September 21, 2000 3:41 PM PDT

Appeals court agrees to hear Microsoft case

WASHINGTON--The U.S. Court of Appeals late today said it will convene a full panel of judges to hear Microsoft's challenge of a breakup order, an unusual move that could favor the software giant in its historic antitrust battle with the government.

The appeals court's acceptance of the case was not unexpected and followed Microsoft's request for such a hearing. But in an unusual move, the court immediately ruled that a full panel of judges will hear the appeal.

Meanwhile, the government this evening attempted to take the case out of the appellate court?s jurisdiction by filing a petition asking the U.S. Supreme Court hear the case directly.

But the appeal's court's action today suddenly puts the government and presiding jurist U.S. District Judge Thomas Penfield Jackson in a defensive position. Several experts said that by giving Microsoft an expedited hearing before a full panel of judges, the Supreme Court would be less likely to intercede in the case.

"Microsoft is looking forward to the next phase of this case, and we are optimistic that the appellate courts will reverse the recent ruling," Microsoft CEO Steve Ballmer said in a statement.

"Obviously, we will comply with any final order in this case, but we believe this judgment is both wrong and unfair. We believe the appellate courts will recognize that Microsoft's product innovation is the heart and soul of competition in the high-tech industry."

The Justice Department issued a statement explaining why it would be asking Jackson to send the case to the Supreme Court.

"Immediate Supreme Court review of this case is in the public interest because of its importance to the American economy,? the statement said. ?We are filing today a request that Judge Jackson certify the case for immediate review by the Supreme Court under the Expediting Act. If Judge Jackson grants our request, we will ask the Supreme Court to hear Microsoft?s appeal promptly.?

But by agreeing to give Microsoft a full, expedited hearing, the appeals court may have removed any reason for the Supreme Court to intervene.

"The appeals court agreeing to act expeditiously and before the full panel, that surely would make it more unlikely the Supreme Court takes the case directly," said University of Baltimore Law School professor Bob Lande.

Rich Gray, an intellectual property attorney with Outside General Counsel Silicon Valley in Menlo Park, Calif., agreed that "it's certainly more likely the Supreme Court will pass on the case."

The Supreme Court, which is under no compulsion to accept the case, is not expected to issue a decision until early October.

Jackson last week ordered that Microsoft be broken into separate operating system and software application companies, which he stayed pending an expected appeal. He previously determined that Microsoft violated two sections of the 1890 Sherman Act by illegally maintaining its operating system monopoly and trying to unlawfully extend that to Web browsers.

In today's order, the appeals court agreed to take the case "by the court sitting en banc," or lacking only those judges who opt out. According to the order, three judges will not hear the case for various reasons, leaving seven to decide Microsoft's fate.

George Washington University School of Law professor Bill Kovacic said it is all but "unprecedented" for the entire appeals court to hear a case. Typically, only three judges would hear the appeal.

Today's announcement by the Special coverage: Breakupappeals court could put the case exactly where Jackson and the government apparently did not want it to go. On two previous occasions, in 1995 and 1998, the appeals court overturned rulings against Microsoft.

"This shows the D.C. Circuit (Court) is prepared to devote the resources necessary to considering the appeal and hearing the case expeditiously," said Microsoft spokesman Jim Cullinan. "That's what all parties are interested in."

Of the panel of 10 active judges, seven will hear the appeal: Douglas Ginsburg, Stephen Williams, David Sentelle and Raymond Randolph, who are appointees of Ronald Reagan or George Bush; and Harry Edwards, David Tatel and Judith Rogers, who were appointed by Jimmy Carter or Bill Clinton.

"Who knows how they are going to respond to this? But that is a pro-Microsoft lineup," Kovacic said. "The lineup features four conservatives. Those are good numbers for Microsoft."

In its appeal, Microsoft argues that "an array of serious substantive and procedural errors" resulted in a breakup order that "extends far beyond the case that was presented, without affording Microsoft an evidentiary hearing." According to the company, Jackson:

 failed to consider the benefits to consumers and developers of offering Internet Explorer free with Windows;

 did not address the design benefits of integrating Internet support into Windows, benefits that cannot be achieved by combining an operating system with a standalone browser such as Netscape Navigator;

 and failed to consider that Navigator was preinstalled on 22 percent of new personal computers, indicating that the rival browser was not locked out of that market.

"The factual errors are the tip of the iceberg," Microsoft lead attorney Bill Neukom said in a statement. "The district court's judgment should also be stayed, and its Findings of Fact and Conclusions of Law should be reversed because it misapplied longstanding legal precedent and presided over a pretrial process and a trial that did not afford Microsoft a fair opportunity to defend itself."

The government, meanwhile, faulted Microsoft's appeal and separate motions the company filed asking the court to stay the provisions of the breakup order.

?Microsoft?s filing in the Court of Appeals, which was made when Judge Jackson has not even ruled on its stay motion, is an ill-conceived attempt to end-run the Expediting Act,? the Justice Department statement said.

But Kovacic faulted the government for trying to pull its own end-run around the appeals court by asking Jackson to withhold ruling on stay requests until after Microsoft filed its larger appeal.

?The government blundered,? he said. ?They did not look at the interaction of these different procedural mechanisms, and they made this astonishing request that Jackson join them in forestalling Microsoft?s exercise of a right given in the existing rules.?

 

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