Legal Complaint Filed
Introduction and Summary of microsoft's Illegal Conduct
Microsoft's Concerted and Systematic Efforts to Unfairly Compete with Borland
Claim for Violation of Business & Professions Code Section 17200 et. seq.
Common Law Unfair Competition
Prayer for Relief
JAMES A. DiBOISE (# 083296)
ELIZABETH M. SAUNDERS (# 138249)
WILSON SONSINI GOODRICH & ROSATI
650 Page Mill Road
Palo Alto, CA 94304
Attorneys for Plaintiff
BORLAND INTERNATIONAL, INC.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
BORLAND INTERNATIONAL, INC.,
VERIFIED COMPLAINT FOR VIOLATION OF BUSINESS AND PROFESSIONS CODE SECTION 17200 et seq. AND COMMON LAW UNFAIR COMPETITION
Plaintiff, Borland International, Inc., ("Borland") alleges the following complaint against Microsoft Corporation ("Microsoft"):
1. Borland brings this action to stop Microsoft from systematically targeting and raiding Borland's employees. In the last two weeks, three Borland employees have been targeted and seduced away by Microsoft. Moreover, Microsoft has systematically engaged in a plan and a concerted course of action to unfairly compete with Borland in the software development tools ("tools") business by targeting and recruiting more than 34 of Borland's engineering and marketing employees over the last 30 months. Microsoft's actions were taken with the intent to deprive Borland of the resources Borland needs to successfully remain as the only significant competitor to Microsoft in the tools business.
2. Despite recent operating losses, Borland's new management team is poised to lead the turnaround of the Company's fortunes with the introduction of several new products and timely updates to its existing product lines. Delbert W. Yocam, Borland's Chairman and CEO has assembled a new management team that promises to lead Borland to profitability. Unfortunately, Microsoft views Borland's promise of success as a threat to its business plans for dominance of the tools market. Borland's tools support not only Microsoft platforms, but also other open industry standards. Microsoft's tools, on the other hand, favor Microsoft platforms and technologies. Borland's success in supporting tools for open industry standards is the greatest threat to Microsoft's entrenched dominance of the desk top market.
3. Microsoft has deliberately set out to recruit many of Borland's best engineering, product marketing and managerial employees. In complete disregard of accepted business practices, Microsoft has placed many of Borland's former employees in positions at Microsoft where they work in the same area of software development that they worked on at Borland. Further, these employees are being asked by Microsoft to market and develop the Microsoft products that compete directly with the Borland products they previously marketed and developed. Microsoft's placement of former Borland employees in these positions jeopardizes and threatens the disclosure and misuse of Borland trade secrets and confidential proprietary information.
4. This action is taken not to restrain or prevent Borland's employees from seeking alternative employment opportunities. Indeed, Borland believes in an open and competitive environment where it may freely compete on the merits of its products and where its employees may seek rewarding and challenging employment opportunities. Unfortunately, Microsoft does not believe in fair competition. Microsoft's plan is to recruit, using unfair practices and confidential information, the best software developers and the people who market that software, with the ultimate goal of destroying Borland as a competitor.
1. Microsoft's conduct as alleged further and more detail herein constitutes unfair business practices violative of California Business & Professions Code Sections 17200 et. seq. Borland seeks both injunctive relief and monetary damages.
5. Borland International, Inc. is a Delaware Corporation. Borland's principal place of business is located at 100 Borland Way, SCOtts Valley, California 95066. Borland develops markets and sells software development tools for client/server and Internet applications.
6. Microsoft Corporation is a Delaware Corporation. Microsoft's principal place of business is located at One Microsoft Way, Redmond, Washington 98052. Microsoft is the world's largest independent software company.
2. Both Borland and Microsoft are in the business of developing and selling software. Software transforms otherwise practically useless computers into powerful, productivity-enhancing tools for millions of users. Much of the software available in the market today may be placed into one of three general categories: operating systems, applications, and software development tools. Borland manufactures and sells software development tools, while Microsoft produces and sells software in all three categories.
