Microsoft lawsuit leads to e-mail destruction questions

A 2000 memo to employees told them to delete e-mail after 30 days

Microsoft Corp. is digging deeper into its stores of electronic correspondence after a U.S. District Court judge instructed the company to provide more information about a four-year-old e-mail from a company vice president that told employees to delete e-mail after 30 days.

Microsoft will comply with the new instructions, which were issued Thursday in a patent infringement and antitrust case brought by Burst.com Inc. Microsoft acknowledged today that the 30-day limit mentioned in the e-mail message is shorter than its official document-retention policy, but the company denied that the order was related to legal cases it faced at the time, said Jim Desler, a Microsoft spokesman.

The company is still reviewing a transcript of the instructions regarding the e-mail message. Microsoft will likely provide the court with more e-mail messages that put in context the reminder that came from James Allchin, group vice president of Microsoft's Platforms Group, to "destroy all business-related" e-mail, Desler said.

Judge J. Frederick Motz of the U.S. District Court for the District of Maryland asked Microsoft to review computer files from the company's legal department and to interview Microsoft lawyers regarding the 30-day policy, according to Spencer Hosie, an attorney at San Francisco-based law firm Hosie Frost Large & McArthur, which represents Burst.com.

Burst.com filed its suit against Microsoft in June 2002, alleging that Microsoft stole patented technology and trade secrets concerning Internet-based video-on-demand for its Windows Media Player product. Microsoft learned all about Burst.com's technology in two years of meetings and discussions. Microsoft signed a nondisclosure agreement with Burst prior to those meetings, Burst.com said.

The Allchin e-mail surfaced after Burst.com filed repeated motions for Microsoft to turn over e-mail messages and backup tapes containing e-mail. Burst.com is looking for documents from a number of Microsoft employees who worked in Microsoft's Digital Media Division and worked with Burst.com prior to the two companies ending talks. A number of those employees have since left Microsoft. Their employee files were destroyed by the company after they left, Hosie said.

The Allchin e-mail surfaced after Burst.com filed repeated motions for Microsoft to turn over e-mail messages and backup tapes containing e-mail.

"[Burst] is trying to make the allegation that Microsoft was doing something in terms of document retention -- this came up in a broader discussion of the existence of e-mails or notes that we have looked thoroughly for, but ... don't know if they exist," Desler said.

So far, Microsoft has turned over more than 500,000 pages from 60 employee files in the case, Desler said.

Allchin's comments in the e-mail were part of an ongoing discussion or "thread" concerning document retention that Allchin didn't start. That said, the 30-day limit on keeping old e-mail is a "stricter version" of the company's policy, Desler said.

Desler couldn't say how long Microsoft employees are allowed to hold on to e-mail messages, but he added that it was longer than 30 days. Still, he said, the company has information that will show that Allchin's comments were "consistent with [Microsoft's] policy to meet all its legal obligations and provide for efficient management of its corporate e-mail."

Burst.com's allegations regarding Microsoft's e-mail retention policies are without merit and are designed to distract attention from the patent infringement issues, which show that Microsoft used its "own work and innovation" with the Windows Media Player, Desler said.

Hosie denied that, and contended that Microsoft's 30-day purging policy was directly related to the company's legal woes.

Among other things, Hosie questioned why a senior Microsoft executive like Allchin would devote any time to an administrative issue such as document retention. He also made connections between the timing of the e-mail and the U.S. government's antitrust case against Microsoft, in which Allchin's e-mail messages were used as proof that the company engaged in anticompetitive behavior.

Microsoft has also been unable to say who created the 30-day purging policy, ultimately crediting an unnamed Microsoft IT department employee, Hosie said.

Despite the fact that the Allchin e-mail was sent long before Burst.com filed suit against Microsoft, it could still affect the outcome of the case if Burst.com can prove that Microsoft made a practice of destroying documents in the face of litigation, Hosie said.

"If I can show that these files were deleted improperly, it will change the way the trial proceeds," he said.

The issue of document retention is a particularly volatile one, especially in the wake of a jury's conviction of Frank Quattrone in May.

Quattrone was head of the Technology Group at Credit Suisse First Boston LLC (CSFB) and was found guilty of obstructing a grand jury investigation into the issuance of shares in an initial public offering after he sent an e-mail reminding colleagues about the New York-based company's document-retention policy shortly after learning of a federal probe into the IPO allocation issue.

Desler dismissed any similarities between Burst.com's allegations about Microsoft and the case against Quattrone and CSFB.

"One thing is clear: Microsoft has been completely forthcoming in providing any and all evidence requested of it," he said.

Copyright © 2004 IDG Communications, Inc.

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