[Federal Register Volume 67, Number 203 (Monday, October 21, 2002)]
[Notices]
[Pages 64657-64666]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26631]
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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil Action No. 02-888-A]
United States v. The Mathworks, Inc. and Wind River Systems,
Inc.; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed final Judgment, and
Stipulation and Order pertaining to each Defendant individually, and a
Competitive Impact Statement related thereto have been filed with the
United States District Court for the Eastern District of Virginia in
United States of America v. The MathWorks, Inc. and Wind River Systems,
Inc., Civil Action No. 02-888-A. The proposed final Judgments represent
a full settlement of this matter, as they resolve all issues between
the United States and each Defendant. On June 21, 2002, the United
States filed a Complaint against The MathWorks, Inc. and Wind River
Systems, Inc. alleging that the Defendants entered into a series of
agreements that had the purpose and effect of eliminating the MATRIXx
product suite from the market in violation of Section 1 of the Sherman
Act, 15 U.S.C. 1. Through these agreements, The MathWorks and WindRiver
agreed to shift dynamic control system design software customers from
Wind River to The MathWorks. The proposed Final Judgments require both
The MathWorks and Wind River to facilitate the sale of the MATRIXx
products and intellectual property to a buyer acceptable to the United
States and the appointment of a trustee to effect the sale. Copies of
the Complaint, proposed Final Judgments and Competitive Impact
Statement are available for inspection at the Department of Justice in
Washington, DC, in Room 200, 325 Seventh Street, NW., at the Office of
the Clerk of the United States District Court for the Eastern District
of Virginia, Alexandria, Virginia, and on the Antitrust Division's Web
site at http://www.usdoj.gov/atr/cases/indx346.htm.
Public comment is invited within 60 days of the days of the date of
this notice. Such comments, and responses thereto, will be published in
the Federal Register and filed with the Court. Comments should be
directed to Renata B. Hesse, Chief, Networks and Technology Section,
Antitrust Division, U.S. Department of Justice, 600 E Street, NW.,
Suite 9500, Washington, DC 20530.
Constance K. Robinson,
Director of Operations.
Stipulation and Order
It is hereby stipulated by and between the undersigned parties,
through their respective counsel, as follows:
1. The Court has jurisdiction over the subject matter of
Plaintiff's Complaint alleging Defendants Wind River Systems, Inc.
(``Wind River'') and The MathWorks, Inc. (``The MathWorks'') entered
into an agreement that violates Section 1 of the Sherman Act (15 U.S.C.
1), and over each of the parties hereto, and venue of this action is
proper in the United States District Court for the Eastern District of
Virginia.
2. The United States and The MathWorks stipulate that a Final
Judgment in the form hereto attached may be filed and entered by the
Court, upon the motion of either party or upon the Court's own motion,
at any time after compliance with the requirements of the Antitrust
Procedure and Penalties Act (15 U.S.C. 16), and without further notice
to either party or other proceedings, provided that the United States
has not withdrawn its consent, which it may do at any time before the
entry of the proposed Final Judgment by serving notice thereof on The
MathWorks and by filing that notice with the Court.
3. The MathWorks shall abide by and comply with the provisions of
the proposed Final Judgment pending entry of the Final Judgment by the
Court, or until expiration of time for all appeals of any Court ruling
declining entry of the proposed Final Judgment, and shall, from the
date of the signing of this Stipulation, comply with all the terms and
provisions of the proposed Final Judgment as though they were in full
force and effect as an order of the Court.
4. This Stipulation shall apply with equal force and effect to any
amended proposed Final Judgment agreed upon in writing by both parties
and submitted to the Court.
5. In the event that the United States withdraws its consent, as
provided in paragraph 2 above, or in the event that the proposed Final
Judgment is not entered pursuant to this Stipulation, the time has
expired for all appeals of any Court ruling declining entry of the
proposed Final Judgment, and the Court has not otherwise ordered
continued compliance with the terms and provisions of the proposed
Final Judgment, then the parties are released from all further
obligations under this Stipulation, and the making of this
[[Page 64658]]
Stipulation shall be without prejudice to either party in this or any
other proceeding.
Respectfully submitted,
Dated: August 15, 2002.
For Plaintiff United States of America,
James J. Tierney,
U.S. Department of Justice, Antitrust Division, Networks and
Technology Section, 600 E Street, NW., Suite 9500, Washington, DC
20530. Tel: (202) 307-0797. Fax: (202) 616-8544.
Richard Parker (VSB No. 44751),
Assistant United States Attorney, 2100 Jamieson Avenue, Alexandria,
VA 22314. Tel: (703) 299-3700.
For Defendant The MathWorks, Inc.
Thane D. Scott,
Ruth T. Dowling,
Mitchell C. Bailin,
Palmer & Dodge LL.P., 111 Huntington Avenue, Boston, MA 02199-7613,
Tel: (617) 239-0100. Fax: (617) 227-4420.
Mark Gidley,
David A. Balto,
Jamie M. Crowe (VSB No. 37186),
601 Thirteenth Street, NW., Washington, DC 20005-3807. Tel.: (202)
626-3600. Fax: (202) 639-9355.
Order
It is so ordered by this Court, this -------- day of -------- 2002.
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Chief United States District Judge.
Certificate of Service
The undersigned certifies that the Stipulation And Order was served
by fax and U.S. Mail on the following counsel this 15th day of August,
2002:
Counsel for Wind River, Inc. Richard L. Rosen, Arnold & Porter, 555
Twelfth Street, NW., Washington, DC 20004-1206. Tel: (202) 942-5000.
Fax: (202) 942-5999.
James J. Tierney.
In the matter of: United States District Court, for the Eastern
District of Virginia, Alexandria Division; Civil Action No. 02-888-
A, Chief Judge Hilton. United States of America, Plaintiff, v. The
MathWorks, Inc. and Wind River Systems, Inc., Defendants.
Final Judgment
Whereas, Plaintiff United States of America filed its Complaint on
June 21, 2002, alleging that The MathWorks, Inc. (``The MathWorks'')
and Wind River Systems, Inc. (``Wind River'') entered into a series of
agreements related to Wind River's MATRIXx product line that violate
Section 1 of the Sherman Act;
And Whereas the United States and Wind River on June 21, 2002,
consented to entry of a Final Judgment that would require Wind River to
use its reasonable best efforts to divest its interest in the MATRIXx
assets in the event a Final Judgment is entered against The MathWorks;
And whereas the United States and The MathWorks, by their
respective attorneys, have consented to the entry of this Final
Judgment constituting any evidence against, or any admission by, any
party regarding any issue of fact or law;
And whereas The MathWorks agrees to be bound by the provisions of
this Final Judgment pending its approval by the Court;
And whereas, the United States believes that entry of this Final
judgment is in the public interest;
Now, Therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is Ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against The MathWorks under Section 1 of the
Sherman Act (15 U.S.C. 1).