3. Operating systems are computer programs that work closely with computer hardware to provide basic functions, including management of the display shown on the computer's screen, storage of files on the computer's disk drive, and printing of documents on the computer's printer. Microsoft produces (and for years has produced) the world's largest selling operating systems for desktop computers -- DOS, windows, and windows NT (hereinafter "Windows"). Indeed, Microsoft is, by far, the dominant provider of desktop operating systems in the world today. Operating systems, however, provide only some of the functions that users need. Typical users are most interested in the specific tasks that the computer running a particular operating system can perform.
4. Applications are the programs that enable computers to perform those tasks. Examples include word processors, spreadsheets, and game programs. Applications may be written so that they will run on only one operating system or in such a manner that they will function properly on multiple operating systems. As the number of applications available for a given operating system increase, so too does the desirability of that operating system. Correspondingly, the fewer applications that are available for a given operating system, the less desirable that operating system becomes. In an effort to cement its dominance of the market for desktop operating systems, Microsoft's strategy is to maximize the number of applications that are compatible only with its Windows products. In shARP contrast, Borland seeks to encourage the development of applications that will run on multiple operating systems.
5. Development of applications, in turn, depends upon products known as software development tools. Development tools are computer programs that enable programmers to create other computer programs, typically applications. As their name suggests, development tools provide programmers with the means to build new applications, either from scratch or from components supplied with the development tools package. Any given development tools package may enable the creation of applications for only one operating system or for multiple operating systems.
6. Borland and Microsoft are the two largest producers of software development tools. Like other ASPects of the software industry, Microsoft today dominates the software tools business, but Borland's products and personnel present a substantial challenge to Microsoft's ongoing ability to maintain this dominance -- not just in software tools, but in operating systems as well. That is because, despite Microsoft's dominance, other operating systems -- e.g., Macintosh, OS/2, and unix -- still exist. The installed base of computers running these operating systems has generated significant demand for applications that will run on multiple operating systems.
7. Despite its size relative to Microsoft, Borland has consistently produced high quality tools products that have been viewed as superior to Microsoft's. In the coming year, Borland intends to release updated versions of its tools as well as new and powerful tools for creating cross-platform Internet applications. Borland today is poised to expand its role as a tools developer and to continue to challenge Microsoft by offering a greater variety of tools choices to applications developers, in part by supporting a broader base of open industry standards.
8. Software development tools are a crucial link in information technology. These tools are the necessary predicate to creating the applications that make computers useful. Because software development tools create applications that must run on a given computer's operating system, tools are crucial to Microsoft's well-known intent to dominate the market for desktop operating systems. The applications created by Microsoft tools favor its operating systems, while the applications created with Borland's tools are not limited to Microsoft's operating systems. The better able Borland is to offer tools that are able to create cross-platform applications, the less able Microsoft will be able to maintain its operating systems dominance. Microsoft's theory of business is to create products that are compatible only with the Windows platform and other Microsoft proprietary system technologies. Other companies, including Borland, favor an open environment and support the development of applications which run on a variety of operating systems and support all major corporate databases as well as all major corporate web browsers and web servers.
9. Borland has traditionally been known for its innovative approaches to software development and for the development of the tools to write software. Currently, Borland is in the middle of a major turnaround effort with a new, dynamic management team led by Delbert W. Yocam. Mr. Yocam has restructured Borland to focus Borland's resources and energies on its core software development tools business. After considerable effort, Borland is poised to turnaround its financial situation and prospects, but it will not succeed if Microsoft is allowed to continue to target and recruit Borland's best employees.
10. As noted previously, Microsoft's development tools favor Microsoft's Windows operating systems and other Microsoft proprietary technologies. Borland's tools, by contrast, are compatible not just with Windows, but with all other open industry standards. Moreover, Borland has developed and continues to develop cross-platform tools that support Java, a portable language created by Sun Microsystems, Inc. that enables programmers to write cross-platform applications. Borland's cross-platform tools, IntraBuilder and JBuilder, support all platforms, including Windows, Macintosh, Unix, OS/2, and any other future platforms.
