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IP: Chinese Wall? What Chinese Wall?!?
From: Dave Farber <farber () cis upenn edu>
Date: Mon, 15 May 2000 06:10:25 -0400



[ For those of you who don't know John, he is an old (not age) and 
experienced professional in our field djf]


Date: Sun, 14 May 2000 19:04:21 -0700 (PDT)
From: John Wharton <jwharton () netcom com>
To: farber () cis upenn edu
Subject: Chinese Wall?  What Chinese Wall?!?

Dave--

I had to chuckle at Microsoft's response to the DoJ's proposed antitrust
remedies; I wonder if anyone else noticed one delicious irony?

For years Microsoft has claimed there's a "Chinese Wall" separating
the operating-systems division from the applications-software division.
This is an intellectual-property firewall that supposedly makes sure
different groups within Microsoft don't have an unfair advantage over
outside competition by having access to unpublished interfaces or
unannounced product plans.  It also means different divisions can't
collude in developing new products, Microsoft has said, and reassures
other software companies they can share confidential information with
one branch of the company without worrying that their trade secrets
might be learned by a competing branch.

It doesn't always work that way.  In his book "Startup", Jerry Kaplan
tells how GO Corp. fell victim to the Chinese Wall gambit in 1989:
Microsoft had approached GO, saying it wanted to develop apps to run
under GO's new PenPoint operating system, but needed to know more about
how PenPoint worked.  GO agreed to share the requested information with
Microsoft's applications group only after it signed an NDA assuring
Kaplan that he "needn't worry about GO's confidential information
jumping from the applications group to the operating systems group"
[Kaplan's words].

Some months later Kaplan was shocked to discover that the very people
he'd been dealing with actually worked on the development team for
PenWindows, Microsoft's competing OS, and had used GO's proprietary
information to clone the GO prototype.  The apps-development story had
been a ruse, Kaplan concluded, to let Microsoft "rip off" the GO design.

(See pp. 63-67, 101-102, 105-106, and 174-178 in the hard-bound edition
of "Startup" for Kaplan's account of these dealings and excerpts from
the non-disclosure agreements Microsoft violated.)

(Sound familiar?  In 1980, Digital Research engineers shared design
details of its CP/M-86 OS with Microsoft after MS said it was porting
its compilers and applications suites to run on CP/M-86.  In truth, the
MS engineers Digital Research worked with were using the information to
make sure MS-DOS capabilities would more closely match CP/M-86.)

====

So now the DoJ has proposed that Microsoft be split in two to make sure
future apps products will not in fact be able to take unfair advantage
of knowledge of OS products and vice versa.  In effect, the DoJ asked
Judge Jackson to plug the holes and make the Chinese Wall more solid.

And how does Microsoft react to enforcing a policy the company says had
been in effect all along?  It screams bloody murder, claims there's no
way the company can survive, much less continue to 'innovate', unless
communications channels between the divisions remain wide open!

"These proposals would block us from doing new product work," Gates has
said.  "Microsoft could never have developed Windows under these rules.
We couldn't have developed Windows because without the great work of the
Office team and the Windows team, it never would have come together."
(see the NYT, 4/29, pp.B1 & B5)

So much for the Chinese Wall theory!

And so much for any claims that Microsoft's control of the OS market
played no role in advancing its interests in the applications arena.

(I laughed out loud to read that.  Perhaps the brightest moment to come
of this case since Microsoft attorneys tried to discredit an Intel VP
during cross-examination and managed only to embarrass themselves!  :-)

  --john wharton


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