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Stories about one leader succeeding another usually begin with a metaphor about passing the baton. When Brad Smith took over as general counsel of Microsoft Corp. last month, his predecessor, William Neukom, might have passed him an M16. After almost 17 years in the trenches as Microsoft’s first general counsel — the last four a period of fierce litigation — Neukom sounds like a battle-scarred general back from the wars. Smith, on the other hand, sounds like the kind of general who wants to lock the gun cabinets and hide the keys. Though he didn’t formally take over until last month, Smith has been running Microsoft’s law department since January and has said repeatedly that he wants to leave past battles behind. He did so last March, when he testified before U.S. District Judge Colleen Kollar-Kotelly in Washington, D.C., in a Tunney Act hearing. It was part of his effort to finalize the proposed settlement of the antitrust suit brought against the company by the Justice Department and 18 states (half rejected the settlement). “We very much hope, as we look to the next five years, to create a future that is different from the past,” Smith told the judge. “We hope to have the opportunity to build relationships with the Department of Justice and with the state attorneys general that are constructive rather than confrontational.” He hasn’t suggested that the task will be easy. Smith knows his company has many critics and expects his statements will be greeted with skepticism. “People are going to listen to what we say, but judge us by what we do,” he acknowledged in a recent interview. Asked what changes could be expected under his leadership, Smith downplayed any perception that he’s doing things differently. “I would say that we as a company are in different circumstances than we were one year ago and five years ago,” he said. “It would not surprise me in the least if Bill Neukom, if he were sitting here, would be doing exactly the same things.” When Neukom first began sitting there, in 1985, he brought one other lawyer and one paralegal. Today, Smith heads a department of 209 lawyers and a support staff of more than 400. The contrast between the two men is nearly as striking. “They couldn’t be more different,” said Marcia Sterling, GC at Autodesk Inc., a California-based software company. Sterling has known both men since 1995, principally through their work for the Business Software Alliance (BSA), a trade association. Sterling chairs BSA’s board this year. Smith, 43, did so last year, and Neukom, 60, was chairman in 1996. “If you walked into a room with Bill Neukom,” Sterling said, “you’d know he was some mucky-muck.” From the silver mane to the bow ties, “he’s a classic, old-school patrician type of guy.” He’s also “reserved, scholarly and moves in sophisticated circles.” Smith is a “remarkably friendly, unassuming guy” who is a good listener and “utterly uninterested in being thought of as important.” Bill Gates, in an e-mail, paid tribute to Neukom’s “great legal mind,” his “professionalism” and his “voice of reason and calm.” He praised Smith for his “strong track record of working collaboratively” with the public and private sectors. “We recognize that we have new responsibilities, that we need to build stronger partnerships within the industry, and that we must constantly demonstrate corporate leadership,” Gates added. MARCHING DOWN MEMORY LANE In a lengthy interview, Neukom reviewed his work for Microsoft, which began in 1979, when he was a partner at the law firm of William Gates, Bill’s father. When the younger Gates moved his fledgling software company from Albuquerque, N.M., to the Seattle area, Gates Sr. asked Neukom to handle its legal work. Recalling his most important cases, Neukom almost seemed to be relitigating them — reviewing key arguments, pointing out judges’ errors. The first big one was in 1982, when Microsoft sued a company that sold software allowing Apple II users to run DOS applications. Neukom handled the case as outside counsel. If the other company had won, Advanced Logic Systems might be a household name. Instead, Microsoft established its code had been infringed, which was “important to this company and to the industry,” Neukom said. On the other end of the spectrum, Apple sued Microsoft in 1988, and in 1994 an appellate court affirmed the ruling that Apple’s overlapping, rectangular information holders — i.e., windows — were too “idea-like” for Apple to copyright. “If Apple had received what it was seeking,” Neukom said, “that could have been the end of this company.” The ongoing antitrust case still seemed painfully fresh, and discussion of the liability trial brought one of his few acknowledgements of disappointment. He regretted that