Microsoft Asks Judge to Dismiss Suit

The software giant claims the states have no legal standing to ask for the harsh penalties that they have proposed.

WASHINGTON D.C.—Microsoft Corp. on Thursday argued that the states proposals to auction, put out for open source and remove code from the companys intellectual property amount to divestiture, which is not supported by the evidence in their case.

Microsoft attorney Dan Webb argued that the states must show a clear link between Microsofts anticompetitive conduct and its dominant position in the market to be granted any structural relief.

"The structural remedy here in this case is enormous," Webb told U.S. District Judge Colleen Kollar-Kotelly. "It is so much worse than the structural relief applied by [U.S. District] Judge [Thomas Penfield Jackson]."

Jackson had ruled that Microsoft should be broken into two following the liability phase of this case. That ruling was overturned on appeal.

"If you take those three things [the plaintiffs want], thats the crown jewels of the company," Webb argued. "If you take away Windows, Office and Internet Explorer, youve taken away the entire company."

The nine states and District of Columbia are seeking harsher penalties on the Redmond, Wash., company than what was agreed upon last year by the U.S. Department of Justice.

The states have proposed auctioning Office to other companies to port it to competing operating systems, making IE an open source technology and making Microsoft provide a modular, or stripped-down, version of Windows.

"Microsoft would still have the technology," said Steven Kuney, an attorney for the states. "I suppose you could call it divestiture of some intellectual property, but not like that Microsoft faced in front of the Court of Appeals."

Webbs comments came as part of Microsofts request that Kollar-Kotelly dismiss the states claims. He argued that the states are only entitled to relief based the 12 acts the appellate court found Microsoft guilty of violating following the antitrust trial.

"The Court of Appeals is saying any remedy you enter should be based on the 12 acts," Webb said. "They have to prove a greater showing of causation than the liability trial, which the Court of Appeals has already said was inefficient."

However, Webb conceded that the states are due relief on the 12 acts in question.

Kollar-Kotelly asked Webb if any of the states proposals might be fit to serve as injunctions on the 12 acts. He replied that he could not think of any.

The judge is holding hearings this week to allow both sides to argue their points, which she said will help her craft a decision.

Webb said Microsoft has worked hard to comply with the courts findings and has stopped all the 12 "bad acts." He said only the issue of commingling of code exists today, and Microsoft addresses that by removing end-user access in its proposed agreement with the Department of Justice and the settling states.

Kuney told the judge Microsoft is continuing its anticompetitive behavior.

"We believe that behavior found wrong by the Court of Appeals is continuing, and commingling is the star of that," he said.

Microsoft also argued that the states lack the legal standing to obtain the relief they seek under federal law. They argued only the DOJ could enforce antitrust law and that the Constitution prohibits the non-settling states from using state antitrust law to impose nationwide regulation of Microsofts business activity.

However, the judge told John Warden, a Microsoft attorney, that the federal government took the position that the states had the right to seek relief, and asked him to explain the divergent views.

Warden said the DOJ took Microsofts position on policy issues to speak with one voice. The DOJ has "come up to the trough but not drunk" from the body of law the Supreme Court has laid out relating to matters such as this.

Warden said the DOJ and Microsoft are in accord. "They get to the same conclusions by a more circuitous route."

Many of the days spent in this remedy hearing dealt with highly technical issues, but Thursday was a day for lawyers. Both sides cited case after case and legal doctrine after doctrine to support their claims.

In particular, Microsoft argued the states need to show some specific injury to them to get relief and should not be able to seek relief on a national scale, which is the job of the DOJ.

Kollar-Kotelly asked John Kester, an attorney for the states, if he felt the states should give any deference to the DOJ in terms of a remedy because the DOJ has settled with Microsoft.

"Absolutely not," Kester said. "Its not correct that the United States is entitled to some sort of superior deference."

"What limitations, if any, are on the states if the remedy is national in scope?" Kollar-Kotelly asked.

"The limitation is the good judgment of the court," Kester said. "The court has considerable discretion and ought to exercise that in developing a remedy. The violator cant say, Im in Redmond, Washington, and you cant touch me."

Gene Schaerr, antitrust counsel for the Association for Competitive Technology, said the weakest part of the states argument is that "they represent such a small fraction of the states and yet theyre seeking such broad claims."