December 18, 2003 4:30 PM PST

Microsoft's antitrust saga continues

Here we go again.

Just when you thought Microsoft might have been nearing the end of a long series of antitrust suits, another one surfaces with RealNetworks' accusation that the software giant illegally used its Windows monopoly to limit consumer choice in digital media.


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That same monopoly has been at the root of lawsuits by the federal government, many of the states, the European Union and several private companies, including Sun Microsystems, Be, and Time Warner's Netscape subsidiary. Although most of the settlements have been largely favorable to Microsoft, the lawsuits soaked up resources and bandwidth, not to mention tarring the company as a monopolist.

Ironically, though the Windows monopoly has been the motor of Microsoft's stunning financial success, it has also gotten the company up to its neck in legal hot water over the years.
Ironically, though the Windows monopoly has been the motor of Microsoft's stunning financial success, it has also gotten the company up to its neck in legal hot water over the years.

The Windows operating system has become the centerpiece of Microsoft's technology strategy--for everything from the company's relatively late move into the Internet to more recent forays into music and streaming video and audio.

But rivals have long bridled at Microsoft's habit of incorporating new features into Windows that were previously supplied by standalone applications. Microsoft contends that the development of Windows reflects technology improvements that make it easier for customers to operate their computers.

This is less an argument over setting digital boundaries than about the measures Microsoft must take to protect its crown jewels.

The dizzying array of lawsuits against Microsoft include:

• In 1997, the Clinton administration accused the company of violating an earlier antitrust settlement from 1995. The allegations focused on the browser war between Netscape's Navigator and Microsoft's Internet Explorer. Among other charges, the government said Microsoft was forcing computer makers to install IE if they wanted Windows 95.

Under terms of the trial judge's order in November 2002, Microsoft agreed to give computer makers more flexibility in configuring Windows and to share more details about Windows' inner workings with other software makers. In November of this year, a federal appeals court took up the case yet again, hearing testimony on whether the remedies imposed on Microsoft have been effective. The court's ruling on whether to approve the order or toss it out in favor of harsher penalties is pending.

• The European Union has also charged Microsoft with abusing its monopoly. In October, Microsoft filed its written response, although the details were not made public. In their 4-year-old investigation, European regulators have maintained that Microsoft's abuse of its monopoly power is "ongoing," suggesting that the Windows Media Player should either be separate from Windows or Microsoft should be forced to bundle competitors' media players as well. The European Commission also wants Microsoft to give its competitors in the low-end server market more technical information to allow them to achieve full interoperability with Windows PCs and servers.

• In October, Microsoft reached settlements that totaled about $200 million in six class-action lawsuits in the District of Columbia, Kansas, North Carolina, North Dakota, South Dakota and Tennessee. Earlier in the year, Microsoft announced a $1.1 billion settlement with California. It also has settled nine other similar suits, leaving five still in the courts. The software giant said it has successfully derailed class-action lawsuits in 17 other states, either by having them dismissed or by convincing courts not to grant class certification.

• In September, Microsoft announced a settlement of an antitrust suit filed by one-time operating system rival Be. Microsoft did not admit wrongdoing in the settlement, in which Be was to receive $23.2 million after attorneys' fees. Founded by former Apple Computer executive Jean-Louis Gassee, Be developed an operating system that won acclaim from a small base of hobbyists but never achieved commercial success.

• In May, Microsoft paid $750 million to Time Warner under a wide-ranging settlement that also called for the companies to jointly cooperate on software distribution and digital media. As part of the deal, Time Warner dropped an antitrust complaint filed by its Netscape Communications unit in January 2002 against Microsoft. Time Warner also agreed to a seven-year, royalty-free license of IE and a long-term, nonexclusive license to use Microsoft's Windows Media 9 software for digital media.

• In June, a federal appeals court tossed out most of a preliminary injunction that required Microsoft to carry Sun Microsystems' version of an interpreter for the Java programming language. The court upheld a requirement that Microsoft cease distributing certain copies of its own Java Virtual Machine (JVM), saying the company "exceeded the scope" of a January 2001 license agreement with Sun. That agreement settled a lawsuit between Microsoft and Sun over Sun's argument that Microsoft's JVM unfairly altered how computers would use Java.

Rivals have long bridled at Microsoft's habit of incorporating new features into Windows that were previously supplied by standalone applications.
From the outside looking in, a resolution for these lawsuits--as well as the new one--seems ridiculously easy: Just split the difference. But that's heresy in Redmond land. This is more than a simple case of compromise-resistant DNA floating around campus. When it comes to developing Windows, Microsoft will go to the mattresses to resist any impairment of its right to do what it wants.

So far it has been a successful, albeit expensive strategy--one that looks to get even costlier in the weeks and months ahead.

 

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