May 20, 2002 10:30 AM PDT

Four years on, Microsoft case far from over

WASHINGTON--Saturday marked the four-year anniversary of Microsoft's antitrust case, which, legal experts say, could still go on for quite some time to come.

And the longer the case drags on, they say, the more likely it is that Microsoft would escape largely unscathed from its legal tangle with federal and state trustbusters. Many of the company's court-affirmed violations occurred at least five years ago. With appeals, the process now under way could stretch on for two more years or longer, which could make any remedy essentially meaningless.

"At some point, Microsoft could argue that the fast-changing technology sector has moved beyond the scope of the original case brought by the Justice Department," said Andy Gavil, an antitrust professor with Howard University's School of Law.

On the other hand, the nine states that continued with litigation against Microsoft, despite a November settlement by their former comrades in arms, have been trying to use the flip side of that argument to wring a wide array of new concessions from the software giant. Their claim is that Microsoft committed further antitrust violations with newer technologies and later versions of its software, despite earlier rulings that found it at fault.

On Friday, after 32 days of testimony--nearly half that of the original trial--and two months in the courtroom, lawyers left U.S. District Judge Colleen Kollar-Kotelly to ponder what sanctions she would eventually impose against Microsoft as a result of that continuing litigation. Attorneys for Microsoft and for the nine states and the District of Columbia, which rejected the settlement by the Justice Department and nine other states, are scheduled to present final arguments in the current proceeding on June 19. Kollar-Kotelly is expected to issue a ruling in late summer or early autumn.

The Justice Department and 20 states had filed the landmark lawsuit on May 18, 1998, alleging that Microsoft used its monopoly in Intel-based operating systems to crush upstart Netscape Communications, now owned by AOL Time Warner.

During the four years since, two states dropped out of the case, a federal judge ordered a breakup of Microsoft, an appeals court threw out that order, a new judge took responsibility for the case, and the majority of original plaintiffs settled with the software giant. Yet even with the findings of two courts--in April 2000 and June 2001--that the software giant violated the Sherman Antitrust Act, no remedy has been put into effect to rein in Microsoft's monopoly power.

At some point in the future, Microsoft could convince the Court of Appeals or the Supreme Court to send the case back for retrial.

"In the war of attrition, so far Microsoft is winning," said Rich Gray, a Menlo Park, Calif.-based attorney closely following the trial.

Kollar-Kotelly's decision, say legal experts, won't be an easy one. The judge must sift through a virtual mountain of evidence before deciding what remedy is appropriate for Microsoft's antitrust violations. The settlement, which she has not yet approved, further complicates the process. No matter what she decides, one thing is certain: An appeal from either side, or both, means the case brought four years ago might still be years from being over.

Kollar-Kotelly is expected to issue what are known as findings of fact and conclusions of law as the main part of her ruling. U.S. District Judge Thomas Penfield Jackson also issued such documents, but he chose to separate them by about six months. Kollar-Kotelly is expected to take the more common approach of issuing the documents at the same time, possibly with her court-imposed remedy, should she issue one. She also could release the remedy decree at a later time.

Issuance of the remedy would likely trigger one or more appeals, as it did when Jackson issued his breakup order in June 2000. Any appeal would likely be heard by the U.S. District Court of Appeals for the District of Columbia Circuit and possibly the Supreme Court.

The more time the process takes, the greater the likelihood that Microsoft could find new ways to entrench its Windows monopoly, legal experts warn, potentially nullifying the legal process--to the company's benefit.

"Without a doubt," Gray said, "the longer this thing goes on, the better for Microsoft's position in the marketplace."

A case of two remedies
Unlike criminal law, in which those convicted of crimes are punished for their wrongdoings, antitrust law focuses more on correcting the damage done by the wrongdoing. Trustbusters have not asked for punitive action, such as fines, against Microsoft. Kollar-Kotelly instead will be looking to put in place mechanisms that will prevent further anti-competitive acts by Microsoft. In theory, her remedy would help restore competition and foster more consumer choice.

But unlike her predecessor, Kollar-Kotelly has the complication of deciding whether she should weigh two possible remedy options against each other or treat them separately.

