Mass. to Appeal Microsoft Ruling

The state's AG Thomas Reilly said Friday his office had filed a notice of appeal to challenge the ruling of Judge Colleen Kollar-Kotelly earlier this month and is prepared to "go it alone."

At least one state that balked at the settlement worked out between Microsoft Corp. and the U.S. Department of Justice is preparing to take on the software giant alone in an appeal that seeks stiffer punishment and greater control over the company for its monopolistic behavior.

In an afternoon press conference in Boston Friday, Massachusetts Attorney General Thomas Reilly said his office had filed a notice of appeal in federal court to challenge the ruling of U.S. District Court Judge Colleen Kollar-Kotelly earlier this month.

"We were disappointed that [Kollar-Kotelly] did little more than accept Microsofts loophole-filled deal," Reilly said. "There is nothing here to change Microsofts business practices."

Reilly said his office has been in constant contact with the other dissenting states since the latest ruling. He said the other states "are focusing on enforcement [so] we are going it alone."

Reilly did not say specifically what elements of the settlement Massachusetts would challenge, saying only that consumers and competition were not helped by the current Microsoft deal.

"Competition is a key to what we are doing here," Reilly said. "Competition spurs new ideas, spurs new technology, spurs jobs. Competition gets things going again. It is vital to the economy.

"This case is also about accountability. Some companies feel they are not bound by the law," he added. "The remedy must send a message that breaking the law does not pay."

Officials in the Massachusetts Attorney Generals office could not estimate how long their appeal might last, adding that an appeals court judge would have to issue a schedule based on their filing. Officials said the cost would be limited to attorneys fees, which they hoped to recover as part of the ultimate settlement.

The move comes in the wake of the remedy ruling by Judge Kollar-Kotelly earlier this month which relied heavily on the federal settlement proposal signed last year. Although Kollar-Kotelly rejected as overly broad much of the tougher penalties proposed by the nine dissenting states, she did incorporate some elements of the alternative proposal into her ruling.

In an executive summary filed with the 300-page opinion, the judge took the states to task for over-reaching in the remedy stage of the case. She admonished them for seeking "to gather all existing complaints regarding Microsofts business practices and bring them before the Court at this late stage in the case."

"This suit, however remarkable, is not the vehicle through which Plaintiffs can resolve all existing allegations of anticompetitive conduct which have not been proven or for which liability has not been ascribed," she wrote in the summary. "Plaintiffs have shown little respect for the parameters of liability that were so precisely delineated by the appellate court."

Calling the judges ruling a conditional approval of the settlement signed with the Department of Justice and nine states last November, Microsoft chairman and chief software architect Bill Gates said it represented a fair resolution of the case.

In a small victory for the states, the judge did incorporate two emerging technologies into her remedy order even though they were not addressed in the liability phase. She included server/network computing and interactive TV software (conditionally), but rejected the requested inclusion of handheld devices and web services.

But Kollar-Kotelly rejected outright the states weightiest proposal, which would have required the availability of a modular version of Windows, in which the operating system would be completely separate from Microsoft middleware. She found that the proposal did not offer a reasonable way for Microsoft to separate the code and comply with other requirements. Instead, she accepted the alternative proposal in the settlement, which permits OEMs and users can to disable access to Microsoft middleware.

As for enforcement provisions, the judge rejected the states request for a special master. Instead, the states will have to establish an enforcement committee, which will have access to Microsofts source code, books, ledgers, accounts and other materials to use to ensure compliance.

Within hours of the judges ruling Iowa Attorney General Tom Miller, who has led the coalition of dissenting states, said the states came away with clear victories in assuring Microsofts compliance with the order as well as addressing the aggressive behavior Microsoft has displayed with OEMs.

However, Miller and other state officials repeatedly hinted in a press conference after the ruling that there may be more to come in their battle with Microsoft. "The last chapter has not been written," Miller said.

Kollar-Kotelly presided simultaneously over two parallel cases stemming from the federal governments anti-trust lawsuit brought against Microsoft in 1998. In June 2000, Judge Thomas Penfield Jackson, having found that Microsoft illegally sustained a monopoly in the desktop operating system market, ordered the software giant to divest its OS business. One year later, a federal appeals court upheld anti-trust charges against the company but overturned Jacksons divestiture order, sending the case back to the district court to determine alternative penalties. When the federal government and nine states agreed to a settlement last November, and nine other states plus the District of Columbia chose to pursue tougher penalties, the judge decided to preside over both cases at the same time.