Microsoft Gets Away With One

Commentary: Peter Coffee wasn't impressed with last year's "proposed" settlement terms, so his reaction to Friday's rulings should come as no surprise.

I wasnt impressed when the settlement terms in the Microsoft antitrust case were merely "proposed," a little less than one year ago, so it shouldnt be hard to predict my reaction to the pair of rulings that finally came down this past Friday evening.

In short words, the company broke the law--and got away with it. Its been a while, I know, since the Court of Appeals upheld the original trials Findings of Fact, sending only the question of appropriate remedy back to the lower court for reconsideration. But as I noted at the time, one of the crucial questions was whether Microsoft could freely stifle potential competing technologies without abusing its monopoly powers. The company claimed that the very novelty of alternative platforms, such as the Java-enabled browser, kept them from being part of the market in which Microsofts monopoly exists.

The Court of Appeals decisively declared that the Sherman Act prohibited anti-competitive action against emerging threats, as well as against established competitors. But the settlement leaves Microsofts hunting license in full force, stating that "No provision of this Final Judgment shall prevent Microsoft from conditioning any license … on the requirement that the licensee meets reasonable, objective standards established by Microsoft for certifying the authenticity and viability of its business."

Until a competitor gets big enough to be a problem, Microsoft is under no obligation to give it the information that might help it achieve that status. A paradox, to say the least: Checkmate before the first move is played.

Yes, I know, I elided a clause from the quotation just above: That section of the agreement talks specifically about Microsofts granting of licenses related to "anti-piracy systems, anti-virus technologies, license enforcement mechanisms, authentication/authorization security, or third party intellectual property protection mechanisms of any Microsoft product."

But as I said last year, "Find me an API that has no connection with any of these functions, especially given the current trend toward pervasive technical measures for digital rights management. Go ahead, Ill wait."

On the evening when the rulings were issued, U.S. Attorney General John Ashcroft announced that the Department of Justice would be "strongly committed" to ensuring Microsofts compliance with the terms. Oh? Then why does the courts order state, as the very first sentence under the heading "Enforcement Authority," that "The Plaintiffs shall have exclusive responsibility for enforcing this Final Judgment"? The remaining language details an expensive regimen of monitoring and inspection. And we all know from our experience in Iraq how well that works.

As an independent software CEO remarked to me on Friday morning, before the rulings came down, the settlement addresses behaviors that no longer matter: "Microsoft moved its nukes."

Many people dont really accept the moral basis of antitrust law, believing that it merely punishes the successful. Those people will probably be relieved by these rulings, believing that they throw a necessary bone to Microsofts influential enemies--and that life can now go on.

Judge Kollar-Kotelly surely believes that she met the burden of finding the settlement to be in the public interest: The industry needs to move forward.

And as I noted during PBS NewsHours segment on the decisions, there has been some social benefit in the pervasive standard of the Windows platform: Its prevalence reduces the cost of bringing new software to market. There are many software companies that defy the proposition that entrepreneurial success only lasts until Microsoft decides to acquire whatever succeeds.

But I cant get away from the Court of Appeals ruling. That court made many specific findings to the effect that Microsoft knowingly used its market power to limit the choices available to IT buyers: for example, in pressuring Intel to abandon platform-neutral Java multimedia efforts by offering to put software speed bumps in the path of Intel competitor AMD. That court found that Microsoft intended to deceive software developers: for example, that "Microsoft … predicted that the effect of its actions [in promoting its Visual J++] would be to generate Windows-dependent Java applications that their developers believed would be cross-platform."

The Microsoft case is over--but at the same time, it may be just beginning, because there may be civil suits yet to come. Injured parties may be emboldened by the rulings statement that "The United States Court of Appeals for the District of Columbia Circuit … affirmed the District Courts finding of liability against Microsoft for violation of § 2 of the Sherman Act." Injured parties can sue for three times the damages that they can satisfy the court that they have suffered--and those suits are civil suits, where the burden of proof is "preponderance of the evidence," not the stricter "beyond a reasonable doubt" of criminal trials.

What certainly remains is the burden on IT buyers to keep their future options open by being selective in the technologies that they adopt today. It was true when this suit began, but its clearly even more true now--after years of labor in the courts have produced such a feeble demonstration of the power of the law.