II. Definitions
As used in this Final Judgment:
(A) ``MATRIXx Agreements'' means the February 16, 2001,
Distribution Agreement and other elated and contemporaneous agreements
between Wind River and The MathWorks.
(B) ``MATRIXx assets'' means all rights and tangible and intangible
assets, including but not limited to, all contracts, software code,
copyrights, patents, licenses, sublicenses, trademarks and other
intellectual property, within the scope of the MATRIXx Agreements
(excluding Retained Rights and U.S. Patents Nos. 4,796,179, 5,133,045,
and 5,612,866 assigned to The MathWorks in the February 16, 2001,
Patent Assignment between ISI and The MathWorks).
(C) ``The MathWorks'' means The MathWorks, Inc., a Delaware
corporation with its headquarters in Natick, Massachusetts, its
parents, successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint ventures, and their
directors, officers, managers, agents, and employees, and any other
person acting for, on behalf of, or under the control of them.
(D) ``Wind River'' means Wind River Systems, Inc., a Delaware
corporation with its headquarters in Alameda, California, its parents,
successors and assigns, and its subsidiaries (including Integrated
Systems, Inc. (``ISI'')), divisions, groups, affiliates, partnerships,
and joint ventures, and their directors, officers, managers, agents,
and employees, and any other person acting for, on behalf of, or under
the control of them.
(E) ``Retained Contracts'' mean all Wind River and ISI contracts
regarding the MATRIXx products that remain in effect as of the date
this Final Judgment becomes effective and were identified and retained
by Wind River in the MATRIXx Agreements.
(F) ``Retained Rights'' mean (a) a worldwide, royalty-free, non-
exclusive right under the MATRIXx assets to use, modify, improve, copy,
display, perform, create derivative work of and enhance the MATRIXx
products and distribute the same solely in connection with Wind River's
provision of support services (including, without limitation, the right
to provide source code to the extent contractually obligated) related
to Retained Contracts; (b) a worldwide, royalty-free, non-exclusive
license under the patents included within the MATRIXx assets to make,
have made, use, sell, offer for sale, or import (I) articles that may
be covered by one or more claims of such patents provided such acts are
in connection with the provision of support services related to
Retained Contracts or (ii) any Wind River products available for
purchase as of February 16, 2001 (except the MATRIXx products),
including all modifications, derivatives, new versions and new releases
of the same.
III. Applicability
This Final Judgment applies to The MathWorks and all other persons
in active concert or participation with the MathWorks who receive
actual notice of this Final judgment by personal service or otherwise.
IV. Asset Sale
The United States and the MathWorks agree as follows:
(A) As soon as possible, but no later than 30 days from the date of
filing of this proposed Final Judgment with the Court, the United
States shall nominate an independent agent to serve as Trustee to
accomplish the sale of the MATRIXx assets to a purchaser approved by
the United States pursuant to the terms of this Final Judgment and any
subsequent order of the Court.
(B) The Trustee shall serve at the cost and expense of defendants,
on such customary and commercially reasonable terms and conditions as
the United States, in its sole discretion, proposes, subject to
approval by the Court. The Trustee shall receive compensation that is
customary and commercially reasonable for asset sales of the size and
[[Page 64659]]
complexity as those included herein, including a substantial success
incentive and any reasonable and necessary legal expenses relating to
its role as Trustee. The Trustee shall account to the Court and
defendants for all monies derived from the sale of the MATRIXx assets
and all costs and expenses so incurred.
(C) Upon application of the United States, the Court shall appoint
the Trustee nominated by the United States and approve the engagement
letter, provided that the engagement letter's terms and conditions are
customary and commercially reasonable and consistent with this Final
Judgment.
(D) The Trustee shall have the duty to attempt to sell the MATRIXx
assets and negotiate a definitive sales and licensing agreement with a
purchase pursuant to the terms of this Final Judgment, the terms of the
engagement letter and any subsequent order of the Court. The Trustee
shall promptly make known, by usual and customary means, the
availability of the MATRIXx assets, and shall attempt to sell the
assets in a manner consistent with its typical commercial practices,
including protection of the defendants' confidential information.
Defendants shall have no authority or responsibility with respect to
the attempt to sell the MATRIXx assets or negotiate the definitive
sales and licensing agreement, except to promptly provide any
information relating to the MATRIXx assets requested by the Trustee in
writing or as otherwise provided herein.
(E) Defendants shall promptly provide to the Trustee all
information and documents requested in order to prepare offering
materials and provide customary due diligence information to
prospective purchasers with respect to the MATRIXx assets. Defendants
shall comply fully with all such requests within three business days,
unless the Trustee, in its sole discretion, waives or extends the time
period, or excuses defendants from providing certain specified
information.
(F) The Trustee shall commence offering the MATRIXx assets for sale
immediately after certification to the Court that it has received
adequate information from the defendants to offer the MATRIXx assets
for sale. The certification shall be made within five business days of
receipt of the adequate information. After the sales offering has
commenced, the Trustee may make such additional written requests for
information as may be reasonably necessary to perform its duties, and
the defendants shall comply fully with such requests within 3 business
days, unless the Trustee, in its sole discretion, waives or extends the
time period, or excuses defendants from providing certain specified
information.
(G) The Trustee shall have 90 days from the date of such
certification in which to offer the MATRIXx assets for sale and
consummate a definitive sales and licensing agreement with a purchaser.
There shall be no extensions of this 90-day period, except, however,
the running of the 90-day period shall toll for any undue delay the
Court finds is caused by defendants.
(H) The Trustee shall negotiate a definitive sales and licensing
agreement on customary and commercially reasonable terms, substantially
equivalent, except for the payment terms, to the terms and conditions
in the MATRIXx Agreements to the extent possible, and that provides to
the purchaser representations, warranties and covenants equivalent to
those in the MATRIXx Agreements. The defendants may allocate primary
responsibility for and indemnification under such warranties among
themselves as customary and appropriate to their respective rights and
obligations concerning the MATRIXx assets on the date of such sale. The
definitive sales and licensing agreement will provide for transitional
support to the purchaser, equivalent to that offered under the MATRIXx
Agreements.
(I) The Trustee shall make written reports of its activities to the
Court, the United States and defendants 30 days, 45 days, 60 days, 75
days, and 90 days after initiation of its attempts to sell the MATRIXx
assets. Such reports shall include the name, address, and telephone
number of each person who made an offer to acquire, expressed an
interest in acquiring, entered into negotiations to acquire, or was
contacted or made an inquiry about acquiring, an interest in the
MATRIXx assets, and shall describe in detail each contact with such
person, including the terms of any offers made or received. To the
extent such reports contain information that the Trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. The Trustee shall maintain full records of all efforts made
to divest the MATRIXx assets. The Trustee may discuss its progress with
the United States and defendants as it deems reasonable under the
circumstances.
