The Empire Strikes Back

Microsoft's brief seeks to send antitrust case back to District Court and calls for a new judge.

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The U.S. Court of Appeals, in Washington, is likely to send the Microsoft Corp. antitrust case back to the District Court for further proceedings, and the software company may well get its wish that the case be heard by a different judge, antitrust experts said.

Microsoft last week filed a 150-page brief with the appellate court in which it launched a stinging attack on the way Judge Thomas Penfield Jackson handled the antitrust case against the Redmond, Wash., company in the District Court. Microsoft said the proceeding was "infected with error" and, accordingly, called on the appellate court to remand any of the "plaintiffs surviving claims" to a new trial before a different district judge so as to preserve the appearance of justice.

The brief also criticized Jacksons public comments about the case both during and after the trial, which it said violated the Code of Conduct for United States Judges. Jacksons comments on the merits of the case "compromised the appearance of impartiality, if not demonstrating actual bias against Microsoft," the brief said. The District Courts conduct in the trial also was "highly unusual and prejudicial" to Microsoft, repeatedly changing the rules of the game, "always to Microsofts detriment," the brief claimed.

Microsoft asks that surviving claims be remanded to a new trial before a different district judge. Legal experts believe this is likely. John Stuart Smith, chairman of the antitrust division at legal firm Nixon Peabody LLC, in Washington, said it was almost certain that the appellate court will return the matter to the District Court for further proceedings and to reshape the relief provision. This is expected to include a recommendation that the case be heard by another judge. "The Court of Appeals is likely to be concerned by the evidence of Jacksons rush to judgment, and I think the government will have a hard time justifying this," Smith said.

The Department of Justice was guarded in its response. Spokeswoman Gina Talamona said Jacksons judgment was "well-supported" by the evidence offered during the 78-day trial. "We are confident in our case," Talamona said.

But Microsoft disagreed, saying the primary argument of its appeal revolved around the fact that the governments lawsuit and the District Courts rulings reflected a clear misunderstanding of antitrust laws.

The District Court had condemned Microsofts competitive response to the growth of the Internet and to Netscape Communications Corp.s emergence as a platform competitor—conduct that had produced "enormous consumer benefits," the brief said.

"Even accepting the District Courts findings of fact, Microsoft must win on liability because there is no exclusion of competing products from consumers," the brief said. The District Court had branded Microsofts conduct anti-competitive even though it recognized that Microsoft did not foreclose Netscape from the marketplace.

The District Court also erroneously held that Microsofts design of Windows to include Web browsing software constituted a tie, the brief said. This claim failed because Windows and Internet Explorer were not "separate products" under any rational test because the inclusion of IE in Windows improved the product, satisfying pervasive demand for Internet-related functionality, the brief said.

The District Court also mistakenly held that Microsoft maintained a PC operating system monopoly, according to the brief. Microsoft strongly disputed this finding, saying it could not control prices or exclude competition and thus did not possess monopoly power in a properly defined market.

The brief further argued that the District Court erroneously held that Microsoft attempted to monopolize the browser market. The company claimed that it did not act with a "specific intent" to monopolize but rather sought to prevent Navigator from dominating the browser market.

In conclusion, the brief said that the relief entered "cannot stand, for both procedural and substantive reasons," particularly as the District Court refused to hold an evidentiary hearing and allow Microsoft to present evidence on relief. It had also failed to make findings to support the relief entered, relied on improper factors and information outside the record, and admitted deference to the plaintiffs proposed remedy, according to the brief.

Accordingly, the District Court was not at liberty to enter sweeping relief over Microsofts objection without conducting an evidentiary hearing and allowing Microsoft to present evidence on all disputed issues, the brief said.

The Justice Department has until Jan. 12 to submit its response to the brief, after which Microsoft may again reply. The appellate court will then hear oral arguments in February.