Microsoft, DOJ Defend Settlement

Former combatants, Microsoft and the Department of Justice, today joined forces before Judge Kollar-Kotelly to defend a settlement hammered to cease legal action over Microsoft's monopolistic practices.

WASHINGTON – After more than four years of protracted legal wrangling on opposite sides, Microsoft Corp. and the U.S. Department of Justice were back in court Wednesday, this time on the same side.

The former combatants, along with a contingent of settling states, combined to put on a rigorous battle to defend a settlement hammered to cease legal action over Microsofts monopolistic practices in U.S. District Court here. A separate proceeding consisting of non-settling states will begin before this court next week to argue over remedies following Microsofts appeal of its verdict on the initial trial.

The judge in the case, Colleen Kollar-Kotelly, spent the day listening to arguments from the three settling parties and several of those contesting the consent decree settlement.

At days end, Kollar-Kotelly said she would consider ruling on this case without waiting for the outcome of the case going to trial next week.

"This is a very important and complex case which deserves and will receive careful and thoughtful attention before I rule," Kotelly said.

Sticking to what has been its signature all throughout the case, Microsoft, of Redmond, Wash., kept to tough talk amid an environment where nearly all of the briefs filed with the court for this hearing said the settlement did not go far enough to benefit consumers.

John Warden, Microsofts lead attorney in the case, argued that Microsoft went far beyond what might have been the outcome of a litigated outcome of the case.

"Microsoft believes a litigated decree would be narrower than the one before the court, if there was one, even after a Supreme Court review," Warden said.

He said Microsofts coverage of middleware in the decree goes beyond what the U.S. Court of Appeal and U.S. District Judge Thomas Penfield Jackson identified in their judgments on the case. He also said provisions with Microsofts OEMs go "well beyond" the issues of the earlier decisions and provisions regarding the licensing of Microsofts communications protocols go "far outside the scope of the case tried."

Warden argued that without a finding of causation in the case, the government could only seek relief in the form of an injunction to remedy anticompetitive behavior. He said the consent decree achieves this.

"The government faced a hurdle as to causation," Warden said. "There has been no proof of cause and effect."

Moreover, Warden said the "plaintiffs dropped their demand for a breakup because it would have been both futile and wrong to pursue it. And they decided against a re-trial because that was at best an uphill fight."

Warden said Microsoft agreed to settle because the parties had been urged repetitively to settle, and that while the terms of the settlement were broader than Microsoft thought a litigated decree would be, "that was the cost of a settlement." Warden said Microsoft also sought to achieve some certainty about the rules going forward and to end a confrontational relationship with the antitrust authorities.

Brad Smith, Microsofts senior vice president and incoming general counsel, gave the court a PowerPoint presentation to describe what Microsoft is doing to comply with the decree, stating that the company made many overtures, such as those toward OEMs, immediately following the Court of Appeals ruling.

However, Microsoft opponents said the decree does not go far enough. Former federal judge Robert Bork, speaking on behalf of a group of Microsoft opponents known as ProComp, said the decree does nothing to benefit consumers and that if it were in place in 1995, "Microsoft would have been able to do the same things it did to Netscape Navigator and to Java," which both posed threats to Microsofts operating system monopoly. Former independent counsel Kenneth Starr, who was in the courtroom accompanying Bork, also represents ProComp

Don Flexner, an attorney representing SBC Communications Corp., warned the judge that the decree does nothing to limit Microsofts incursions into other areas, such as Internet services and possibly more, and asked that she consider this in her ruling.

But Gene Schearr, who argued on behalf of the Association for Competitive Technology, known as ACT, said the main competitors in the case are companies such as Sun Microsystems Inc., Oracle Corp, and Time Warner-America Online Inc., which are dominant in their spaces and are worried about competition. Schearr likened the situation to that of a chicken coop where chickens attack and peck at a sick or injured bird "until that chicken is no longer a competitor for the food supply." He said the competitors had little legal grounds, but were simply trying to gang up on Microsoft.

Ken Wasch, president of the Software and Information Industry Association said: "If the settlement is so good why isnt there somebody out there saying thank you DOJ, you helped me out? Why arent the dogs barking?"

William Neukom, Microsofts outgoing general counsel, who has led the companys legal strategy to this point told eWEEK: I think the proceeding is going very well for us. Its good to be on the side with the government."