(J) The MATRIXx assets to be conveyed shall include substantially
all assets, rights and property interests of both The MathWorks and
Wind River as currently exist pursuant to the MATRIXx Agreements,
except, however, that The MathWorks may retain ownership of the three
patents referenced in paragraph II(B), in which case the definitive
sales and license agreement shall include a patent license to the
purchaser. Any such patent license must:
(1) Cover as many of the three patents as the purchaser wishes to
license;
(2) Be perpetual, fully paid-up, and without continuing royalties
to either defendant;
(3) Not contain any field-of-use restrictions whatsoever;
(4) Permit the purchaser to sublicense the intellectual property so
licensed (the ``IP'') in order to:
(a) Adequately convey rights to exploit the technology to end user
customers of any product or service that includes the IP;
(b) Enter into development or support outsourcing or co-development
agreements with third parties in conjunction with the purchaser's
products or services, or joint venture agreements with third parties in
which the purchaser and the third party both retain an interest in the
resulting product, service, research or IP;
(c) Effectuate transfer of the license either upon change of
control of the purchaser, or upon sale of all or a substantial portion
of the MATRIXx assets; and
(d) Permit use of the IP in third-party products or services
designed and intended for use with the purchaser's product, e.g.,
complementary softward tools;
(5) Permit, without any restriction, grantback, or royalties, the
ability to innovate based on the IP and to use such innovations in the
purchaser's products or under any circumstances set forth above without
restriction;
(6) Permit enforcement of infringement that damages the purchaser,
except that The MathWorks may have a first right to enforce the
patients, provided that if it does so the purchaser has appropriate
intervention rights to protect its license or IP rights, and may have
the right to join the purchaser as a party to any such infringement
suit as may be necessary to protect fully the rights of The MathWorks;
and
(7) Contain an appropriate covenant not to sue the purchaser with
respect to the patents covered by the license.
(K) Wind River shall be entitled to Retained Rights as provided in
the proposed Final Judgment by the United States and Wind River and
filed June 21, 2002.
(L) The minimum price for the MATRIXx Assets shall be $2 million
cash, plus the cost and expenses of the Trustee. The defendants may,
with the approval of the United States, waive this
[[Page 64660]]
minimum reserve price requirement. The MathWorks shall not finance the
purchase or retain a contingent monetary or other interest in the
MATRIXx assets being sold, other than ownership of certain patents to
the extent described herein. All other costs (including the
compensation of the Trustee in the event a sale of the MATRIXx assets
is not consummated) will be borne by the defendants, allocated between
themselves as they may agree.
(M) The United States shall have, in its sole discretion, the right
to approve any prospective purchaser and the terms of any sales and
license agreement negotiated with a prospective purchaser as follows:
(1) The United States shall have sole discretion to determine
whether the MATRIXx assets could be competitively viable if owned by a
prospective purchaser identified by the Trustee. If the United States
determines that a prospective purchaser is competitively viable, the
Trustee shall negotiate a definitive sales and license agreement with
such purchaser. In the event of multiple bids, the United States, in
its sole discretion, shall decide which prospective purchaser(s) the
Trustee should pursue for purposes of negotiating a definitive sales
and license agreement and shall so direct the Trustee. The MathWorks
shall not challenge any such determinations by the United States.
(2) The United States and defendants shall have the right to
request modifications, consistent with the terms of this Final
Judgment, to any of the terms of any sales and license agreement with a
prospective purchaser. The Trustee shall have discretion to approve or
disapprove any such modifications, subject to the right of final
approval of the definitive sales and license agreement by the United
States. When considering any such request for modifications, the
Trustee will take into account whether the terms and conditions in the
proposed sales and license agreement are customary and reasonable for
such sales and license of assets.
(3) Should the United States disapprove any purchaser or any term
of the definitive sales and license agreement, the United States shall
direct the Trustee to attempt to identify an alternative purchaser, or
negotiate an acceptable agreement, consistent with this Final Judgment.
(N) The Trustee may seek to enforce the obligations of The
MathWorks pursuant to this Final Judgment or the engagement agreement
by filing a contempt motion with the Court.
(O) If the Trustee is unable to negotiate a definitive agreement
within the period set forth in paragraph IV(G) at or above the price
set forth in paragraph IV(L), the case shall be dismissed upon motion
by any party.
V. United States' Access and Inspection
(A) For the purpose of determining or securing compliance with this
Final Judgment or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privileged,
duly authorized representatives of the United States Department of
Justice, including consultant and other persons retained by the United
States, shall, upon written request of a duly authorized representative
of the Assistant Attorney General in charge of the Antitrust Division,
and on reasonable notice to The MathWorks be permitted:
(1) Access during The MathWorks' office hours to inspect and copy
or, at the United States' option, to require The MathWorks to provide
copies of all books, ledgers, accounts, records, and documents in its
possession custody or control relating to any matters contained in this
Final Judgment; and
(2) To interview, either informally or on the record at the United
States' discretion, The MathWorks's directors, officers, employees, or
agents, who may have their individual counsel present, relating to any
matters contained in this Final Judgment. The interviews shall be
subject to the reasonable convenience of the interviewee and without
restraint or interference by The MathWorks.
(B) Upon written request of a duly authorized representative of the
Assistant Attorney General in charge of the Antitrust Division. The
MathWorks shall submit written reports, under oath if requested,
relating to any of the matters contained in this Final Judgment as may
be requested.
(C) No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
(D) If, at the time information or documents are furnished by The
MathWorks to the United States, The MathWorks represents and identifies
in writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and The MathWorks marks each pertinent page
of such material, ``Subject to claim of protection under Rule 26(c)(7)
of the Federal Rules of Civil Procedure,'' then the United States shall
give ten (10 calendar days' notice prior to divulging such materials in
any legal proceeding (other than a grand jury proceeding) to which the
MathWorks is not a party.
VI. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for such further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify or terminate any of its provisions, to
enforce compliance, and to punish any violations of its provisions.
VII. Expiration of Final Judgment
This Final Judgment shall expire upon the earlier of (1) the date
on which The MathWorks no longer has any right, title or interest in
any of the MATRIXx assets except with regard to ownership of patent
rights as specified herein, or (2) the date of dismissal of this action
as a result of the failure of the Trustee to accomplish the sale of the
MATRIXx assets pursuant to the terms of this order. If the MATRIXx
assets are sold pursuant to the terms of this Final Judgment, The
MathWorks shall not purchase, license or otherwise acquire
substantially all of the MATRIXx assets before September 1, 2007,
without the prior written consent of the United States.
VIII. Costs
Each party shall bear its own costs of this action.
IX. Public Interest Determination
Entry of this Final Judgment is in the public interest.
Dated:-----------------------------------------------------------------
Court approval subject to the Antitrust Procedures and Penalties
Act, 15 U.S.C. 16.
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Chief United States District Judge.
In the matter of: United States District Court for the Eastern
District of Virginia, Alexandria Division; Civil Action No. 02-888-
A, Chief Judge Hilton. United States of America, Plaintiff, v. The
MathWorks, Inc. and Wind River Systems, Inc., Defendants.