7. In contrast, Microsoft's support for Java encourages developers to create Windows only applications thereby increasing the likelihood that developers become locked into using the Windows operating system or other proprietary Microsoft technologies. Microsoft's tools are heavily oriented towards Windows and Microsoft proprietary platforms and provide poor support for cross-platform capabilities. Microsoft perceives the efforts by Borland to continue to develop superior Java and other cross-platform development tools as a critical threat to Microsoft's continued dominant position in the industry.
11. Borland and Microsoft each sell four fundamental types of development tools. The first is a tool that uses 4GL or a fourth generation computer language. With a 4GL tool, a programmer can quickly build applications much faster than with a traditional third generation language. Borland's 4GL tool is called Delphi and Microsoft's directly competing product is Visual Basic. The second type of tool uses the C or C++ computer language. C++ is a more complex language that provides more control over the final product and more options for the application being created. Borland's C++ tool is called C++Builder and Microsoft's directly competing product is Visual C++. The third type of tool uses Sun's revolutionary new Java computer language. Borland's Java tool, due to be introduced this summer, is JBuilder and Microsoft's directly competing product is Visual J++. Finally, the fourth type of tool is a data-driven web server tool that creates cross-platform database applications for the Internet. Borland's web server tool is called IntraBuilder and Microsoft's directly competing tool is Visual InterDev. Microsoft offers its tools together in a so-called Visual Studio Suite.
(Languages) Borland Microsoft Fourth Generation
- Windows and open industry standardsVisual Basic
-Windows and Microsoft Technologies OnlyC++ C++Builder
- Windows and open industry standardsVisual C++
-Windows and Microsoft Technologies OnlyJava JBuilder
- cross-platform and open industry standardsVisual J++
- Windows Oriented and Microsoft Technologies OnlyData-Driven
- cross platform and open industry standardsVisual InterDev
- Windows Oriented and Microsoft Technologies Only
1. Borland's principal product is Delphi, while Microsoft's equivalent product is Visual Basic. Many commentators believe and have stated that Delphi is the superior product of the two. Through Microsoft's dominant position in the Window's operating environment, however, Microsoft has sold more Visual Basic than Borland has sold Delphi. Another key product for Borland is C++Builder. In March, when Borland first shipped C++Builder, it replaced Microsoft's Visual C++ on Windows Magazine's Recommended List.
2. Borland's Delphi and C++Builder are software tools programs that peRmit users to develop applications for the Windows operating environment and, in addition, support all major corporate databases including ORACLE, Sybase, Informix, IBM db2, Borland InterBase and Microsoft's sql SERVER. Additionally, Borland's tools support the Microsoft and Netscape web browsers and web servers. Microsoft's equivalent tools favor development of applications that use only Microsoft technologies (Microsoft database, web server and web browser products). Although Microsoft claims that it can provide open database connectivity with these tools, the resulting applications are slow, substandard and not very secure. Microsoft wants to stall development of applications other than those that are specific to Windows operating systems and Microsoft database, web server and web browser products. Unfortunately for Microsoft, it was caught unprepared and surprised by the groundswell of support and adoption of Internet based software systems, which are based on open industry standards. This groundswell of support for development tools and applications that are based on open industry standards, severely undermines and threatens Microsoft's dominant position.
3. When Delphi was first released, Microsoft, like most of the software industry observers, quickly realized that it was a much superior tool than Microsoft's Visual Basic. Borland is informed and believes and on that basis alleges, that Microsoft management was upset that its tools team had not produced a product comparable to Delphi. Microsoft decided that it must quickly make a better product than Delphi. And Microsoft further decided to make available whatever funds were necessary to accomplish this goal.
4. Borland is informed and believes, and on that basis alleges, that the method Microsoft chose to develop its answer to Delphi, as well as to C++ and the Internet tools, was to hire away the people at Borland who had developed Borland's superior products. By taking Borland employees, Microsoft reduces the number of people working on products that can compete with Microsoft and support open industry standards.
5. Microsoft's systematic, targeted recruiting of Borland's technical and marketing employees has been occurring since at least August of 1994 and grew increasingly relentless as Borland remained the only viable competitor to Microsoft in the development tools business. In early 1995, Borland learned that a group of former Borland employees at Microsoft had formed a so-called "Dead Borlanders Society" which met regularly to share information about Borland with Microsoft. Borland was also informed that the "Society" systematically provided Microsoft recruiters with the names of Borland employees who would make good additions to the Microsoft development team.
