying to punish the Linux community. In a high visibility case, the entertainment industry hired top-flight lawyers to go after the Linux community. The entertainment industry claims that this is about piracy, which is factually incorrect. It is about the power of the entertainment industry to prevent you from buying DVDs from any country and playing them on your Linux computer.

The Microsoft case is coming to and end, and this case has just begun. Some of the finest minds are now working (without pay) on the defence of Johansson and other defendents, but we have yet to see what the legal outcome is. The decryption code is, however, roaming free on the Internet.

In conclusion. The Microsoft Trial and the DVD Trial are the defining events in the evolution of technology and economics at the end of the 20th century. In both cases, we see a confrontation between big business and clever technologists; and in both cases, big business lost.

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