Competitive Impact Statement
Pursuant to Section 5(b) of the Clayton Act, as amended by Section
2 of the Antitrust Procedures and Penalties Act (codified at 15 U.S.C.
16(b)-(h) (``Tunney Act'')), the United
[[Page 64661]]
States files this Competitive Impact Statement relating to the proposed
Final Judgments against Wind River Systems, Inc. and The MathWorks,
Inc., submitted on June 21, 2002 and August 15, 2002, respectively, for
entry in this antitrust proceeding.
I. Nature and Purpose of the Proceeding
On June 21, 2002, the United States filed a civil antitrust
Complaint alleging that The MathWorks, Inc. (``The MathWorks'') and
Wind River Systems, Inc. (``Wind River''), head-to-head competitors in
the sale of dynamic control system design software products, restrained
competition in violation of Section 1 of the Sherman Act, 15 U.S.C. 1.
The complaint alleges that, on February 16, 2001, the MathWorks and
Wind River entered into a number of agreements that eliminated
competition between Wind River's MATRIXx products and The MathWorks'
Simulink products. These agreements (hereinafter, collectively, the
``MATRIXx Agreement'') give The MathWorks the exclusive worldwide right
to price and sell Wind River's MATRIXx for two years, transfer the
customer support of MATRIXx to The MathWorks, require Wind River to
stop developing and selling MATRIXx, and give The MathWorks an option
to acquire MATRIXx in 2003. The MathWorks announced at the time it
entered into the MATRIXx Agreement that there would be no further
development of the MATRIXx products. As result of the MATRIXx
Agreement, competition has been eliminated between The MathWorks and
Wind River in the sale of dynamic control system design software. The
Complaint seeks divestiture of the MATRIXx products to an independent
and viable third party to restore the competition eliminated by the
MATRIXx Agreement.
Defendants in this action have now agreed to cooperate fully to
offer the MATRIXx products for sale. On June 21, 2002, the United
States filed a proposed Final Judgment in this matter containing
injunctive relief against Wind River, the nominal owner of the MATRIXx
assets, that will require Wind River to fully cooperate with any court
order requiring the divestiture of MATRIXx to a competitively viable
third party. Because the MathWorks had previously acquired significant
rights in the MATRIXx assets under the MATRIXx Agreement, Wind River's
consent alone was insufficient to effectuate fully the relief sought by
the United States in the Complaint. The lawsuit therefore continued
against The MathWorks. On August 15, 2002, the United States and The
MathWorks filed a proposed Final Judgment that will lead to either the
prompt and certain divestiture of the MATRIXx assets to a competitively
viable third part or the dismissal of the Complaint in this action. By
the proposed Final Judgment against The MathWorks, in combination with
the proposed Final Judgment previously filed against Wind River, the
United States has now received consent from all necessary parties
sufficient to effectuate a judicially-supervised sale of the MATRIXx
products. The proposed Final Judgments filed with the Court will
terminate this action against the Defendents.
II. Actions Giving Rise to the Alleged Violations
A. Dynamic Control System Design Software
An integral part of the control system of many complex devices is
the ``controller''--the on-board computer and software programs that
govern a device's operation. In aircraft, for example, the controller
works by receiving pilot input plus input from various sensors (such as
speed and altitude), processing the input, and providing outputs that
optimize the aircraft's handling and operation through the use of
various components (such as engines, flaps and the rudder).
Control system design tools were introduced approximately fifteen
years ago and they provide significant benefits to control system
design engineers. Before such tools were developed, engineers had to
manually create equations that mathematically represented the behavior
of the control system, write the appropriate software code to be
installed in the on-board computers, and then build prototypes to test
the system. Modern control system design tools have automated the
analysis and modeling, as well as the code generation and simulation.
With a mathematical engine at their core, and enhanced by graphical
user interfaces, control system design tools are used by engineers to
create ``virtual'' models of the control system. For very complex
systems, the analytical process (model, analyze, design, test, produce)
can only be accomplished efficiently with the help of computers and
specialized software.
The initial modeling step is extremely important. The better the
model is at simulating reality, the better and more robust the control
system will be. Yet, a model is still an abstraction. So, after the
analyzing and designing steps, the engineer still needs to test the
controls in real or near-real situations. If the controls fail the
testing, then the initial steps of the analytical process are repeated
with small design tweaks and the process repeats until the control pass
final testing. The final product is computer code that can be embedded
in a computer or on a chip.
MATRIXx and The MathWorks' Simulink are dynamic control system
design toolsets providing functionality that addresses each of the
engineer's tasks and aids in rapid control systems development. For
example, both toolsets have:
(1) Graphical interfaces and high level scripting languages for
modeling and simulation, and mathematical engines with advanced control
design modules, or libraries, for design and analysis;
(2) Automatic efficient code generation suitable for testing and
production; and
(3) Tools for real-time simulation and testing.
The tools in the Simulink toolset, numbered by functionality, are
called: (1) Simulink and MATLAB; (2) Real Time Workshop; and (3) xPC.
The tools in the MATRIXx toolset are called: (1) Systembuild and xMath;
(2) Autocode; and (3) RealSim.
MATRIXx and Simulink are considered ``suites'' or ``toolsets'' of
control design software. Suite products from a single vendor offer not
only full functionality, but also seamless integration between tools
used throughout the analytical process. As a result, no time is lost by
a need to convert designs or data from one tool to another. Utilizing a
suite or toolset of control design software facilitates the ability to
make changes anywhere in the modeling and design process. Seamless
integration is one of the keys to the rapid development of complex
control systems.
MATRIXx and Simulink were developed from common source code in the
early 1980s. Because of their common origin, the products are similar.
However, the products have been independently developed by different
companies for more than fifteen years. The competing development
efforts represent one critical way that the Defendants compete. For the
last ten to fifteen years. MATRIXx and Simulink have competed head-to-
head for sales, not only by competing on price, but also by adding
features to lure customers away from one another.
B. Illegal Agreement To Allocate Markets, Fix Prices, and Unreasonably
Reduce Competition
In April 2000, Wind River acquired Integrated Systems, Inc.
(``ISI''). At the
[[Page 64662]]
time, ISI was a well regarded vendor of software, tools, and
engineering services for the embedded systems market. Its embedded
real-time operating system, deployed in more than 38 million devices
worldwide as of 2000, addressed the telecom/datacom, consumer
electronics, automotive, aerospace, and emerging Internet appliance
marketplaces. Among its software portfolio it also produced the MATRIXx
family of software products. Although ISI had spent considerable
resources developing MATRIXx since the mid-1980s, its primary business
continued to revolve around the embedded systems market.
Wind River, itself a significant vendor of software for embedded
systems, pursued the acquisition of ISI, in large part, to obtain a
skilled pool of embedded system software developers that it hoped would
shorten the time to market for critical new embedded system products.
Wind River soon came to view MATRIXx as a struggling product line
within ISI with small revenue and no growth potential. More
importantly, the MATRIXx market was neither within Wind River's core
competency nor central strategic focus for the future. Thus, Wind River
decided not to devote any of its resources to the continued development
and sale of MATRIXx.
