There is an excellent book on the inside workings of Microsoft titled Breaking Windows, How Bill Gates fumbled the future of Microsoft written by David Banks (reporter for the Wall Street Journal). The book is interesting because Banks draws on Microsoft internal memos and emails (that were made public during the recent antitrust trial) and his own experience reporting on the company for the WSJ to back up his argument that Bill Gates is partially fossilized and quite possibly wrong in his insistence that nothing Microsoft does or supports (including the Internet) should threaten Windows.

On it, there was an interesting discussion regarding cloning, particularly because it affects how Microsoft behaves, regardless of the market power they obtain.

"[Gates] made no apologies for Microsoft's efforts to clone Netscape's features. Cloning was a common industry tactic, he explained. Microsoft had cloned the Lotus 1-2-3 spreadsheet to create Excel. Word had mimicked every feature of Wordperfect. And Microsoft itself had faced clones of MS-DOS.
Gates treated his audience to a remarkably frank lesson in software economics. "There are always businesses that start up to build clones of that software," he said. "If they catch up, then the value of the software becomes zero." Now Microsoft would clone Netscape's browser, and when it did, Netscape's advantage would evaporate."

For recent examples of this behavior, we have recent announcements on future versions of Windows XP (attacking several competitors, including Apple) and other announcements that included details of Windows Media 9 (with Apple and Realnetworks on their sights).