August 29, 2002 10:36 AM PDT

Microsoft highlights antitrust progress

Microsoft is seeking to underline the trust in its antitrust settlement.

Though there was no legal requirement for it to do so, the software titan on Wednesday issued a progress report on the work it's been doing to comply with a proposed agreement it reached last year with the Justice Department and nine states.

In its seven-page filing, Microsoft pointed to several milestones it had reached in accordance with the consent decree: Tuesday's release of application programming interfaces, the recent disclosure of Windows communications protocols, and the introduction of a new control into Windows 2000 and Windows XP that will let PC makers keep middleware such as the Internet Explorer browser off the software desktop.

U.S. District Judge Colleen Kollar-Kotelly is reviewing that agreement and separately is looking at whether to impose stiffer sanctions against Microsoft, as requested by nine other states and the District of Columbia, which continued with the litigation.

The timing of the filing could be important for Microsoft, say legal experts, given that the judge could still reject the November settlement, which the parties amended in February. Kollar-Kotelly's decision on the settlement and call for a stiffer remedy could come at any time.

With the progress report, Microsoft is "trying to persuade (Kollar-Kotelly) they are trusted allies in the agreement they have signed onto," said Andy Gavil, an antitrust professor at Howard University School of Law. The filing "suggests they have an ongoing credibility gap they have to address--that they have to persuade the judge they can be trusted and will carry out what they say they will."

The trust issue is crucial for Microsoft, given credibility concerns raised by the case's earlier jurist, U.S. District Judge Thomas Penfield Jackson, and the plaintiff states' call for stiffer sanctions. "It's a question of whether they can be trusted or whether they need to be before the court occasionally to make sure they toe the line," said Gavil.

The agreement has already passed the first of two hurdles. In July, Kollar-Kotelly determined that the Justice Department and Microsoft had properly disclosed their communications, as mandated by the Tunney Act. The act requires that no backroom, political deal-making influence an antitrust settlement.

But the second hurdle--whether the proposed deal is in the public interest--has yet to be determined by the judge. More than half of the 30,000 people submitting comment about the settlement opposed the deal, according to the Justice Department.

"One of the questions the judge is going to have to address is, Can a settlement be deemed as in the public interest if it does not take into account all of the elements of the Court of Appeals decision?" Gavil said.

"Even after a victory, it is not unusual for the parties to settle on a little less than expected" in private lawsuits, he added. But the situation here is different, he said, "given the judge's obligation to ensure the settlement is in fact in the public interest."

Compliance landmarks
On Tuesday, Microsoft disclosed technical information known as application programming interfaces (APIs) one day earlier than anticipated. APIs are crucial for developers to be able to create software applications that work well with Microsoft's Windows operating system. During the antitrust trial, government prosecutors charged that Microsoft withheld some technical information so its programs would work better with Windows than applications developed by competitors.

Microsoft also noted that on Aug. 6, it released communications protocols used to allow the Windows desktop OS to work with Windows server products. But unlike the APIs, which are available royalty-free, the communications protocols must be licensed from Microsoft. The company does not publicly disclose what the fees are. In all, Microsoft released 113 communications protocols and 290 APIs. Earlier in the month, Microsoft said it would disclose 272 previously undocumented APIs.

The filing also documented compliance with one of the most hotly debated areas of the proposed settlement. Microsoft agreed to introduce a new control into Windows 2000 and Windows XP that would allow PC makers and consumers to hide access to five pieces of middleware: Internet Explorer, Windows Media Player, Windows Messenger, Outlook Express and Microsoft's version of the Java Virtual Machine.

As noted in the court filing, the software giant already released the control with Windows 2000 Service Pack 3 on Aug. 1. A more sophisticated version of the control, which lets PC users set competing third-party middleware as default, is coming in Windows XP Service Pack 1.

"In the next few days, Microsoft will release SP1 for Windows XP," the company said in Wednesday's filing.

Legal experts warn that this particular settlement provision might not satisfy the judge. In its unanimous seven-judge ruling, a federal appeals court found that Microsoft had acted in an anti-competitive manner when it "commingled" the software code for Internet Explorer with Windows 98.

"We conclude that such commingling has an anticompetitive effect," the ruling states. "The commingling deters (PC makers) from pre-installing rival browsers, thereby reducing the rivals' usage share and, hence, developers' interest in rivals' APIs as an alternative to the API set exposed by Microsoft's operating system."

The settlement does not compel Microsoft to remove commingled code, merely to hide access to the software, which could still be called upon by third-party programs or other functions of the operating system.

Gentle cage-rattling
Microsoft's filing is unusual, because there was no requirement to make it, said Rich Gray, a Menlo Park, Calif.-based attorney who is watching the trial closely. "I think they just did it as a gentle reminder that they're still waiting for a decision," he said. "It's way of rattling the judge's cage, and in the case of a federal judge, you rattle very gently."

In its legal filing, Microsoft also laid out how the company had moved to uniform licensing terms for Windows. During the antitrust trial, government prosecutors alleged that the company used Windows licensing contracts to reward some PC manufacturers and punish others. The terms of the proposed settlement call on Microsoft to establish uniform terms for the top 20 PC makers--which are also known as original equipment manufacturers (OEMs)--but the company "voluntarily extended those uniform terms and conditions to all OEMs that license Windows on a royalty basis," according to Wednesday's filing.

During the remedy hearing proceeding in March, Gateway executive Anthony Fama testified that Microsoft was using the uniform licensing terms to institute new restrictions on Gateway. Hewlett-Packard and Sony also raised concerns over the new uniform terms, which some PC makers said raised the cost of Windows by $4 a copy.

In its filing, Microsoft said that because of time constraints, the company "was unable to solicit feedback from OEMs before it published the first version of the new uniform licensing agreements."

The company has since published revised terms based on PC-maker response. The new licensing agreements started on Aug. 1 and will end on July 31, 2003. Microsoft will solicit additional PC maker feedback before the next cycle of licensing terms starts, according to the legal filing.

 

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