Shortly after Wind River's acquisition of ISI, The MathWorks
approached Wind River and began vigorously negotiating to acquire the
MATRIXx assets. On February 16, 2001, The MathWorks and Wind River
entered into the MATRIXx Agreement under which Wind River granted The
MathWorks exclusive distribution and license rights to the MATRIXx
toolset and the MATRIXx intellectual property (including the right to
incorporate MATRIXx source code into The MathWorks products) during a
thirty-month license period beginning on February 16, 2001. Following
the expiration of the thirty-month license period, The MathWorks would
have the option to acquire MATRIXx.
Under the MATRIXx Agreement, The MathWorks is required to provide
two years of customer support (ending in February 2003) for existing
MATRIXx users.\1\ While Wind River agreed to continue fulfilling its
existing customer support obligations, as well as provide ``critical''
bug fixes during the license period, the MATRIXx Agreement provides
that Wind River will not produce new versions of MATRIXx with feature
enhancements. The MathWorks and Wind River also agreed on the pricing
of Simulink when purchased by MATRIXx customers. The companies agreed
that The MathWorks would give customers with current MATRIXx licenses,
who switched to The MathWorks suite of products, a discount amounting
to 50% off the list price of The MathWorks products for those who
switched in the first year of the MATRIXx Agreement and 25% off for
those who switched in the second year of the MATRIXx Agreement.
---------------------------------------------------------------------------
\1\ Wind River retained rights to the MATRIXx intellectual
property during the license period in order to provide support
service to two International Space Station customers.
---------------------------------------------------------------------------
The MathWorks agreed to make payments to Wind River totaling
$11,500,000 over a three-year period. These payments are to be made on
a set schedule and are not contingent on the volume of MATRIXx products
MathWorks sells. Further, Wind River granted The MathWorks an option to
purchase MATRIXx and certain MATRIXx intellectual property (e.g., the
source code, customer lists, trademarks and copyrights) twenty months
after closing for an additional sum of $2,000,000. Wind River has
retained exclusive ownership of the optioned assets during the interim
and until The MathWorks exercises its right to acquire them. Finally,
the MATRIXx Agreement assigned certain patent rights to The MathWorks
for $500,000.
C. Effect of the Illegal Agreement
The MATRIXx Agreement eliminated competition between The MathWorks
and Wind River in the simulation software, automatic code generation,
and testing software markets. The MathWorks now has complete control
over the development and pricing of the products of its closest
competitor in these dynamic control systems design software markets,
thus depriving customers of the benefits of competition between
Defendants' products, including competition based on price, service,
and product innovation.
Further, many customers value tight integration of the products in
each of the dynamic control system design software markets. Both The
MathWorks and Wind River cooperated with a small number of companies to
facilitate interfaces between the Defendants' products and those
companies' products that compete with the Defendants' products in
individual software markets. The competition between the MATRIXx
toolset and the Simulink toolset provided Defendants an incentive to
facilitate interoperation with third-party products, as an
unwillingness by one to do so would likely advantage the other. As a
consequence of the elimination of competition resulting from the
MATRIXx Agreement, The MathWorks will have less incentive to provide
such technical cooperation to competitors selling individual products,
thus further reducing competition for consumers who value integrated
products.
The MATRIXx Agreement allocates MATRIXx customers between Wind
River and The MathWorks, fixes price terms for those customers ceded to
The MathWorks who subsequently switch to Simulink, and permits The
MathWorks to control the future of, and enables the elimination of, the
MATRIXx products. As the MATRIXx products are the principal competitive
products to The MathWorks' own dynamic control system design software,
the overall effect of the MATRIXx Agreement is to eliminate competition
between Defendants in the three separate dynamic control system design
software markets: (1) Simulation software market, where products in the
MATRIXx and Simulink suite are used by engineers to design, analyze,
and simulate dynamic control system behavior; (2) automatic code
generation software market, where products in both suites are used to
automatically generate code from models developed with simulation
software; and (3) testing software market, where products in both
suites are used by engineers to test their models and then
automatically generate code by simulating the function of the control
system in a real time environment. Consumers are harmed both by the
elimination of the MATRIXx products as a competitive alternative, as
well as the resulting reduction of competitive pressure on The
MathWorks to lower prices, improve service, continue product innovation
and development of its own dynamic control system design software
products, and cooperate with companies selling individual products.
III. Explanation of the Proposed Final Judgments
During the course of an investigation, customers complained to the
Antitrust Division that the MATRIXx Agreement had eliminated Wind
River's MATRIXx--the only significant products that competed directly
with The MathWorks' Simulink products--as a competitive alternative in
the market. Because customers indicated that, due to the present lack
of development of MATRIXx and its uncertain future, they would soon
have to begin a costly migration to The MathWorks' Simulink products,
the United States ultimately concluded that a quick and effective
remedy was necessary to reestablish MATRIXx as a viable alternative.
The
[[Page 64663]]
United States further concluded, however, that simply rescinding the
MATRIXx Agreement would not restore the competition it had eliminated
in light of Wind River's genuine desire to exit the markets for the
MATRIXx family of software products. At the same time, the principal
defense offered by Defendants for their conduct was a contention that
no competitive buyer would be interested in purchasing the MATRIXx
assets. Taking into account customer concerns and the The MathWorks'
arguments, the United States pursued an enforcement approach that would
both test Defendants' assertions as to MATRIXx market value and
maximize the possibility of restoring effective competition in a timely
manner.
The United States and Defendants entered into an April 26, 2002,
letter agreement that required an attempted sale of the MATRIXx product
line in an effort to restore the competition eliminated by the MATRIXx
Agreement. Under the April 26 letter agreement, Defendants were given
the opportunity to test their assertion that no other viable purchaser
existed by agreeing to ``shop'' the MATRIXx assets through an
independent agent. The United States believed that one or more viable
purchasers existed and that an independent agent would succeed in
finding a buyer. The United States acknowledged, however, that, if no
alternative viable purchaser emerged from the ``shop,'' remedying the
competitive harm caused by the MATRIXx Agreement would be difficult.
The United States thus agreed that, should the ``shop'' fail following
a good faith effort, and given Wind River's decision to discontinue the
sale and development of the MATRIXx products, it would close its
investigation without taking any enforcement action. However, the
Defendants did not comply with the terms of the April 26 letter
agreement and the United States, on June 21, 2002, filed its Complaint
seeking a judicially-enforced sale of the MATRIXx assets.
Contemporaneously with the filing of the Complaint, the United
States and Wind River filed a proposed Final Judgment that would settle
the case against Wind River on the condition that it fully cooperate
with any court order requiring the divestiture of the MATRIXx assets.
