-Caveat Lector-
[No Microsoft breakup. Appeals court vacates ruling!!! P.S. I told you
guys that there was A LOT of good $h!t in the last couple days! --MS]
June 28, 2001
Appeals Court Issues Mixed Ruling In the Microsoft Antitrust Case
A WALL STREET JOURNAL ONLINE
News Roundup
WASHINGTON -- A federal appeals court affirmed part and reversed part of a
lower court's Microsoft Corp. antitrust decision.
More details were expected shortly. The ruling came with little warning.
In a notice issued earlier this month, the U.S. Court of Appeals for the
D.C. Circuit said that although the court usually issues rulings on
Tuesdays and Fridays, "that usual practice may not be followed in this
case." Microsoft watchers had been keeping an eye out for a ruling for
several weeks.
Long Battle
The current battle between the Justice Department and Microsoft began in
late October 1997. The nearly four years since the case was filed have
brought a host of changes: The U.S. has changed presidents, attorney
generals and antitrust chiefs, Bill Gates changed job titles, and the
company most poised to benefit from the case -- Netscape Communications
Corp. -- no longer exists as an independent entity. And while the
Internet revolution continues apace, the boom in technology stocks that it
fueled has petered out, leaving profitability and caution as the watchwords
of the day.
The legal war has been fought in a number of different courts, with
different charges filed by the government. But the contention of the
government remains the same: that Microsoft illegally used its dominant
market position in personal-computer operating systems to try and expand
into other technologies. And Microsoft's defense remains the same: that it
can't survive in the cutthroat tech industry unless it has the freedom to
add new features to those operating systems.
In 1994, Microsoft settled government charges that it had illegally
exploited a monopoly over operating systems, agreeing to change some
contracts with PC makers and eliminate some restrictions on software
makers. But then came the Web browser, first popularized by Netscape
Communications. The Web browser replaced complex code with mouse clicks
and opened up the Internet to ordinary people with home PCs -- and also
struck Microsoft as a possible replacement for a PC's operating system. So
the company worked to create its own Web browser -- Internet Explorer --
and that's where it ran afoul of the Justice Department.
The fall 1997 charges were narrow: Microsoft, the government charged, had
violated the 1994 consent decree by forcing PC makers to use Internet
Explorer if they wanted to offer the Windows 95 operating system. But
Microsoft fought back furiously, contending that it couldn't maintain its
operating-system dominance unless it had the freedom to constantly
incorporate new features to it.
But the way Microsoft did battle set an unfortunate precedent for the
company. In December 1997, U.S. District Judge Thomas Penfield Jackson
issued a preliminary injunction ordering the company to stop requiring
companies that sold machines with Windows to also install Internet Explorer
on those machines. Microsoft complied -- but offered PC makers a choice
between offering Windows 95 with Internet Explorer and offering a version
of Windows that the company warned wouldn't work properly. The press
dubbed that "compliance with a raised middle finger," and Judge Jackson
would remember it throughout the trial that followed.
Another important theme in the legal battle also was first heard quite
early:
In June 1998, an appeals-court panel threw out Judge Jackson's preliminary
injunction. The panel ruled that the judge exceeded his authority in
asking for it and said it was inclined to conclude that the combination of
Windows and Internet Explorer was an integrated product that Microsoft
could offer under the terms of the consent decree. It was the full
appelate panel of that same court that is issuing Thursday's ruling.
By June 1998, however, the stakes had changed dramatically. In May, the
Justice Department and 20 states (one, South Carolina, would later drop the
case) filed a sweeping antitrust suit that went far beyond just Web
browsers.
The suit charged Microsoft with crushing competition and stifling
innovation in a number of software markets and sought extraordinary changes
in its business practices. Besides waging war on Netscape, the government
charged, Microsoft sought to hobble Sun Microsystems Inc.'s Java
programming language and struck exclusionary agreements with online service
providers and providers of online content and entertainment.