8. Borland also uncovered evidence that a Microsoft recruiter had possession of and was using a confidential Borland telephone list to make targeted calls. Microsoft went so far as to have its recruiters call Borland employees with invitations to "Microsoft training conferences" at a hotel in San Jose. In fact, no such conferences existed and the calls were made to gain information about Borland technical employees through dishonest means. Borland further learned that Microsoft had set up a "recruitment center" at a San Jose hotel to aid its raiding efforts. Microsoft's recruiters at other times represented themselves as employees of the Federal Government calling Borland to get the names of Borland employees to allegedly send them information or put them on their support lists for contractors. These representations were obviously false inducements to get unsuspecting Borland employees to turn over the names of Borland's talented employees. Borland employees have received hundreds of phone calls from Microsoft recruiters urging them to move to Microsoft.
1. Borland is informed and believes that part of the Microsoft plan was entrusted to Brad Silverberg of Microsoft. Brad Silverberg had been Borland's Vice President of Research & Development prior to being recruited to Microsoft in the spring of 1989. When Silverberg left Borland, he repeatedly stated that Borland should have no issues regarding the potential threat to Borland's confidential information by his taking a job at Microsoft because he was going to work on a non-competing product at Microsoft. Silverberg, at least at the time he left Borland, clearly understood the problems that arise when a software developer and engineer is asked to work on a directly competing product for a competitor. Silverberg over the years after his departure maintained his contacts at Borland and took a large part of Microsoft's recent efforts to recruit key Borland personnel.
2. In the Summer of 1995, Microsoft recruitment efforts led them to attempt to steal away Delphi's chief architect, Anders Hejlsberg. Microsoft, through Silverberg, attempted to entice Hejlsberg to join Microsoft. Silverberg's and Microsoft's efforts failed after Borland succeeded in convincing Hejlsberg to stay.
3. Microsoft was undeterred by this losing attempt to recruit Hejlsberg and thereby further its goal to deprive the industry of a software architect producing tools that support open industry standards. By the summer of 1996, Borland was undergoing difficult times and management turnover, and Microsoft saw another opportunity. Paul Gross, Borland's Senior Vice President of Research and Development and a key leader of Borland's tools business was making a pitch to be Borland's new CEO. Borland, in turn, was trying to define Gross' role in Borland's future. Borland did not expect Gross to leave; and if he did, the last place Borland expected him to go was Microsoft. Gross had always been vehemently opposed to Microsoft and its way of doing business and had tried to discourage many of Borland's employees from taking jobs there. Representatives of Microsoft set their sights on Gross, however, and one day Silverberg and Bob Muglia of Microsoft arrived outside of Borland's headquarters in a limousine to pick up Gross to recruit him over lunch at an expensive restaurant.
4. Borland is informed and believes, and on that basis alleges, that as part of Microsoft's recruiting effort, Microsoft told Gross that they needed someone to oversee their tools business as they ramped up their software offerings for the Internet world, and Microsoft wanted Gross for this job. Gross had overseen the development of Borland's tools business and now Microsoft wanted him to do the same thing for it. As Gross put it, without even asking him to interview, "Microsoft gave him an offer he could not refuse." Borland is informed and believes, and on that basis alleges, that Microsoft's offer included a $1 million signing bonus, stock options and title to selected real estate in or near Redmond, Washington. Microsoft also informed Gross that it would increase the already substantial offer if he would accept it immediately, even though he had already scheduled a three month sabbatical to plan his wedding.
5. Borland is informed and believes, and on that basis alleges, that Microsoft viewed Gross as key to its successful recruitment of Anders Hejlsberg and other Borland employees in Microsoft's ongoing effort to catch up with and eventually destroy Borland in the tools business. Borland is informed and believes, and on that basis alleges, that Gates participated in the seduction of Gross and spoke to him several times, offering Gross increasing amounts of money to entice him to join Microsoft.