As noted above, because both Wind River and The MathWorks retain rights
in the MATRIXx products, Wind River's consent alone was insufficient to
effectuate fully the relief sought by the United States in the
Complaint. The lawsuit, therefore, continued against The MathWorks. On
August 15, 2002, the United States and The MathWorks filed a proposed
Final Judgment that would resolve the case against The MathWorks. The
proposed Final Judgment between the United States and The MathWorks
contains injunctive relief that is intended to promptly offer the
MATRIXx assets for sale to a competitively viable third party approved
by the United States. It further establishes a structure and time line
for the sale that will be supervised by the court. Thus, the proposed
Final Judgments against Wind River and The MathWorks will lead to
either the prompt and certain divestiture of the MATRIXx assets or the
dismissal of the Complaint in this action.
A. Proposed Final Judgment Against Wind River
On June 21, 2002, the United States filed a Stipulation and Order
and a proposed Final Judgment that resolved the allegations in the
Complaint against Wind River. Pursuant to the proposed Final Judgment,
Wind River agreed to facilitate the United States' efforts to divest
the MATRIXx assets. Wind River's agreement to assist the United States
in a divestiture of the MATRIXx assets, however, was expressly
conditioned on the Court entering a Final Judgment against The
MathWorks ordering the divestiture of the MATRIXx assets.
1. Wind River Covenants
Section IV of the proposed Final Judgment against Wind River sets
forth the substantive injunctive provisions and is designed to assist
the United States in its efforts to promote continued competition in
the markets for dynamic control system design software. Thus, Section
IV(C) of the proposed Final Judgment states that the United States is
seeking a judgment that would require, among other things, the prompt
and certain divestiture of all MATRIXx assets to a buyer acceptable to
the United States and the appointment of a trustee to effect the
divestiture. Wind River is expressly prohibited from contesting the
entry of such a judgment. In addition, Section IV(C) requires Wind
River to use its reasonable best efforts to assist in effectuating such
an order by divesting all of its rights, title, and interests in the
MATRIXx assets. Section IV(D) further requires Wind River to take steps
to ensure the prompt and certain divestiture of any rights in the
MATRIXx assets currently held by The MathWorks that revert to Wind
River. Wind River shall retain certain rights to use and distribute the
MATRIXx products and intellectual property related to specific
contracts it retained in the MATRIXx Agreement and any Wind River
products available for purchase as of February 16, 2001 (except for the
MATRIXx products). These Retained Rights, as outlined in the proposed
Final Judgments, are all current rights held by Wind River.
2. Termination of Action, Compliance, and Expiration of Final Judgment
Insofar as Wind River's consent alone was insufficient to achieve a
full divestiture of the MATRIXx assets, and because the United States
had neither an order from the Court requiring The MathWorks to divest
the MATRIXx assets nor had reached an agreement with The MathWorks on a
proposed Final Judgment requiring the divestiture of the MATRIXx
assets, Wind River remained a party to this action under Section IV(A)
for the sole purpose of effectuating any relief ordered by the Court or
agreed to by the United States and The MathWorks. Wind River also
agreed to permit the United States to monitor its compliance with the
Final Judgment under Section V of the proposed Final Judgment under
substantially the same terms as agreed to by The MathWorks and
discussed in subsection III(B)(2) below.
Under Section VII of the proposed Final Judgment against Wind
River, the Final Judgment does not have a fixed term or date of
expiration. Because Wind River's obligations were dependent upon the
United States gaining a Final Judgment against The MathWorks requiring
divestiture of the MATRIXx assets, the Final Judgment against Wind
River was made contingent upon a Final Judgment against The MathWorks
and will expire upon the earlier of: (1) Wind River's completion of all
obligations imposed upon it pursuant to Section IV of this Final
Judgment in light of the proposed Final Judgment against The MathWorks;
or (2) the date on which Wind River no longer has any right, title, or
interest in any of the MATRIXx assets (except for the Retained Rights).
B. Proposed Final Judgment Against the MathWorks
Subsequent to the proposed Final Judgment filed in this case
against Wind River, the United States reached agreement with The
MathWorks on a proposed final Judgment that will facilitate the offer
for sale of the MATRIXx assets to a competitively viable third party.
Defendants' compliance with the terms of the proposed Final Judgments,
filed on June
[[Page 64664]]
21, 2002 and August 15, 2002, will terminate this action.
1. Divestiture Provisions
Section IV of the proposed Final Judgment agreed to by The
MathWorks contains substantive provisions setting forth the terms on
which the MATRIXx assets will be offered for sale. It is designed to
lead expeditiously to the identification of competitively viable third
parties who are interested in acquiring the MATRIXx assets, negotiation
of a definitive sales and licensing agreement, and restoration of
competition in the markets for dynamic control system design software.
Thus, Sections IV(A)-(C) provide that the United States will, as soon
as possible, but in no event later than 30 days from the date the
proposed Final Judgment was filed with the Court, select an independent
agent to serve as Trustee for the purpose of accomplishing the sale of
the MATRIXx assets to a purchaser approved by the United States. The
United States will have the sole discretion, subject to approval by the
Court, to negotiate the terms and conditions on which the Trustee shall
serve and the Trustee shall serve at the cost and expense of the
Defendants.
Sections IV(D) and (E) direct the Trustee to attempt to sell the
MATRIXx assets and negotiate a definitive sales and licensing agreement
with a prospective purchaser. To this end, the Trustee is required to
promptly make it known that the MATRIXx assets are available for
purchase. In order to assist the Trustee in preparing offering
materials and to provide prospective purchasers with customary due
diligence information with respect to the MATRIXx assets, the
Defendants must provide the Trustee with all requested information and
documents within three business days. Section IV(D) expressly provides
that Defendants shall have no authority or responsibility with respect
to the sale of the MATRIXx assets, except promptly to provide any
information relating to the MATRIXx assets requested by the Trustee.
Sections IV(F)-(H) provide that the Trustee shall have 90 days from
the date on which it certifies to the Court that the Defendants have
provided adequate information to offer the MATRIXx assets for sale and
to consummate a definitive sales and licensing agreement with a
purchaser approved by the United States. During this 90-day period, the
Trustee may request additional information and documents from the
Defendants who shall comply with any such request within three business
days. If a divestiture of the MATRIXx assets is to occur under the
proposed Final Judgment, it must be consummated within the 90-day
period prescribed by Section IV(G), as the 90-day period may only be
extended for undue delays fond by the Court to be caused by Defendants.
A definitive sales and licensing agreement, negotiated by the Trustee,
shall be on customary and commercially reasonable terms and
substantially equivalent, except for the payment terms, to the terms
and conditions in the MATRIXx Agreement, to the extent possible. For
example, the definitive sales and licensing agreement should include
representations, warranties, covenants, and transitional support to the
purchaser equivalent to those in the MATRIXx Agreement.
