Microsoft Case Moves On

Microsoft may have settled its lengthy antitrust case with the Department of Justice, but the refusal of nine states and the District of Columbia to agree to the terms will keep the case open for the foreseeable future.

Microsoft Corp. may have settled its lengthy antitrust case with the Department of Justice, but the refusal of nine states and the District of Columbia to agree to the terms will keep the case open for the foreseeable future.

Further complicating matters is that the judge who presided over the DOJ-Microsoft settlement—and will continue to review it to determine whether it is in the public interest—will preside over the continuing litigation with the dissenting states.

To the DOJ and the nine state attorneys general who signed the agreement, the settlement is a road map for rival software developers to compete more effectively. It provides more flexibility for OEMs to configure Windows and include non-Microsoft products, requires Microsoft to disclose computer code to rival developers, bans exclusive license deals, bans retaliation against manufacturers that dont abide by Microsoft demands, and sets up a three-person review committee to monitor compliance.

Most agree there will be more opportunity for installing rival applications on desktops as a result of the settlement, but whether the opportunity is sufficient to spur competition remains in question.

"The settlement does not fundamentally change the state of competition," said Andrew Gavil, professor of law at Howard University, in Washington. "Consumers and manufacturers willing to take the time and expense to have more choices will be able to do so. But its not a costless process."

To the parties that refused to settle (Connecticut, West Virginia, Minnesota, Utah, Kansas, Massachusetts, Florida, California, Washington and the District of Columbia), the agreement represents a good starting point for remedies. Those plaintiffs, while continuing to review the agreement, are planning further litigation, beginning with filing their own remedy proposals with Judge Colleen Kollar-Kotelly in court Dec. 7.

Connecticut Attorney General Richard Blumenthal said he will continue reviewing the deal, leaving the door open for a future agreement with Microsoft, though thats unlikely.

Other critics of the settlement charged that Microsoft, of Redmond, Wash., retains too much power to decide which products and technologies are integrated into its operating system.

"If Microsoft wants to put in its video player, audio player and instant messaging system and say theyre part of the operating system, theyre allowed to do it," said Robert Lande, professor of law at the University of Baltimore.

In addition, some say the terms do not prevent subtle retaliation against OEMs. Furthermore, the review committee, which is to be placed on the Microsoft premises and on the companys payroll, has no real authority.

"All the review committee can do is write a report," Lande said. Before the court decides whether the settlement is in the public interest, the DOJ will elicit comments from interested parties and defend its position. The public comment period is slated to end by early March. Meanwhile, the remedy hearing in the states litigation is scheduled to begin March 11.

The courts unusual position of simultaneously reviewing the public interest value of the settlement and presiding over a remedy hearing has legal experts unsure of how the case will progress. Some say there is no legal conflict of interest at stake, but the dual-track proceeding will require the judge to compartmentalize information.

"Theres a psychological element that is added here," said Jonathan Baker, professor of economics and law at American University, in the District of Columbia. "Having encouraged a settlement, the judge does not want to find that the settlement was inadequate."

On the dual track

The dual-track proceeding could take several paths, lawyers say. The judge could refuse to approve the settlement unless additional, pro-competition terms are added. In that case, some or all of the litigating states could then join the settlement. If the settlement is approved and later the judge finds the states offered sufficient evidence to warrant tougher remedies, those remedies would be ordered by the court and either supplement or supersede the negotiated settlement.

Legal experts say it is unlikely the judge will order further negotiations.