Microsoft Ruling: Everybody Wins

Last week's unanimous appeals court decision overturning substantive portions of the Microsoft antitrust verdict took everyone by surprise.

Last weeks unanimous appeals court decision overturning substantive portions of the Microsoft antitrust verdict took everyone by surprise. Anticipating a complete victory for Microsoft, reporters had already lined up industry wags and economists to rail against the ruling as the death of antitrust enforcement. Pro-Microsoft observers were ready with press releases gloating over the appeals courts presumed drubbing of the Department of Justice.

Instead, the court delivered a ruling that set us all to scratching our heads. We in the media love a winner, need a loser. We dont deal well with shades of gray or ambiguous abstraction. But thats just what the U.S. Court of Appeals for the District of Columbia Circuit delivered, and anyone who read the decision had to come away impressed by its even-handedness. It restores faith in a judicial system agile enough to apply fin de siècle antitrust laws to the rapidly moving target of 21st-century technology.

This was a just and balanced decision, tainted by neither political doctrine nor judicial activism. Far from threatening antitrust law, it affirmed it.

While recognizing the fact that Microsoft had clearly acted illegally to protect its Windows monopoly, the judges wisely set aside other portions of the verdict, as well as the Draconian remedies imposed by Judge Thomas Penfield Jackson — most important among them, the breakup of Microsoft into three independent companies.

For that reason, Microsoft rushed to claim victory. Chairman Bill Gates announced that the ruling freed Microsoft to proceed full-speed on the development of Windows XP, which incorporates Microsofts multimedia platform just as Windows 98 had incorporated the Internet Explorer browser. But champagne toasts in Redmond may be premature. If Microsoft can be said to have won at all, it was a paradoxical, hollow victory — the equivalent of being told, "Youre guilty of being the playground bully, but we think hanging you is a bit extreme."

Yet neither was it a victory for the DOJ, which got none of the remedies it sought and will have to retry two parts of the case that were remanded to a lower court. The issue of "tying" that arose from Microsofts having incorporated the Internet Explorer browser into Windows will be revisited, as will the entire remedies phase of the trial — that is, determining what steps must be taken to keep the bully on a leash. If this indeed turns out to be a win for Microsoft, it will only be because the Bush DOJ has no stomach for prolonging the fight.

Fortunately for those of us in the no-shades-of-gray media, the ruling clearly pointed to one loser. Jacksons behavior during the second half of the trial and during the remedies phase was so blatantly biased that, had his decisions stood, they would have forever blemished the legal certainty of the case and added only confusion to antitrust jurisprudence.

Clearly, there are times when government and the courts have not just the right, but the obligation to force the breakup of predatory monopolies. But it is a remedy so drastic, so disruptive of the traditions undergirding our free-market system that we cannot suffer even a hint of bias on the part of those who impose it. In this case, the appeal panel ruled, Jackson had not only rushed the case, but "seriously tainted the proceedings" in his public comments about Microsoft and its executives.

But this doesnt mean that Microsoft walks. Should the DOJs current antitrust division choose to pursue the case rather than negotiate a settlement, another judge, hopefully less partial, will hear a new penalties phase of the trial and determine new remedies.

The subtleties of the ruling appear lost on Microsoft, which is not surprising, given its lawyers clumsy handling, throughout the trial, of what should have been a worthy defense. This is a company that clearly has not learned its lesson. While it may assume it will get a free ride from the current administration, its assertions of victory and business as usual last week are almost certain to antagonize the career legal professionals who will determine the DOJs next step.