Microsoft Case to End, but Battle to Continue

With Microsoft Corp.'s rejection of a federal judge's last-minute call for compromise last week, the embattled software maker has signaled that it will likely appeal any decision in its drawn-out antitrust battle, court watchers say.

With Microsoft Corp.s rejection of a federal judges last-minute call for compromise last week, the embattled software maker has signaled that it will likely appeal any decision in its drawn-out antitrust battle, court watchers say.

In what many observers saw as a rebuff to U.S. District Judge Colleen Kollar-Kotelly, Microsoft lead attorney John Warden in his closing argument refused to name any areas for possible modification in a proposal from a group of states seeking tougher sanctions for the Redmond, Wash., companys anti-competitive behavior. Instead, Warden called the states proposal fundamentally flawed. He also declined to offer any changes in the federal settlement proposal, drafted with the Department of Justice in November, to make it more palatable to the states, again ignoring the judges request.

"We cant remedy any of this by changing a few words here and there," Warden told the judge during closing arguments in the 4-year-old case.

Warden did suggest the possibility of removing several settlement provisions regarding API disclosures, IP licensing, anti-retaliation and uniform pricing, making that document easier on Microsoft. The bold stance came despite several concessions from the states, including de-emphasizing their long-standing demand for a modular version of Windows.

Microsofts decision to sidestep the judges order—issued just hours before closing arguments were set to begin last Wednesday—was widely seen as a risky, but not inconsistent, strategy. From the outset, Kollar-Kotelly has pressed the parties to offer areas of potential commonality.

But nine weeks of witness testimony and thousands of pages of documents only persisted in presenting contradictory views of the facts in the case and the relevant legal issues.

"It was basically betting the house," Ed Black, president of the Computer and Communications Industry Association, in Washington, said of Wardens refusal to offer compromises. "It is a very tricky set of things Microsoft is doing, but their style is not to give up anything that matters."

Those who support Microsofts position, however, said that any remedies that go beyond the federal settlement would punish the company unduly. "There are times when you shouldnt be compromising," said Jonathan Zuck, president of the Association for Competitive Technologies, in Washington. "I think there are things in the settlement proposal already that could adversely affect the marketplace."

In contrast, Steven Kuney, attorney for the states, ranked the provisions in the states remedy proposal and listed several points that could be altered. In his closing arguments, Kuney responded to the judges order by suggesting ways in which the federal settlement proposal could be modified, including broadening the scope to include nascent platform threats, strengthening disclosure requirements and eliminating exceptions in the provisions regarding OEM flexibility.

In a surprise to many in the courtroom, Kuney did not list as a top priority the states proposed requirement for a modular version of Windows. Instead, he said that disclosing APIs and other technical information is the most important remedy. A modular version of Windows, which was the first provision in the states proposal, is only the fourth most important remedy, behind information disclosure as well as more flexibility and retaliation protection for OEMs.

"In this industry more than any other, information is the lifeblood because it is vital to innovation," Dick Blumenthal, attorney general of Connecticut, said following the court hearing. "Nothing could be more central to sparking competition in the future."

However, ACTs Zuck said that he saw the states willingness to answer the judges order for prioritization as recognition of the difficulty in implementing some of their proposals.

In addition to presiding over the states request for tougher remedies, Kollar-Kotelly is separately reviewing the federal settlement proposal, which was crafted last year by Microsoft and the DOJ. The settlement was reached after the U.S. Court of Appeals for the District of Columbia Circuit upheld District Judge Thomas Penfield Jacksons ruling that Microsoft illegally maintained a monopoly in PC operating systems. However, the appeals court rejected Jacksons order to split Microsoft in two (and removed Jackson from the case) and instead directed Kollar-Kotelly to determine behavioral remedies for the illegal conduct.

The judges hint last week that she may be seeking a compromise between the two proposals and Microsofts unwillingness to budge suggest that the case will not come to a close swiftly, even if Kollar-Kotelly issues a decision soon. The judge is unrestricted in the kind of remedy she will ultimately order, but courtroom observers agree that it is unlikely she will approve either the states proposal or the federal settlement without some modifications. A ruling is not expected for at least several weeks.

Related Stories:

Microsoft to Include Java in Windows XP

More Coverage of Microsoft vs. DOJ