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Microsoft Settlement Is Questioned

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Times Staff Writer

A federal appeals court Tuesday sharply questioned key provisions of Microsoft Corp.’s landmark antitrust settlement but gave few hints about whether it might impose tougher penalties on the software giant.

During a three-hour hearing, a six-judge panel of the U.S. Circuit Court for the District of Columbia expressed concern that the pact struck two years ago had failed to spur more competition in a software market where Microsoft’s flagship Windows operating system runs more than 90% of all personal computers.

But the judges were uncertain how much leeway they had to second-guess U.S. District Judge Colleen Kollar-Kotelly, who last year upheld Microsoft’s settlement with the Justice Department and 19 states.

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The deal was intended to end the government’s pursuit of Microsoft for abusing its monopoly power and to make it easier for computer makers to install competing software on the PCs they sell.

Attorneys for Massachusetts, the only remaining plaintiff from the original antitrust suit, and two software industry trade groups argued that Microsoft still had a stranglehold on the market, and urged the appeals court to impose tougher sanctions.

“You may think that’s inadequate, and I may agree with you,” Judge David S. Tatel told Robert Bork, a former appeals court judge representing the trade groups. “But don’t we owe some deference to the Justice Department’s judgment about that?”

Microsoft lawyer Michael Lacovara said the settlement and sanctions already in place were tough enough. “The decree does not simply say go forth and sin no more,” Lacovara said.

Steven Kuney, a Washington lawyer who argued on behalf of Massachusetts, pressed the court to force Microsoft to release the code for its Internet Explorer Web browser and allow PC manufacturers to remove Explorer from Windows without crippling the operating system.

Kuney said that computer makers had little incentive to install competing browsers and that developers would have no incentive to write software that works with competing products because Microsoft had integrated so many features into Windows.

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Judge Harry Edwards asked whether making Internet Explorer’s source code widely available would make the browser “totally ubiquitous.”

“You would have placed Internet Explorer everywhere with your ‘open-source’ remedy,” Edwards told Kuney.

Kuney countered that his proposal would instead create independent versions of the browser for Windows and other operating systems that would be controlled by Microsoft competitors.

In a news conference outside the court after the hearing, Massachusetts Atty. Gen. Tom Reilly told reporters that he believed the questioning by the judges indicated deep concern about the effectiveness of the antitrust agreement.

“They appeared bothered by” the lack of competition, Reilly said. “And the question is, ‘Is Microsoft -- no matter how powerful they are -- going to be held accountable?’ ”

Microsoft is still being investigated by the European Commission, which has scheduled a Nov. 12 hearing in Brussels to review complaints about Microsoft’s business practices.

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Microsoft shares fell 61 cents, or 2%, to $26.07 on Nasdaq.

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