AOL launches Netscape lawsuit against Microsoft

23 January 2002 AOL Time Warner has filed a lawsuit against software giant Microsoft seeking reparations for damage inflicted on its Netscape software unit during the so-called browser wars.

Media conglomerate AOL, which bought Netscape for $4.2 billion (€4.76bn) in December 1998, is seeking three times the damages that it claims were inflicted on Netscape since 1995. AOL is reportedly looking for damages as high as $12 billion (€13.6bn).

It is also seeking an immediate injunction against Microsoft to prevent what it sees as any further distortion of the market.

A Microsoft spokesman told Reuters that the company had not yet studied the lawsuit and could not comment on specific allegations. But he added, “AOL purchased Netscape for [billions of dollars], now AOL wants to blame Microsoft for Netscape and AOL’s own mismanagement.”

AOL’s 20 page lawsuit says that the Netscape browser suffered from Microsoft’s unfair promotion of its Internet Explorer browser with its own desktop operating systems.

It also cut deals to prevent PC vendors from bundling the browser with their systems. This enabled Microsoft to win more than 85% of the market for browsers by the end of last year and led to a US government anti-trust suit which the software giant emphatically lost.

AOL general counsel Randall Boe said in a statement: “Netscape’s lawsuit is a logical extension of the findings entered by the District Court and unanimously affirmed by the Court of Appeals that Microsoft thwarted competition, violated the anti-trust laws and illegally preserved its monopoly at Netscape’s expense.”

The lawsuit alleges that Microsoft’s actions caused Netscape to lose browser licensing revenue and market share, which could have helped it earn revenues from other sources. It also claims that marketing and distribution costs were forced up because of Microsoft’s actions.

“There is no question that Microsoft’s conduct violated the law and harmed competition and consumers,” added Boe.

The long-awaited move by AOL comes after a US appeals court in June 2001 upheld the US Department of Justice’s case against Microsoft that asserted that the software giant illegally used its monopoly in PC operating systems to assert dominance and control of other markets.

The Department of Justice and nine of 18 states that joined the government case have reached a proposed settlement. The nine other states are seeking stiffer penalties against Microsoft, with a fresh round of court hearings due to begin on 11 March 2002. AOL is one of several companies due to testify on behalf of the non-settling states.

The states want Microsoft to sell a cheaper, stripped-down version of its Windows operating system as well as give competitors access to the Internet Explorer source code, enabling them to sell their own versions of the Microsoft browser.

Netscape was the first company to popularise the web browser, with the release of Navigator in beta in October 1994. The full release followed in December 1994. The release inaugurated the Internet boom of the 1990s and Netscape itself became the first big Internet stock in the summer of 1995 when it made a hugely successful debut on the Nasdaq stock exchange.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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