Microsoft: Antitrust Ruling Infected with Error

By Peter Galli  |  Posted 2000-11-27 Print this article Print

In a 150-page brief filed with the U.S. Court of Appeals for the District of Columbia today, Microsoft Corp. launched a stinging attack on the way Judge Thomas Penfield Jackson handled the antitrust case against the software giant in the U.S District Cour

In a 150-page brief filed with the U.S. Court of Appeals for the District of Columbia today, Microsoft Corp. launched a stinging attack on the way Judge Thomas Penfield Jackson handled the antitrust case against the software giant in the U.S District Court.

The Redmond, Wash., company said the entire proceeding, including Jacksons order to break up the company, was "infected with error" and, accordingly, called on the appellate court to remand any of the "plaintiffs surviving claims" to a new trial before a different district judge in order to preserve the appearance of justice.

The brief also sharply criticized Jacksons public comments about the case both during and after trial, saying they violated the Code of Conduct for United States Judges.

"By repeatedly commenting on the merits of the case in the press, the district judge has cast himself in the publics eye as a participant in the controversy, thereby compromising the appearance of impartiality, if not demonstrating actual bias against Microsoft," the brief stated.

These repeated violations of the code of conduct were "emblematic of the manner in which he conducted the entire case -- employing improper procedures and changing the rules of the game, always to Microsofts detriment."

The district courts conduct was also "highly unusual and prejudicial to Microsoft," the brief claimed. Microsoft ultimately had less than five months to prepare for trial -- and much less time to prepare its defense against plaintiffs new allegations, which involved highly technical subjects like Java, NSP software and QuickTime, it said.

Microsoft was also limited to 12 trial witnesses, plus three rebuttal witnesses.

"As a result, Microsoft was unable to pursue entire avenues of important discovery and trial testimony. The district court also largely suspended application of the Federal Rules of Evidence at trial, admitting scores of newspaper and magazine articles and other rank hearsay," the brief charged.

As such, Microsoft called on the appellate court to remand any of the "plaintiffs surviving claims" to a new trial before a different district judge.

Clear misunderstanding?

The brief further claimed that the district court had revealed a profound misunderstanding of the antitrust laws, condemning Microsofts competitive response to the growth of the Internet and Netscape Communications Corp.s emergence as a platform competitor -- conduct that had produced "enormous consumer benefits," Microsoft stated.

The primary argument of the appeal is that the governments lawsuit and the district courts rulings reflected a clear misunderstanding of antitrust laws, the company said.

"Even accepting the district courts findings of fact, Microsoft must win on liability because there is no exclusion of competing products from consumers," it said. The district court had branded Microsofts conduct anti-competitive even though it recognized that Microsoft did not foreclose Netscape from the marketplace.

The district court also erroneously held that Microsofts design of Windows to include Web browsing software constituted a tie, the brief said. This claim failed as Windows and Internet Explorer were not "separate products" under any rational test -- including the governing standard articulated by the Court -- because the inclusion of IE in Windows improved the product, satisfying pervasive demand for Internet-related functionality, according to Microsoft.

The alleged tie also did not foreclose competition in the browser market and, thus, did not unreasonably restrain trade.

The brief claimed that the plaintiffs did not prove, and the district court did not find, that the benefits of Microsofts integrated design could be duplicated by combining an operating system with a standalone browser like Navigator.

The district court also erroneously held that Microsoft maintained a PC operating system monopoly, the brief continued. Microsoft strongly disputed this finding, saying it could not control prices or exclude competition and thus did not possess monopoly power in a properly defined market. Microsoft also did not engage in anti-competitive conduct because it did not foreclose Navigator or Java from any marketplace, the company claimed.

The brief further argued that the district court erroneously held that Microsoft attempted to monopolize the browser market. The company claimed that it did not act with a "specific intent" to monopolize but rather sought to prevent Navigator from dominating the browser market.

"In short, IEs usage share is highly vulnerable to decisions made by AOL, a formidable Microsoft competitor. On April 5, 2000 -- the day after the district court issued its conclusions of law -- AOL announced its intent to replace IE with Navigator in AOLs proprietary client software," the brief stated.

Relief cannot stand

In conclusion, Microsoft maintained that the relief entered "cannot stand, for both procedural and substantive reasons," particularly as the district court refused to hold an evidentiary hearing and allow Microsoft to present evidence on relief; failed to make findings to support the relief entered; relied on improper factors and information outside the record; and admitted deference to plaintiffs proposed remedy.

Accordingly, the district court was not at liberty to enter sweeping relief, over Microsofts objection, without conducting an evidentiary hearing and affording Microsoft an opportunity to present evidence on all disputed issues. Nor was the district court free to enter such relief without making findings of fact based on admissible evidence regarding the terms of the decree, it said.

"The entire decree should be vacated on these grounds alone. The Court should reverse the judgment below and direct the entry of judgment for Microsoft. As to any aspect of the judgment not reversed, the Court should vacate and remand the case to a different district judge for a new trial," the brief concluded.

The Department of Justice has until January 12 to submit its response to this brief, after which Microsoft may again reply. The court will then hear oral arguments in February.

Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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