"What does the Microsoft monopoly mean? It means you can't even send a Christmas card to your mother without Bill Gates's permission."
This may sound like a joke. But the words came, apparently seriously, from one of America's leading software antitrust lawyers. He was referring to the forthcoming court case of Blue Mountain Arts v Microsoft.
Blue Mountain Arts is the trading name of a publishing company in Boulder, Colorado, which started an online greeting card service in 1996. Blue Mountain's "cards", however, are not physical paper cards, but more of an Internet gimmick.
To "send" one, the sender goes to the web site www.bluemountain.com, chooses a design, and then enters the email address of the recipient. Blue Mountain Arts then emails the friend (or indeed mother), letting them know a card is waiting at its website. The recipient then clicks on a link in the email, which starts up the Web browser and shows the card - complete with sound and graphics.
The service is free, and hardly seems like the stuff of which Internet billions are made. But Blue Mountain shows banner ads on its site to both senders and recipients, and also makes sales commissions from e-commerce merchants by providing links to their sites from its own. According to Media Metrix (www.mediametrix.com), 9.1 million people visited the site in November - a figure equal to 16 per cent of all Internet users - making Blue Mountain the 13th busiest site on the Internet.
The company probably shows around a billion pages a month, and probably generates between $6 million and $18 million a year in ad and transaction revenues. I believe the company is in the middle of a "bake-off", choosing an investment bank to take its greetings-card service public on Nasdaq.
Enter Bill Gates - wielding a big stick. Microsoft launched its own competing free greetings-card service in November. Shortly afterwards, according to a complaint filed in a California state court, Blue Mountain began to get strange complaints from its users - saying Blue Mountain cards they had sent were being automatically relegated to a "junk mail" folder in the latest version of Microsoft's Outlook Express mail program.
The mail program, bundled into the beta 2 version of Microsoft's Internet Explorer 5.0 browser, has a new feature designed to protect users from unwanted email, or spam. Outlook Express can send mail it believes to be spam to a special "junk mail" folder where the user can view it or have it automatically deleted every few days.
Blue Mountain's cards were therefore wrongly identified as spam - and the company contacted Microsoft to get the problem fixed. What happened next is disputed. According to Blue Mountain, Microsoft initially said the cause was a "bug" in the new version of Explorer, but then dragged its feet when asked to fix it. Microsoft, however, claims it sent a technical fix to Blue Mountain, but received no response to its messages other than a summons to court.
After some legal manoeuvring in early December, Blue Mountain persuaded a California judge to grant a temporary restraining order against Microsoft. This required the software company to give Blue Mountain, under terms of confidentiality, the technical information needed to ensure its cards escaped the spam filter, and to warn users that it could unintentionally relegate real messages to the junk folder. A full-scale case is due to be heard later this month.
This may seem like a small spat. If only 600,000 copies of the offending software have been downloaded, then well under 1 per cent of Blue Mountain's customers will have been affected. But Microsoft has a long history of tweaking its products in a way that has caused trouble to competitors.
Blue Mountain's management realises two things: first, it will not be long before Explorer 5.0, complete with spam filter, becomes the world's most popular browser; and second, it makes more sense to fight the battle early than to suffer a Netscape-like demise by acquisition.
The key issue will be whether Microsoft's spam filtering was deliberately arranged to damage Blue Mountain. Microsoft's strongest defence against this is declarations from a Microsoft technical person and an independent laboratory expert that the spam filter relegated Microsoft's own greetings cards to the junk mail folder. However, tests supporting these claims were carried out after the suit was filed. Blue Mountain claims to have evidence that before the suit was filed, Microsoft's own cards were getting through.
A scepticism filter should be applied to the case, however. The lawyer hired by Blue Mountain to fight its case - Gary Reback of the Palo Alto firm Wilson, Sonsini - is the best known Microsoft-basher in the industry. Winning such a case could add tens of millions of dollars to Blue Mountain's valuation.