Apple Tells of Microsoft Bullying in Letter to Judge : Computers: Software maker allegedly threatened to withhold a key new product unless Apple made several concessions.

TIMES STAFF WRITER

In the most dramatic allegation yet that Microsoft Corp. uses bullying tactics to protect its turf, Apple Computer Inc. has charged that the software giant threatened to withhold a key piece of software unless Apple agreed to drop two lawsuits and a competing product.

The allegations are contained in a Feb. 13 letter from Apple to U.S. District Judge Stanley Sporkin. In a stunning decision last week, Sporkin rejected as too narrow a consent decree that settled antitrust charges by the Justice Department against Microsoft.

Apple's letter, sent one day before the decision, was part of an effort by Apple to get the judge to reject the consent decree as being too weak. Sporkin has not said whether the letter influenced him.

Microsoft on Thursday denied the allegation, and Chairman Bill Gates said he was disappointed by Apple's treatment of Microsoft.

The latest dispute between Apple and Microsoft escalates a growing feud between the two companies that stems fundamentally from their rivalry in the market for the basic core software controlling the nation's personal computers. Microsoft makes the operating system, or core software, for about 85% of all PCs, but it also wants the 15% that Apple controls.

According to Apple's letter, the computer maker a year ago attempted to obtain a copy of Windows 95, a yet-to-be released version of Microsoft's best-selling operating system software. The software is critical because Apple wants its Macintosh computers to be compatible with Windows.

Typically, Microsoft gives an early version of its software to independent software developers. Since December, 1993, about 40,000 independent software developers have received the early, so-called beta versions of Windows 95.

Apple claims that Microsoft withheld Windows 95 because of two copyright infringement cases. In 1988, Apple filed suit against Microsoft, contending that Windows copied the Macintosh operating system. Earlier this week, the Supreme Court declined to hear the case, effectively ending it.

In December, Apple filed a lawsuit against San Francisco Canyon Co., charging that the start-up company gave Apple's copyrighted video software to Intel Corp. and Microsoft. Later, Apple sued Microsoft.

On Jan. 13, Apple Chief Executive Michael Spindler and Microsoft's Gates met to settle their disputes, Apple's letter claims. Apple contends that Gates issued a veiled threat against Apple, saying that withholding Windows 95 was "cause and effect" for Apple's decision to file a second lawsuit against Microsoft.

At the same meeting, Gates asked Apple to drop Open Doc, a software program that competes with a Microsoft product called Ole.

Apple said it informed Assistant U.S. Atty. Gen. Anne K. Bingaman of its problems with Microsoft. After a phone call from Bingaman, confirmed on Thursday by the Justice Department, Apple received the early version of Windows 95.

Although unorthodox, Bingaman's decision to intervene falls within her rights, legal experts said. "I wouldn't call it mediation," said Stanford University law professor William Baxter. "I would call it law enforcement."

Microsoft spokeswoman Pam Edstrom, in denying any wrongdoing, said: "Legally, Microsoft is under no obligation to give away beta copies of its software. Microsoft chooses to make pre-release versions of its software widely available to software companies because they offer input that allows Microsoft to improve the product and because their livelihoods depend on Windows. Neither is the case with Apple."

Microsoft Senior Vice President Pete Higgins expressed surprise at the Apple charges. "It was a normal business meeting," said Higgins, who attended the January session between Spindler and Gates. "Afterward, Bill (Gates) and Mike (Spindler) talked privately and the rest of us went to lunch."

"We told them we would give them the beta if they could explain (the Canyon lawsuit) to us," Higgins said. He said Bingaman's call did not prompt Microsoft to change its mind.

Gates on Thursday sent a letter to Spindler, saying that he was "disappointed" by Apple's actions. "Microsoft develops more software for Apple than any other company," he stated. Reflecting the tense relations between the two, Gates listed more than two pages of grievances.

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