-Caveat Lector-
Mediator in Microsoft case
By Staff Writer John Frederick Moore
November 19, 1999: 5:56 p.m. ET
NEW YORK (CNNfn) - A federal judge appointed a mediator in the Microsoft
Corp. antitrust trial Friday, raising the prospects for an out-of-court
settlement in the company's lengthy battle with the government.
U.S. District Judge Thomas Penfield Jackson named Richard Posner, chief
judge of the 7th Circuit U.S. Court of Appeals in Chicago, to handle
so-called "voluntary" negotiations between Microsoft (MSFT) and the
government.
Under the order issued late Friday, Posner will act as mediator in a
private capacity, meaning it is separate from the U.S. District Court's
involvement in the case. Posner will determine the schedule and duration of
the negotiations.
Jackson found Microsoft to be a monopoly in a preliminary ruling in the
case earlier this month. Most antitrust experts expected Jackson's findings
of fact to stimulate a new round of settlement discussions between the two
sides.
"We look forward to working with Judge Posner," said Jim Cullinan, a
Microsoft spokesman. "We think this is potentially a very positive step
toward resolving the case."
A Justice Department spokeswoman said the government anticipates
meeting with Posner "to discuss a way to address the serious competitive
problems identified in the court's findings of fact."
Cullinan declined to comment on when Microsoft and government lawyers
will meet with Posner for the first round of discussions.
Microsoft shares gained 1-1/16 to close at 86 in Nasdaq trade. Its
shares jumped to 90-1/2 in after-hours trade on the Instinet system.
Settlement hopes rise?
The Justice Department and 19 states sued Microsoft in May 1998 for
broad antitrust violations, including using its monopoly in the Windows
operating systems market to thwart competition and harm consumers.
Trial watchers believed the sweeping nature of Jackson's findings would
compel Microsoft to engage in settlement talks.
In light of the fact that Jackson sided with nearly all of the
government's arguments in his preliminary findings, federal prosecutors have
indicated they will seek harsh remedies against the firm in the likely event
that Jackson rules Microsoft violated antitrust laws.
Those remedies could include a breakup of the company, or forcing it to
release the valued source code to its Windows operating system, which
controls more than 90 percent of the world's personal computers, legal
experts say.
A settlement also could have more far-reaching results in Microsoft's
favor. If Microsoft and the government reach a settlement, Jackson's finding
of monopoly power would never become final, and firms seeking to sue the
company would have to go through the difficult task of proving its monopoly
position.
Sun Microsystems Inc. (SUNW) and Caldera Systems both have private
suits pending against Microsoft that bear some similarities to the federal
case.
"Microsoft needs a settlement more than the government," Harvey
Saferstein, an antitrust lawyer at Fried, Frank, Harris, Shriver & Jacobson
in Los Angeles, told CNNfn.
Sides far apart
While both sides have long maintained that they have been open to an
out-of-court settlement, they have remained far apart on key issues.
Bill Gates, Microsoft chairman and chief executive officer, has said
any proposed settlement must leave Microsoft free to add whatever features
it chooses to its Windows operating system.
Jackson's ruling, however, provides the government with ammunition
against that stance. A cornerstone of the government's case has been that
Microsoft included the Internet Explorer Web browser for free within Windows
to thwart a potential threat to its monopoly power.
Microsoft claims its actions have worked to the benefit of consumers;
Jackson, however, ruled that by engaging in illegal tactics to thwart its
competitors, Microsoft also harmed consumers.
"Many of the tactics that Microsoft has employed have also harmed
consumers indirectly by unjustifiably distorting competition," Jackson
wrote.
Microsoft officials have also indicated that the firm could take its
chances on appeal. An appellate court has already overturned Jackson twice
in the ongoing Microsoft matter.
"Microsoft likes its chances in the appeals courts," Saferstein said.
"Posner, who is an appellate judge, will tell them what is likely to happen
in the appeals courts."
Unless a settlement is reached first, the government will file a brief
on Dec. 6 outlining how to apply antitrust laws to Jackson's findings of
fact, with Microsoft due to file its responding brief on Jan. 17.
The government will then get a chance to file a response by Jan. 24,
with Microsoft's final response due Jan. 31
Microsoft and government lawyers are due to deliver oral arguments on
their proposed conclusions of law on Feb. 22.
--
Life is learning to live with us. Now we must learn to live with life.
-- Shane A. Saylor, 11.99
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