Pursuant to Section IV(M), the United States shall have the sole
discretion to approve both prospective purchasers and the terms of any
sales and licensing agreement negotiated with an approved prospective
purchaser. If the United States determines that a prospective purchaser
is competitively viable, it will direct the Trustee to negotiate a
definitive sales and licensing agreement with that prospective
purchaser. In the event of multiple prospective purchasers, the United
States, in its sole discretion, will direct the Trustee as to with
which prospective purchaser(s) the Trustee should negotiate. The
MathWorks is expressly prohibited from challenging any decisions made
by the United States regarding the selection of prospective purchasers
or approval of specific terms. While each Defendant has the right to
request modifications to the terms of any sales and licensing agreement
with a prospective purchaser, the Trustee is permitted to approve or
deny such modifications. The United States, however, retains the right
of final approval over all terms and conditions of the definitive sales
and licensing agreement. Should the United States reject any purchaser
or any term of the definitive sales and licensing agreement, the United
States will direct the Trustee to attempt to identify an alternative
purchaser, or negotiate an acceptable agreement, consistent with the
proposed Final Judgment.
Section IV(J) expressly provides that The MathWorks may retain
ownership of three patents subject to the MATRIXx Agreement, so long as
the purchaser is offered a comprehensive license to the patents that
permits unimpeded use. Any patent license issued under the Final
Judgment:
[sbull] Must be perpetual, fully paid-up, and without continuing
royalties to either Defendant;
[sbull] Must not limit the purchaser's ability to use the patents
in any of purchaser's current or future products or service;
[sbull] Must permit the purchaser to sublicense the intellectual
property contained in the patents so as to:
[sbull] Convey rights necessary to exploit the technology to end
user customers of any product or service that includes the intellectual
property;
[sbull] Enter into joint development, joint marketing, and other
joint ventures with third parties in which the purchaser and the third
party retain an interest in the resulting product, service, research or
intellectual property;
[sbull] Permit transfer of the license either upon change of
control of the purchaser, or upon sale of all or a substantial portion
of the MATRIXx assets; and
[sbull] Permit the use of the intellectual property in products or
services designed and intended for use with purchaser's products or as
a complement to purchaser's products:
[sbull] Must permit the purchaser the ability to innovate based on
the intellectual property and to use such innovations in the
purchaser's products or under any circumstance set forth above without
restriction, grantback, or royalty;
[sbull] Must permit the purchaser to enforce infringement claims
that damage the purchaser in circumstances where The MathWorks fails to
enforce intellectual property rights under the patents; and
[sbull] Must contain an appropriate covenant not to sue the
purchaser with respect to the patents covered by the license.
Under Section IV(I), the Trustee is required to file written
reports with the Court, the United States, and the Defendants after
thirty days, and each 15 days thereafter, describing the Trustee's
activities to date. Section IV(K) provides that Wind River is entitled
to retain certain rights to defined in Section II of the proposed Final
Judgment. Section IV(L) establishes a minimum price of $2,000,000, plus
the cost and expenses of the Trustee, for which the MATRIXx assets may
be sold unless the Defendants, with the approval of the United States,
waive this minimum reserve price requirement. Section IV(N) expressly
gives the Trustee the ability to enforce the obligations of the
MathWorks under the proposed Final Judgment or the Trustee's engagement
letter by way of filing a contempt motion with the Court. Finally,
Section IV(O) provides that if the Trustee is unable to negotiate a
definitive sales and licensing agreement with the period set forth in
Section IV(G), the United
[[Page 64665]]
States' Complaint in this action may be dismissed upon motion by any
party.
2. Compliance
Section V of the proposed Final Judgment requires The MathWorks to
provide documents and information within its control necessary for the
purposes of determining and securing compliance with the Final
Judgment. Upon written request and on reasonable notice, The MathWorks
shall provide the United States with access to all records and
documents in its possession or control, make available its employees,
and submit written reports related to matters contained in the Final
Judgment.
3. Jurisdiction, Termination, and Acquisition of MATRIXx
Pursuant to Section VI of the proposed Final Judgment, the Court
retains jurisdiction over this matter in order to enable any party to
the Final Judgment to apply to the Court at any time for further orders
and directions as may be necessary or appropriate to carry out the
Final Judgment, to modify or terminate any of its provisions, to
enforce compliance, and to punish any violations of its provisions.
Because the outcome of the sale is uncertain, the Final Judgment
does not have a fixed term or date of expiration. The Final Judgment
sets out a procedure and time line under which a trustee will offer the
MATRIXx assets for sale, but recognizes that such sale may not be
accomplished, in which case the lawsuit will be dismissed. Because
divestiture of the MATRIXx assets is dependent upon the Turstee's
success in identifying a suitable prospective purchaser and negotiating
a definitive sales and licensing agreement acceptable to the United
States within a prescribed period of time, Section VII provides that
the Final Judgment shall expire upon the earlier of: (1) the date on
which The MathWorks no longer has any right, title or interest in any
of the MATRIXx assets except with regard to the ownership of patent
rights specified in Section IV(J); or (2) the date of dismissal of this
action as a result of the failure of the Trustee to accomplish the sale
of the MATRIXx assets pursuant to the terms of the Final Judgment.
Finally, Section VII further expressly provides that if the MATRIXx
assets are sold pursuant to the terms of the Final Judgment, The
MathWorks is prohibiting from purchasing, licensing, or otherwise
acquiring all or substantially all of the MATRIXx assets before
September 1, 2007, without the prior written consent of the United
States.
IV. Alternatives to the Proposed Final Judgments
The United States considered, as an alternative to the proposed
Final Judgments, a full trial on the merits against the Defendants. The
United States is satisfied, however, that a trial would not result in
injunctive relief against Defendants beyond what is contained in the
proposed Final Judgments against Wind River and The MathWorks, filed on
June 21, 2002, and August 15, 2002, respectively. Moreover, the
proposed injunctive relief is designed to more quickly achieve the
primary objective of the litigation--preserving MATRIXx as a viable
competitive alternative in the relevant markets for dynamic control
system design software to the extent it is possible to do so.
V. Remedies Available to Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages suffered, as well as costs and reasonable attorneys' fees.
Entry of the proposed Final Judgment will neither impair nor assist
the bringing of any private antitrust damage action. Under the
provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the
proposed Final Judgment has no effect as prima facie evidence in any
subsequent private lawsuit that may be brought against defendants.
VI. Procedures Available for Modification of the Proposed Final
Judgments
The parties have stipulated that the proposed Final Judgments may
be entered by this Court after compliance with the provisions of the
Tunney Act, provided that the United States has not withdrawn its
consent. The Tunney Act conditions entry of the decree upon this
Court's determination that the proposed Final Judgments are in the
public interest.
As provided by Sections 5(b) and (d) of the Clayton Act, 15 U.S.C.
16(b) and (d), any person may submit to the Department written comments
regarding the proposed Final Judgments. Any person who wishes to
comment must do so within sixty days of publication of this Competitive
Impact Statement and the proposed Final Judgments in the Federal
Register.
The Department will evaluate and respond to the comments. All
comments will be given due consideration by the Department, which
remains free to withdraw its consent to the proposed Final Judgments at
any time prior to entry. The comments and the responses of the
Department will be filled with the Court and published in the Federal
Register.