9. In response to Microsoft's offer to Gross and as part of its ongoing effort to help Gross define his role at the Company, on or about September 23, 1996, Gross was invited to Borland's September 24, 1996 Board meeting to discuss his future with Borland. Gross accepted the invitation and indicated his williNGNess to discuss his options at Borland. That night, however, Gross called Borland Director Bill Miller to say he was going to Microsoft. Borland is informed and believes, and on that basis alleges, that Microsoft had responded to Borland's efforts to keep Gross by immediately offering Gross an additional $500,000 to quit Borland that very day. Gross officially resigned on September 25, 1996. For Borland, it was too late to turn Gross around; his seduction by Microsoft was sealed by a compensation package worth well over $1.5 million despite the fact that Gross would not begin work at Microsoft for at least three months.
6. Microsoft's recruiting efforts at Borland, always relentless, became even more so after Gross's crossover. Around the same time it recruited Gross, Microsoft renewed its efforts to convince Hejlsberg to join Microsoft. After the initial effort to recruit Hejlsberg failed, Silverberg had continued to contact Hejlsberg. In late September 1996, around the time Gross announced his intentions, Silverberg convinced Hejlsberg to take a trip up to Microsoft in Redmond to talk about his employment opportunities at Microsoft. Microsoft arranged this trip at a time when Borland was facing weak financial results, management turnover and badly needed the help and resources of its key employees. In Redmond, Hejlsberg was recruited by Gates, Silverberg and other former Borland employees. Microsoft made a point of telling Hejlsberg how happy the many former Borlanders at Microsoft were. Hejlsberg was reluctant to leave California, but Microsoft offered him a $1.5 million signing bonus, over a base salary of approximately $150,000 to $200,000 and extremely lucrative options to purchase 75,000 Microsoft shares.
7. Hejlsberg discussed the Microsoft offer with Borland management. He was clearly torn about what to do and invited a counter offer from Borland if it could be made quickly. He explained to Borland that a counter offer had to be forthcoming promptly because Microsoft had given him a short deadline for accepting its offer. On Friday, October 4, 1996, Borland director David Heller sent Hejlsberg Borland's counter offer. Hejlsberg seemed pleased by Borland's offer and the opportunity it gave him to stay in California. He indicated to Heller that day that he thought he would accept Borland's offer. On Saturday morning (the next day), however, Hejlsberg called Heller and said he now felt he had to accept Microsoft's offer. Indeed, overnight and in response to Borland's offer, Microsoft had promised Hejlsberg another $1.5 million to join it. Hejlsberg indicated to Heller that Gates had been applying "incessant" and "intense" pressure to get him to work at Microsoft. On October 30, 1996, Hejlsberg, the principal architect of Borland's Delphi product and a significant participant in Borland's future product development plans, left Borland and went to work for Microsoft developing "Delphi for Java."
8. Microsoft's continuous raiding did not stop after Microsoft took the top Borland strategist and Borland's top tools developer. Before 1996 was out, Ramin Halviatti, a Delphi Development Manager and, Jean Marie Babet, a C++ R&D engineer, had moved to Microsoft. In the past few weeks alone Microsoft has successfully recruited at least three more key Borland employees: Bill Dunlap, Marie Huwe, and Roland Fernandez.
9. In April 1997, Microsoft hired two Borland marketing managers. Both Bill Dunlap, the Product Manager for JBuilder and Marie Huwe, the Product Marketing Manager for C++Builder, left Borland with detailed knowledge of its product strategies, planned product features, marketing plans, positioning strategies on unreleased products, program statuses and personnel positions and talents. Borland is informed and believes, and on that basis alleges, that each is doing the same job at Microsoft, except rather than managing marketing for JBuilder, Dunlap is now marketing the competitive product, Visual J++, and rather than marketing C++Builder, Huwe is marketing Visual C++.
10. In April 1997, Microsoft also hired Borland's senior Architect for its C++Builder product. Roland Fernandez, who resigned from Borland on April 25, 1997 played the key role in Borland's development of C++Builder, Borland's Rapid Application Development ("RAD") tool for C++. He left Borland with detailed knowledge of the overall architecture and feature set definition of C++Builder. At Microsoft, he is now doing exactly the same thing: creating a RAD C++ tool that competes directly with C++Builder. Unable to fix its tools products on its own, Microsoft has recruited Borland knowledge to do it. Minds that previously worked on products that support a wide variety of open industry standards are now limited to products that now support Microsoft platforms and proprietary technologies.
