Microsoft Ruling Draws Mixed Reaction

Attorneys General for the nine dissenting states claimed a mixed victory in the wake of the judge's order – but the case may not be closed yet.

Saying a federal judges ruling improved the controversial antitrust settlement between Microsoft Corp. and the U.S. Dept. of Justice, the Attorneys General for the nine dissenting states claimed a mixed victory late Friday – but the case may not be closed yet.

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 aggresive 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.

Meanwhile, antitrust experts late Friday expressed surprise at what they considered the enormous victory federal District Court Judge Colleen Kollar-Kotelly handed Microsoft in her ruling on the landmark antitrust case.

Luanne Sacks, an antitrust expert at legal firm Gray Cary in San Francisco, said the judge had taken six long months to merely rubberstamp the settlement. She also said she disagreed with the Judges statement that the issues in the case were a tightly woven fabric.

"This is a case fraught with many holes, including the fact that it does nothing about the bundling of Internet Explorer in the Windows code, which was the subject of the tying claim. Taking off the icons from the desktop doesnt remove the code or Application Programming Interfaces (APIs), therefore it doesnt remove the incentives that are there for developers to write for Microsoft," she said.

The ruling still allows Microsoft to embark on joint ventures for new and exclusive products and it only applies to future product releases. The ruling also did not apply to non-middleware applications like Microsoft Word and Excel, she said.

Microsoft was also left "controlling the definitions of the Windows operating system in terms of what is going to determine its disclosure obligations. So they can escape their disclosure obligations by saying something was an update to prior middleware and not new middleware, an area that will be the subject of much individual interpretation. Im not sure what the Judge sees in all this that is tightly woven," she said.

Attorney General Miller said it is too early to discuss whether the states will appeal Kollar-Kotellys ruling, or possibly file another lawsuit against Microsoft. "We continue to analyze and dissect this ruling," he said.

Indeed, the states claimed victory in their push for a compliance officer to assist in the enforcement of the ruling and to oversee Microsofts adherence to the judges order. Microsoft had argued for a technical committee to be in charge of enforcement issues.

"The technical committee had severe limitations," Miller said. "Judge Kollar-Kotelly adopted our suggestion of a compliance committee -- to hire a compliance officer who will report to us. This sets a very strong tone for enforcement.

In addition to compliance, Miller said the states were able to close "loopholes" or "carve outs" in the agreement. A key provision will allow OEMs to include non-Microsoft software that launches automatically, a demand Microsoft had opposed . Another provision gives OEMs the ability to work in the boot sequence. In addition, the states claimed victory in limiting Microsofts ability to impose certain intellectual property claims in its licensing agreements.

Connecticut Attorney general Richard Blumenthal praised the decision saying, "this requires, on an annual basis, that there be certification that Microsoft is in compliance" with the order.

Blumenthal called the judges decision "historic because it marks the first time the states have improved or achieved more than the federal government" on a case the two groups fought together. "We sought more and we got more. The states can be proud of that, " he said.

But not all observers were so charitable about the ruling. Ed Black, the president of the Computer & Communications Industry Association, which filed friend-of-the court briefs opposing the settlement, said Fridays ruling was, " so bad it makes it more appealable. The weaknesses of the settlement are so glaring that an Appeals Court will need to address it again. They have already shown an understanding of the case and this is the logical place to go back to," he said.

But Mike Madison, an assistant law professor at the University of Pittsburg, said the Judge had probably made the right decision. Kollar-Kotelly had been sensitive to a difficult balancing act that required her to weigh giving Microsoft the freedom to innovate while making sure it did not behave in a predatory way and injure consumers, Madison said.

"The settlement also takes place in the context of a lot more competition for Microsofts operating system that did not exist a few years ago to any significant degree. There are thus now also other limitations on Microsofts competitive position in addition to antitrust remedies," he said.

Microsoft officials issued a statement Friday saying the order, "is a tough, but fair compromise. It imposes significant requirements on Microsoft, but it enables us to continue to innovate, and to create products that address the changing needs of our customers.

"We recognize that we will be closely scrutinized by the government and our competitors, and we will devote all the time, energy and resources needed to ensure that we meet our responsibilities," the statement said.