Microsoft Wants Case Dropped

Microsoft Corp.’s top lawyer called on the government Tuesday to end its landmark antitrust trial against the company, contending that America Online Inc.’s purchase of Netscape Communications Corp. knocks the legs from under the government’s case.

Speaking outside the U.S. District Court here, Microsoft General Counsel William Neukom said the AOL deal “drives home the point that the marketplace can take care of consumers far better then the government ever can.”

However, Neukom and Microsoft’s lead trial lawyer, John Warden, said Microsoft had no immediate plans to file a motion to dismiss the case. And most experts believe that Microsoft is unlikely to get a hearing from U.S. District Judge Thomas Penfield Jackson on any dismissal request until the government rests its case.

Justice Department trial lawyer David Boies took issue with the idea that the America Online deal undercuts the government’s case. He noted that AOL said it will continue to integrate Microsoft’s Web-browsing software into its service, and he said the demise of Netscape as an independent company will be bad for competition.

“The fact that Netscape has been forced to exit the business of providing browsers is evidence, to an extent, of what we are saying” about the dominance of Microsoft, Boies said.

Microsoft’s bid to capitalize on the AOL acquisition of Netscape came as the software giant enjoyed one of its best days in court in the 6-week-old trial.

In a departure from the occasional humiliations that Microsoft has endured from the government’s six previous witnesses, the rambling testimony of the government’s latest witness, economist Frederick Warren-Boulton, gave Microsoft a new lease on life in the eyes of some observers.

Warren-Boulton’s forgetfulness and inability to grasp questions had Justice Department lawyers openly moaning about his performance in the hallway outside the courtroom.

Typical was Warren-Boulton’s answer to a question posed by Microsoft lawyer Michael Lacovara about whether Microsoft’s inclusion of Web browser software in Windows 98 caused any decrease in performance of the operating system.

“Well two points--” Warren-Boulton began.

“Can I get a ‘yes’ or ‘no’ answer,” Lacovara interrupted.

After a long pause, Warren-Boulton responded: “Can I go on at length?”

Another pause.

“Actually I have lost my train of thought,” Warren-Boulton continued before adding, “What is the question again?”

Warren-Boulton, who served as the chief economist of the Justice Department’s antitrust division during the Reagan administration and now has his own consulting firm, is a key witness. He is one of two economists the government is depending on to convince the court that Microsoft is a monopoly and is likely to use its power to extend its software monopoly to other technologies.

The economist did score several points. He argued that Microsoft’s monopoly power made possible “astonishing” profit margins of 38.5%. He also gave examples of how Microsoft’s business practices harmed consumers.

The government also released more evidence documenting how Microsoft does business. A Microsoft contract with entertainment powerhouse Disney Online called for Disney to promote and distribute, in some cases exclusively, Microsoft’s Internet Explorer browser in exchange for giving Disney a coveted spot on the Window 98 desktop with other selected Internet sites.

But other evidence introduced by the government indicated Microsoft officials were worried about how to persuade Internet service providers to adopt its Web browser because the company couldn’t exert influence over them.