10. Microsoft has also begun to display complete disregard for the threat of trade secret misappropriation that may accompany its placing former Borland employees in the same jobs on competing products at Microsoft. In addition to the three most recent hires, both Gross and Anders were privy to large amounts of Borland proprietary and confidential information, including negative knowledge concerning the pitfalls and mistakes to avoid when developing a new software tool. Gross was involved in and had intimate knowledge of Borland's confidential plans regarding products and long term strategy. Both are now working on the same types of projects at Microsoft that they worked on at Borland.
11. Microsoft has engaged in unfair competition in violation of B&P Code ' 17200 et seq., committing many of the unfair acts and causing much of the injury to Borland in Santa Clara County and elsewhere through California and the world. Microsoft's unfair acts include raiding Borland employees with the intent to prevent Borland from being able to compete against Microsoft in the marketplace. Microsoft and Borland directly compete for talented software engineers. Borland and Microsoft directly compete in the design, development and sale of software development tools. Microsoft willfully, deliberately, according to a preconceived plan, and with the intention of harming Borland, hired 34 Borland employees since August, 1994 to specifically injure Borland and to obtain Borland=s confidential and proprietary information. Borland is informed and believes, and on that basis alleges, that Microsoft=s solicitation and recruitment of Borland employees is intentional and being done for wrongful purposes: to inhibit Borland=s competitive position and to acquire employees who have knowledge of Borland trade secrets and confidential information -- all for the purpose of unfairly benefiting Microsoft. As a result Microsoft has engaged in and continues to engage in unfair competition in violation of California law.
12. Microsoft willfully, deliberately, according to its plan, and with the intention of harming Borland, hired at least 34 former employees of Borland and set them out to use their knowledge of tools development, some of which is proprietary to Borland, to create tools for Microsoft. Microsoft continues, and will continue unless restrained, to accomplish this illegal course of conduct by continuing to solicit and recruit Borland employees.
13. >Borland is informed and believes, and on that basis alleges, that Microsoft=s solicitation and recruitment of Borland employees is intentional and being done for wrongful purposes: to inhibit Borland's competitive position in this technology area and to acquire Borland confidential information -- all with the express intent and purpose of unfairly benefiting Microsoft.
14. Microsoft's threatened use of Borland's trade secrets and confidential information in the development of Microsoft's software development tools, as well as the identity of key employees to recruit, improperly obtained from former Borland employees, inures to the benefit of Microsoft and to the irreparable harm of Borland.
15. As a result, Microsoft is guilty of unfair business practices and is in violation of California Business and Professions Code Section 17200 et seq.
16. Borland incorporates by reference each and all of the allegations contained in paragraphs 1-41 above.
17. Borland and Microsoft directly compete in software development tools. The foregoing acts of Microsoft were done without justification and for the wrongful purpose of injuring Borland and inhibiting Borland's competitive position in this technology area -- all for the purpose of unfairly benefiting Microsoft. As a result, Microsoft has engaged, and continues to engage, in unfair competition in violation of California Law.
WHEREFORE, plaintiff Borland respectfully prays that judgment be entered in favor and against Microsoft, and that Borland be granted the following relief:
Dated: May 7, 1997 WILSON SONSINI GOODRICH & ROSATI
James A. DiBoise
Attorneys for Plaintiff
BORLAND INTERNATIONAL, INC.
I, Hobart Birmingham, declare:
I am a Vice-President and the General Counsel of Borland International, Inc., plaintiff herein, and am authorized to make this verification on its behalf. I have read the foregoing Complaint For Violation of Business and Professions Code Section 17200, et. seq. and hereby state that I am informed and believe, on the basis of my own and others' investigation, that the facts stated herein, other than those facts alleged on information and belief, are true and correct.
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this Verification is executed on the 7th day of May, 1997 at Scotts Valley, California.
Copyright © 1994 - 2001 Borland Software Corporation. All rights reserved
Last Modified Thursday, 29-Jun-00 13:25:06 PST
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