Microsoft and Gates were “demonized” in the press. He said he felt vindicated when the appeals court rebuked Judge Thomas Penfield Jackson in Washington, D.C., and overturned key rulings, including his proposed breakup of the company. Gates and Microsoft remained popular throughout, he added. (And Gallup polls have confirmed this.) Neukom paid grudging respect to the Justice Department’s “clever job in the courthouse and on the courthouse steps.” Asked about Gates’ videotaped deposition, which was universally viewed as a disaster for the defense, Neukom said: “He was prepared to be a witness in a discovery deposition.” The tape wasn’t supposed to be used in the trial, he maintained. “I can’t say that everything that happened was what we would have wanted even in a discovery deposition, but the point is, the rules were changed after the game.” David Boies, who led the Justice Department’s liability litigation, disputed that assessment. He said of the tape: “I was not taking it for my memory book. So I’m always a little uncertain why people thought it wasn’t going to be used.” Boies went on to describe Neukom as “a very fine lawyer. … He’s very smart, very polished, very well organized.” SEEING A CHANGE Sterling said she’s seen a change in the man. “I think his years of litigation have been hard on him, in spite of all the success. I think he’s been made more cautious and cynical about the ways of politics and public opinion than he was in the years I first knew him.” In August, Neukom will rejoin his old firm, Seattle’s Preston Gates & Ellis, which, he said, will be his “base of operations.” He’s thinking about teaching and writing, but first needs time to “decompress.” He will also devote time to a family foundation he established with his four grown children. (Press accounts have estimated his net worth as high as $600 million, which Neukom called “wildly inflated.”) Early on at Princeton, Smith knew he was going to law school. He was pretty sure his interests would combine politics and diplomacy and lead him to a large law firm. And they did. After he graduated from Columbia Law School in 1985, he took a job at Washington, D.C.’s Covington & Burling. But he didn’t anticipate his future in technology. His first work in the field coincidentally brought him to the attention of Microsoft. It was 1989 and Covington was about to send him to London. A partner told him about the European Community’s software directive, intended to “harmonize” copyright rules throughout the region. Smith stopped by the office of Douglas Phillips, a former Covington partner who had just become president of a new trade association called BSA. Phillips made an offer: He’d give him a copy of the directive if Smith wrote a memo about it. Phillips needed it done in four days. Smith knew nothing about copyright law. And he was going to Palm Beach, Fla., for the weekend with his wife, Kathy (now a GC herself, at Metawave). But he grabbed a few treatises and immersed himself. He came up for air only on the day he’d promised to go to Disney World, where he wandered through Epcot thinking about copyrights. Phillips still remembers the memo: “It was clear, it was comprehensive, it was written without a lot of jargon.” What it told him about Smith was: “He doesn’t have a lot of ego. This is a guy who gets to the heart of the matter.” When Phillips distributed the memo to his board, one of whom was a Microsoft lawyer, it was Smith’s first contact with the department he leads, 13 years later. Smith went on to become BSA’s European counsel while still working at Covington. He lobbied and reported developments, and later led a major anti-piracy effort, bringing more than 100 lawsuits against large companies throughout Europe. In 1993, Microsoft hired him away from Covington, moving him to Paris to head its European team. In 1996, Smith was brought to the company’s Redmond, Wash., headquarters to head legal support of Worldwide Sales, a 200-employee division responsible for all international units and global anti-piracy efforts. A global approach seems deeply ingrained in his thinking. “I think we have been too insular,” he said. Smith seems intent on changing that, and initial reviews have been positive. His efforts to reach out included participating in a panel discussion in April on open-source development. Stanford Law Professor Lawrence Lessig, a fellow panelist, came away impressed. “I think he’s an extraordinarily bright lawyer, and a straight shooter.” He called Smith’s rise a “good move” that will “strengthen Microsoft’s credibility significantly.” Summing up his aspirations, Smith said of himself and Neukom: “I hope that they will say of both of us that each was the right person for the right time.”

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