February 27, 2001 7:15 PM PST

Microsoft could win, legal experts say

WASHINGTON--Microsoft, for the first time, may be in a position to completely overturn the government's antitrust victory, legal experts say.

That conclusion comes after two days of oral arguments, during which questions from seven appeals judges left open the possibility that Microsoft could win the whole case. Until the hearing, many legal experts had handicapped in favor of the government but concluded Microsoft would punch some holes in the government's victory. Now even that is uncertain.

"I think there is a real possibly Microsoft could win the whole case," said Bill Kovacic, an antitrust professor with George Washington University Law School. "After the last two days one can imagine a chain of events where the whole case collapses and nothing is left standing."

Bob Lande, an antitrust professor with the University of Baltimore School of Law, shared similar sentiments.

"For a long time I had figured 70-30 for the government," he said. "But now I think there's a 50 percent chance Microsoft walks away free and 50 percent there will be one ruling on conduct."

Winning just one claim would pale in comparison to the government's victory at trial and could lead to little more than a slap on the wrist for Microsoft, Lande said.

"It is not beyond the realm of possibility that this court might reverse," said Glenn Manishin, an attorney with Batton Boggs in McLean, Va. "With this appeals court all bets are off."

The U.S. Court of Appeals for the District of Columbia Circuit is hearing the appeal, which could determine whether Microsoft is broken into separate operating system and software application companies. U.S. District Judge Thomas Penfield Jackson issued the breakup order last year after earlier ruling Microsoft violated two sections of the 1890 Sherman Act.

Going into the oral arguments, the government faced serious challenges to several portions of its case, but by no means enough to overturn everything. Microsoft, for example, faced a potentially receptive audience on the claim it had illegally tied--or bolted--its Internet Explorer Web browser to Windows 95 and 98. The same court ruled in favor of Microsoft on this issue in an earlier proceeding, feeding speculation the software company could win that point.

The government's case is multifaceted, comprising five or six major claims. Among the other claims: Microsoft illegally maintained a monopoly in Intel-based operating systems; the software giant sought to extend its monopoly to Web browsers; and the company used exclusive contracts to prevent Netscape from effectively distributing Navigator.

No competitive threat
But the whole case essentially hangs on monopoly maintenance, which could collapse if the Court of Appeals decides Netscape posed no competitive threat to Microsoft, or Microsoft's competitive actions did not prevent Netscape from effectively distributing its Web browser.

The Court of Appeals dismissing either point would likely lead to a complete reversal in favor of Microsoft, Kovacic said.

"This is not inconceivable at all," Lande agreed.

During


Gartner analyst David Smith says that in the soap opera of the Department of Justice's antitrust case against Microsoft, the latest episode clearly appears to favor the defendant.

see commentary

Monday's hearing, appeals court Chief Judge Harry Edwards told government attorney Jeffrey Minear that nowhere in the court record did he see where Netscape ever planned to compete with Windows, as the government had asserted. If Netscape never planned to compete with Windows--even if Microsoft acted against a perceived threat--there could be no antitrust violation, Edwards said.

Edwards asserted Netscape had no "capacity to serve" as a competitor to Microsoft. Even if it could be shown Netscape planned to compete with Windows, because there was no guarantee of success, the browser maker could not be considered a competitor. In that scenario there could be no antitrust violation, he concluded.

"This continuing Edwards theme could spread like wildfire through court," Kovacic said. The chief judge would likely carry with him judges Douglas Ginsburg, Raymond Randolph and Stephen Williams on this point, giving a majority vote, he added.

"If Edwards is not shaken from that point of view, the whole maintenance claim falls apart," Kovacic said. "Then everything is dead."

Manishin agreed the Court of Appeals could concede this point to Microsoft, leading to a complete reversal and victory for the software maker.

"Microsoft wrote a brilliant brief that played into that," he said. "There were intellectual holes in Judge Jackson's analysis that I think that an ordinary Court of Appeals would defer to, because of the strength of the facts. But this court is predominantly an egghead court. They are very, very bright and love the analytical approach."

He added that "Microsoft played very well into the predispositions and the political leanings of court."

Market access
Perhaps more serious were signs that the Court of Appeals didn't buy the government's claim that Microsoft violated antitrust law by preventing Netscape from distributing its browser.

"The other place where the whole government's case collapses is the foreclosure issue," Lande said. "I thought the government made some serious mistakes presenting its foreclosure argument."

Microsoft attorney Richard Urowsky on Monday effectively showed how perhaps 60 million people had downloaded Navigator, rebuffing the government's claim that Microsoft's use of restrictive contracts and other means prevented Netscape from effectively distributing its browser.

"Netscape had unfettered access to consumers," he asserted, adding that the absence of foreclosure "undermines every aspect of this case."

That argument resonated with some of the appeals judges, Lande said. He pointed out that even if Microsoft used what might appear as unfair tactics to block Navigator, as long as the Court of Appeals concluded that Netscape could effectively distribute the browser there would be no antitrust violation.

"The one thing that Urowsky did well was say, 'Here's the issue that decides the case, and we're going to put all our chips out on this one: No foreclosure,'" Kovacic said.

Which side will ultimately prevail or whether the government will walk away with some victory is uncertain. "You can never really be sure what the judges' vigorous questioning really means," Manishin said.

Edwards, for example, is known for asking tough questions and taking positions during oral arguments that don't always reflect his views.

But Kovacic said there is an extremely plausible scenario that topples the maintenance of monopoly claim and with it the government's case.

"That is a chain reaction that gives you a vast explosion, and the remnants of the government's case goes fluttering to the ground," he said. "You can imagine a vast scenario where the whole thing falls apart."

 

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