August 10, 1998 6:00 PM PDT

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In its most detailed defense yet, Microsoft today refuted the government's broad antitrust case against it by arguing that its actions benefit consumers and urging a judge to dismiss the matter altogether.

In two voluminous court documents filed in U.S. District Court in Washington, D.C.--the most comprehensive formal defense offered by the company so far--Microsoft said the government's case "fails to meet the criteria for injunctive relief."

Justice Department lawyers and 20 states are arguing that Microsoft illegally has maintained leadership in the market for desktop operating systems and that it is using its ubiquitous Windows platform to gain monopolies in other computer and software sectors, including Web browsers.

The company's 33-page response argues that it should not be barred from including its Internet Explorer browser with Windows 98 on the basis of what the software giant perceives as three key facts: IE is not separate but rather is integrated; it produces "clear benefits to consumers"; and it has not hindered rival Netscape Communications from distributing its competing browser.

In a separate 88-page filing today, Microsoft attorneys also are seeking a summary judgment that effectively would dismiss the case as unfounded.

Microsoft is hoping to get a judge to rule in its favor without taking the matter to trial, arguing that the facts "fatally undermine" the governments' case.

The documents filed today offer key insights about the company's legal strategy for defending its market leadership as a simple capitalistic success rather than as an illegal monopoly. Much of that strategy already has been reported.

"Microsoft said nothing new today," said Gina Talamona, a Justice Department spokeswoman. "Ever since we brought this case, Microsoft's position can't be squared with the company's own documents, much less with the large body of evidence that the government will introduce at trial."

But others say Microsoft's filings were strong.

"The DOJ needs to go further and show why competition can't viably compete," said Hillard Sterling, an antitrust litigator with the law firm of Gordon and Glickson. "The government hasn't done a very good job of that yet. Microsoft smells that vulnerability." Sterling nevertheless described Microsoft's chances for summary judgment "a real longshot."

Trustbusters are seeking a preliminary injunction that would stop Microsoft from bundling its Internet Explorer browser with its Windows 98 operating system or require the company to ship Netscape's browser with Windows.

But Microsoft, in its 33-page response, said it first considered including support for Internet standards, "including Web-browsing functionality," in 1992, and publicly announced its plans in April 1994, the same month Netscape predecessor Mosaic Communications was founded.

"They had TCP/IP connectivity in Windows 95, not browsers," said Netscape general counsel Roberta Katz. "Only one-half of one page in the 350-page manual was dedicated to the Internet."

Microsoft, for its part, argues that IE cannot be removed from Windows 98 without making it a much weaker product and that the integration behooves consumers and software developers alike.

Finally, Microsoft said its browser gained popularity because the technology driving it was better than that behind Netscape's browser. Redmond asserted that its partnerships with PC makers and Net access providers are not exclusive, and therefore do not prevent Netscape from also bundling its products.

Katz argued that Microsoft's deals might not be exclusive, but that they are exclusionary because they require the company's partners to make IE the default browser, among other provisions.

"That's like saying it doesn't matter because Netscape still has the Internet to distribute its browser," she said. "[Microsoft's deals] have done some harm to us with respect to significant channels of distribution."

The high-profile trial between Microsoft and federal trustbusters is slated to begin September 8, assuming Microsoft does not win a summary judgment. Sterling said that he expects the judge to consider the motion for summary judgment on an expedited basis and that a decision could come within ten days to two weeks.

The Justice Department will respond to the documents Microsoft filed today, but Talamona could not say when. Sterling said a DOJ response is likely within a week to ten days.

U.S. District Judge Thomas Penfield Jackson has ordered Microsoft to make chief executive Bill Gates available for testimony in the case, but he declined to specify a length of time for Gates's deposition.

Federal lawyers want Gates deposed for two days, while Microsoft says the CEO is extremely busy and that eight hours of testimony is sufficient.

Under Jackson's ruling, the company also must allow government attorneys to depose 16 other top Microsoft executives and turn over the source code for certain versions of the Windows 95 and 98 operating systems.

Meanwhile, Microsoft's stock price was off slightly following the filings. The shares closed at 104.4375, down more than 1 percent.

The stock has traded as high as 119.625 and as low as 59 during the past 52 weeks. Volume was more than 11 million shares, making Microsoft the fourth most active stock on the Nasdaq.

 

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