A Bruising Trial
The various phases of the trial would be dominated by two men. The first
dominant figure was David Boies, the Justice Department's lead lawyer, who
proved remarkably deft at cross-examination. He eviscerated Microsoft
witnesses time and time again with their own e-mail messages, hanged them
on bald contradictions in their own writings, and had a field day after he
caught the company monkeying with a videotaped software demonstration.
Microsoft's lawyers sniffed that Mr. Boies' assaults were long on
theatrics and short on matters of law -- but they did next to nothing to
counter him, and the parade of fumbling witnesses was devastating press for
the proud software company.
The other dominant figure was Mr. Gates -- and that wasn't good for
Microsoft, either. The Microsoft co-founder never took the stand, but Mr.
Boies used a videotaped deposition of him to searing effect. In the
deposition, Mr. Gates claimed not to remember e-mail messages about
top-level Microsoft strategy and debated the definition of such esoteric
terms as "compete" and "concerned." The image of a sullen, uncooperative
Mr. Gates would be splashed all over the TV news and stick in Judge
Jackson's mind as well.
The last rebuttal witness stepped down in late June 1999, and in November
Judge Jackson issued his "findings of fact" in the case -- a prelude to
"findings of law" and a final ruling. Those findings of fact clearly
showed whom the judge believed -- Judge Jackson determined that Microsoft
had monopoly power in the market for PC operating systems and essentially
backed all of the government's allegations. In his ruling, he called
Microsoft "a predatory monopolist."
A Failed Settlement
The findings of fact offered a clear warning to Microsoft that it was in
for more trouble; after their release, Judge Jackson did his best to force
the two sides to settle, naming Richard Posner, the outspoken and
conservative chief judge of the U.S. Court of Appeals in Chicago, as a
mediator between the two. Those settlement efforts failed, however, and on
April 1, 2000, Judge Posner ended his mediation efforts. Two days later,
Judge Jackson issued his findings of law, ruling that Microsoft maintained
its operating-system monopoly through anticompetitive means and tried to
monopolize the Web-browser market by unlawfully "tying" Internet Explorer
with Windows.
In all, the judge accepted 23 of the 26 arguments brought by the
government.
In June 2000, Judge Jackson ruled in the case, ordering (as the Justice
Department had requested) that Microsoft be split into two companies -- one
for operating systems and one for software applications. He also set
restrictions on Microsoft's business practices pending the breakup,
reaching all the way back to the 1997 preliminary injunction to describe
the company's conduct as "untrustworthy" As for why he accepted the Justice
Department's proposed remedy, his answer was simple: "Plaintiffs won the
case."
At Last, an Appeal
Before the case could go to appeal, both sides found themselves in another
duel of legal briefs. Mindful of its earlier defeat in the appeals court,
the government invoked an obscure provision of antitrust law and tried to
hand the case directly to the Supreme Court for final review -- a move
Judge Jackson supported. The high court declined to accept it in September
2000, ensuring that the appeals court would get another crack at the
matter.
Before that, however, Judge Jackson did hand Microsoft one substantial
legal victory, agreeing to suspend his harsh restrictions on Microsoft's
business practices while appeals were pending.
The U.S. Court of Appeals heard the case in late February, and from the
beginning of the questioning the tide seemed to have turned Microsoft's
way.
U.S. Circuit Judge Harry Edwards attacked the bundling claim, calling it
"a highly questionable proposition" that a market for operating-system
software without a browser even exists anymore and warning that he didn't
feel bound by Judge Jackson's findings of fact on that aspect of the case.
The court also dealt harshly with Judge Jackson, calling statements he made
to the news media after the earlier trial's conclusion "beyond the pale"
and a serious breach of judicial conduct. More troubling for the
government, the panel assailed a major element of the Justice Department's
case, with several members saying that Judge Jackson failed to properly
define the market for Web browsers, as required under antitrust law. The
judges had tough questions for Microsoft's lawyer about charges that the
company acted illegally to protect its Windows monopoly.
The oral arguments ended after two days, leaving both sides to review four
years of legal battles and await Thursday's decision.
=======================================================
Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT
FROM THE DESK OF:
*Michael Spitzer* <[EMAIL PROTECTED]>
The Best Way To Destroy Enemies Is To Change Them To Friends
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