On track one is the Justice Department settlement, which for five years would place some restrictions on Microsoft's business practices and compel the company to disclose more Windows technical information to software developers. Microsoft also would agree to let PC makers and consumers hide access to so-called middleware technologies, such as Web browsing and instant messaging, but not remove any software code. Later this month, Microsoft is expected to release a beta--or test--version of a Windows XP update that would address these changes.

On track two, the judge must contend with the stiffer remedies--many affecting software code--requested by the litigating states. Among other things, the states want Microsoft to sell a second, modular version of Windows from which PC makers could remove middleware; license its Office application through auction for use on other operating systems; give away for free the source code, or blueprint, to Internet Explorer; and carry support for Sun Microsystems' Java language in Windows for 10 years. A crown jewel provision would force Microsoft to give away for free the source code to any software, including Windows, found in violation of the 10-year decree.

"Technically they should be two separate processes, but I think you will find the two are going to go hand in hand," Gavil said. One reason: Kollar-Kotelly has yet to approve the settlement deal cut in November.

Gavil predicted that the judge would eventually approve the settlement but also impose additional remedies. "Understanding that her order will be stayed, subject to appeal--that's why she will approve something on track one," he said.

In terms of the settlement, Kollar-Kotelly is very limited in what she can do. On the other hand, she has broad discretion in crafting a remedy.

"Under the statute (for the settlement), she only has two options: She can approve or reject it," Gavil said. "But in practicality she has the middle ground of saying, 'I will only approve if you agree to certain changes.' She hasn't shown any inclination to be that hands on, but that doesn't mean she wouldn't at some point sit down with the federal government and Microsoft and ask for changes. There would then be a lot of pressure on the Justice Department and Microsoft to make those changes."

Such a request would not be without precedent, say legal experts. The judge overseeing the AT&T breakup, for example, requested eight changes before approving the settlement.

"If she doesn't ask for any changes, then she's not likely to do very much with track two," Gavil said. "But it's very unlikely for her to go through all of this process and say, 'I'm not going to order any additional remedies.' I don't think there's a basis for saying the states failed to meet their burden of proof in whole--maybe in particular parts or sections, they did."

Three judges a charm?
A truism in the tech industry is that Microsoft is notorious for getting software "right" on the third try. Does the same rule apply to judges? An appeals court removed Microsoft's first jurist, U.S. District Judge Stanley Sporkin, for refusing to sign a 1994 settlement deal between the Justice Department and Microsoft. The appellate court removed Jackson for talking to the media behind the scenes during the main part of the antitrust trial. Kollar-Kotelly, who has little experience with antitrust issues and is burdened with taking over the case late in the process, might appear to be the right judge for Microsoft.

"She certainly made a lot of rulings that appeared to favor Microsoft," Gray said. "But many of those were procedural issues. Most of the big stuff went to the states."

If anything, Kollar-Kotelly's ongoing chastising of the states "could indicate she was frustrated with them for not putting on a better case," Gray said. "They also made a number of procedural errors. The last thing any judge wants is to be reversed on appeal because of a point of procedure. She knows no matter what she does, Microsoft is going to appeal this thing."

Kollar-Kotelly, unlike Jackson, made few comments during testimony and asked few questions. In fact, her quiet demeanor made it "pretty difficult" to read her impressions of testimony and evidence, Gavil said. "She's close to the vest."

But in court last week, as lawyers argued several motions before her, Kollar-Kotelly not only asked lots of questions, but also demonstrated that she understands some of the case's technological nuances.

"I was astounded by some of technical questions she asked," said Bob Lande, an antitrust professor with University of Baltimore Law School. "I think she surprised everyone by her technical grasp of the case."

That understanding could be essential to sorting out several complex issues vital to crafting a remedy. No matter what she does, Kollar-Kotelly made clear to Microsoft on Friday that she expects the company to hold to its promise to abide by whatever the court orders.

During three days in court last month, Microsoft Chairman Bill Gates testified that the company is "committed to complying fully with court orders, including any remedy that might be ordered in this case. We can do that only if the remedy is clear as written and its terms feasible."

"I would expect that that's going to be the case," Kollar-Kotelly told Microsoft's attorneys on Friday, "because these are the kinds of things that come back to haunt you if it turns out you don't, because I will have a memory for all of these statements."

 

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