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Name and title: Bradford L. Smith, senior vice president, general counsel and corporate secretary, head of the department of law and corporate affairs, chief compliance officer Age: 45 The company: Founded in 1975 and headquartered in Redmond, Wash., Microsoft Corp. is the world’s largest software company. It offers the gamut of software, related services and Internet technologies for personal and business computing. With an annual budget of $7 billion for research and development, Microsoft is known for the design and creation of a wide range of computer technology. The publicly traded company has 57,000 employees and, in the fiscal year ended in June, reported $36.8 billion in revenues. United States v. Microsoft: In 1998, the Department of Justice (DOJ) and 20 states sued Microsoft, alleging violations of the Sherman Antitrust Act. The action focused on the Windows product and charged that Microsoft had unlawfully used anticompetitive means to maintain a monopoly. Issues related to the integration into Windows of its Internet Explorer Web browser were central to the case. Microsoft denied the allegations, but in 2001, after a 78-day trial and rulings against it at the district court and appellate level, the company, with Smith’s predecessor William Neukom at the helm, negotiated a settlement with the DOJ that was signed onto by nine of the plaintiff states. A 2002 decision by the U.S. District Court for the District of Columbia “largely supported the settlement that had been negotiated in ’01,” said Smith, who by that time had reached closure with all but West Virginia (which ultimately settled) and Massachusetts, which appealed. On June 30, 2004, the U.S. Circuit Court for the District of Columbia ruled in Microsoft’s favor, upholding the remedies spelled out in the district court decision. Smith is now waiting to see if Massachusetts takes its case to the Supreme Court or agrees to settle. The settlement “prescribes a course of conduct Microsoft must follow . . . and the court’s judgment governs all of our contracts with companies that manufacture PCs and that ship Windows,” said Smith. Microsoft is not barred from “bundling” new functions into Windows. Instead it has set uniform royalty rates for PC manufacturers and created a new standardized Windows desktop license. It also has made available certain codes to promote interoperability and created compliance training programs for its employees. Smith said that the company is focusing more energy on complying with the court’s judgment, adhering to the settlement and obeying antitrust laws in general, while adding, “It is incumbent upon us to do a good job of participating in a broader public discussion about how legal rules can best change so as both to protect the needs of consumers and promote ongoing innovation.” Related suits: Other antitrust suits popped up on the heels of the federal action. AOL Time Warner accused Microsoft of monopolistic conduct, and Smith “opened earnest settlement negotiations” to forge an agreement to share technical information and cooperate in the digital media realm. A suit by Sun Microsystems was also settled, and one by RealNetworks Inc. remains outstanding. In private class actions, 18 states and the District of Columbia alleged that Microsoft had overcharged consumers. All but four of these state actions have now been settled, with Microsoft providing vouchers to class members and school districts toward the purchase of computers, software or peripheral computer devices. The GC and the E.C.: In March 2004, Microsoft absorbed a $603 million fine, the European Commission’s largest ever, because of matters similar to those pursued by the DOJ. Smith asserted that the E.C. engages in “unfair compulsory licensing” of intellectual property, noting that “the E.C. takes a regulatory approach that conflicts with the U.S. when it comes to the integration of new technology into computer operating systems.” He is now focused on the litigation process as the case moves in the fall to the European Court of First Instance in Luxembourg. Injunctive remedies have not yet taken effect, and Smith hopes to have the $603 million returned in a successful appeal. Legal team: Smith is at the top of an 800-person legal team, 290 of whom are attorneys. He reports directly to Steve Ballmer, Microsoft’s chief executive officer. His department is responsible for all of the corporation’s legal work, as well as its government, industry and community affairs activities. An estimated 60% of the legal work is performed in-house, with four firms providing the bulk of external counsel: Preston Gates & Ellis (Seattle), Sullivan & Cromwell (New York), Covington & Burling (Washington) and Heller Ehrman White & McAuliffe. Smith supervises the hiring of outside lawyers and, for important, high-profile cases, is apt to make the decision himself. He identifies five core competencies he seeks for Microsoft attorneys: legal expertise, business and technical prowess, management skills, government affairs expertise and public relations ability. “All of the innovations that we create have commercial value principally because they are protected by the intellectual property laws,” said Smith, and 100 members of his department concentrate in IP. Microsoft increased its patent filings from 2,100 last year to more than 3,000 this year. Smith’s team is also involved in combating unlawful spam, viruses and worms. Route to the top: Milwaukee-born Smith graduated summa cum laude from Princeton University in 1981, also receiving the highest award given to a graduating senior, and received his law degree in 1985 from Columbia Law School. He then attended the Graduate Institute of International Studies in Geneva, where he studied international law and economics. He has been with Microsoft since 1993, after a stint with Washington’s Covington & Burling representing computer industry companies. Before becoming general counsel in July 2002, he managed the company’s European law and corporate affairs group in Paris, then served as deputy general counsel and head of legal support for Microsoft’s worldwide sales. He lectures at the Hague Academy of International Law. Personal: Smith and his wife Kathy Surace-Smith (also an attorney) have two children. His hobbies include boating, skiing and “whatever the kids are doing.” Last book and movie: Alexander Hamilton, by Ron Chernow, and The Manchurian Candidate.

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