Written comments should be submitted to: Renata B. Hesse, Chief,
Networks and Technology Section, United States Department of Justice,
Antitrust Division, 600 E Street, NW., Suite 9500, Washington, DC
20530.
The proposed Final Judgments provide that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for modification,
interpretation, or enforcement of the Final Judgments.
VII. Standard of Review Under the Tunney Act, for the Proposed Final
Judgments
The Tunney Act requires that injunctions of anticompetitive conduct
contained in proposed consent judgments in antitrust cases brought by
the United States be subject to a 60 day comment period, after which
the court shall determine whether entry of the proposed Final Judgments
are ``in the public interest.'' In making that determination, the court
may consider--
(1) The competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration or relief sought, anticipated effects of alternative remedies
actually considered, and any other considerations bearing upon the
adequacy of such judgment.
(2) The impact of entry of such judgment upon the public generally
and individuals alleging specific injury from the violations set forth
in the compliant including consideration of the public benefit, if any,
to be derived from a determination of the issues at trial.
15 U.S.C. 16(e) (emphasis added). As the Court of Appeals for the
District of Columbia has held, the Tunney Act permits a court to
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the Government's
Complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. See United States v. Microsoft Corp., 56
F.3d 1448, 1458-62 (D.C. Cir. 1995).
In conducting this inquiry, ``the Court is nowhere compelled to go
to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly
[[Page 64666]]
settlement through the consent decree process.'' \2\ Rather,
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\2\ 119 Congressional Record 24,598 (1973). See United States v.
Gillette Co., 406 F. Supp. 173, 715 (D. Mass. 1975). A ``public
interest'' determination can be made properly on the basis of the
Competitive Impact Statement and Response to Comments filed pursuant
to the Tunney Act. Although the Tunney Act authorizes the use of
additional procedures, those procedures are discretionary (15 U.S.C.
16(f)). A court need not invoke any of them unless it believes that
the comments have raised significant issues and that further
proceedings would aid the court in resolving those issues. See H.R.
Rep. No. 93-1463, 93rd Cong. 2d Sess. 8-9 (1974), 1974 U.S.C.C.A.N.
6535, 6538.
absent a showing of corrupt failure of the government to discharge
its duty, the Court, in making its public interest finding, should *
* * carefully consider the explanation of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.\3\
---------------------------------------------------------------------------
\3\ United States v. Mid-America Dairymen, Inc., 1977-1 Trade
Cas. (CCH) ] 61,508 at 71,980 (W.D. Mo. 1977); see also United
States v. Loew's Inc., 783 F. Supp. 211, 214 (S.D.N.Y. 1992); United
States v. Columbia Artists Mgmt, Inc., 662 F. Supp. 865, 870
(S.D.N.Y. 1987).
Accordingly, with respect to the adequacy of the relief secured by
the decree, a court may not ``engage in an unrestricted evaluation of
what relief would best serve the public.'' United States v. BNS, Inc.,
858 F.2d 456, 462-63 (9th Cir. 1988), quoting United States v. Bechtel
Corp., 648 F.2d 660, 666 (9th Cir.) cert. denied, 454 U.S. 1083 (1981);
---------------------------------------------------------------------------
see also Microsoft, 56 F.3d at 1458. Precedent requires that
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be let, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest,'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.\4\
---------------------------------------------------------------------------
\4\ United States v. Bechtel Corp., 648 F.2d at 666 (citations
omitted) (emphasis added); see United States v. BNS, Inc., 858 F.2d
at 463; United States v. National Broadcasting Co., 449 F. Supp.
1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 406 F.
Supp. at 716. See also United States v. American Cyanamid Co., 719
F.2d 558, 565 (2d Cir,. 1983), cert denied, 465 U.S. 1101 (1984).
The proposed Final Judgments, therefore, should not be reviewed
under a standard of whether it is certain to eliminate every
anticompetitve effect of a particular practice or whether it mandates
certainty of free competition in the future. Court approval of a final
judgment requires a standards more flexible and less strict than the
standard required for a finding of liability. A ``proposed decree must
be approved even if it falls short of the remedy the court would impose
on its own, as long as it falls within the range of acceptability or is
`within the reaches of public interest.' '' \5\
---------------------------------------------------------------------------
\5\ United States v. American Tel. & Tel. Co., 552 F. Supp. 131,
151, (D.D.C. 1982) (quoting Gillette, 406 F. Supp. at 716), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); United
States v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985); United States v. Carrols Dev. Corp. 454 F. Supp. 1215, 1222,
(N.D.N.Y. 1978).
---------------------------------------------------------------------------
Moreover, the Court's role under the Tunney Act is limited to
reviewing the remedy in relationship to the violations that the United
States alleges in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Since the ``court's
authority to review the decree depends entirely on the Government's
exercising its procsecutorial discretion by bringing a case in the
first place,'' it follows that the Court ``is only authorized to review
the decree itself,'' and not to ``effectively redraft the complaint''
to inquire into other matters that the United States might have but did
not purse. Id.
VIII. Determinative Material/Documents
No materials and documents of the type described in the Section
5(b) of the Clayton Act, 15 U.S.C. 16(b), were considered in
formulating the proposed Final Judgments. Consequently, none are being
filed with this Competitive Impact Statement.
Dated: September 19, 2002.
Respectfully submitted,
James J. Tierney,
Patricia A. Brink,
Kenneth W. Gaul,
Jeremy West,
J. Robert O. Hizon,
David E. Blake-Thomas,
Patrick O'Shaughnessy,
Trial Attorneys.
Paul J. McNulty,
United States Attorney, U.S. Department of Justice, Antitrust
Division, Networks & Technology Section, 600 E. Street, NW., Suite
9500, Washington, DC 20530. Tel: 202/307-6200. Fax: 202/616-8544.
Richard Parker,
Assistant United States Attorney, VSB No. 44751, 2100 Jamieson
Avenue, Alexandria, VA 22314. Tel: 703/299-3700.
Certificate of Service
I certify that on September 19, 2002, a true and correct copy of
the United States' Competitive Impact Statement, related to the
proposed Final Judgments in this matter against Defendants and agreed
to by Defendants pursuant to the Stipulations And Orders filed with the
Court, was served on the following counsel:
Counsel for Wind River Systems, Inc.: Richard L. Rosen, Arnold &
Porter, 555 Twelfth Street, NW., Washington, DC 20004-1206. Fax: 202/
942-5999.
By: hand delivery.
Counsel for The MathWorks, Inc.: Thane D. Scott, Palmer & Dodge,
LLP, 111 Huntington Avenue, Boston, Massachusetts 02199-7163. Fax: 617/
227-4420.
By: fax and Federal Express.
J. Mark Gidley, White & Case, LLP, 601 Thirteenth Street, NW.,
Washington, DC 20005-3807. Fax: 202/639-9355.
By: hand delivery.
David E. Blake-Thomas.
[FR Doc. 02-26631 Filed 10-18-02; 8:45 am]
BILLING CODE 4410-11-M