Government Hands Its Case Against Microsoft to Judge

Government lawyers on Tuesday asserted that Microsoft Corp. engaged in a “broad pattern of unlawful conduct” to squelch competition in the personal computer operating systems business.

Distilling 76 days of testimony into 776 pages of “proposed findings of fact,” the U.S. Justice Department, 19 states and the District of Columbia submitted the massive document to presiding U.S. District Judge Thomas Penfield Jackson to support their claim that Microsoft engaged in anti-competitive behavior to fortify its Windows monopoly.

The government said Microsoft integrated its Internet Explorer Web browser and other software into Windows--the software that runs more than 90% of all personal computers--in an attempt to extend its dominance to emerging markets for new Internet software technologies.

Microsoft, in its own 442-page court submission, countered that its actions were legal and that the government failed to produce evidence that consumers have been harmed. Microsoft argued that by melding its Net Explorer browser to Windows, consumers benefited from easier software installation and “a more engaging way to view information about the operating system.”

The presentation of findings of fact marks the start of the final phase of the antitrust trial that began last October. Testimony ended June 24.

Though the findings of fact are not a make-or-break document, “they are very important” and are “not taken lightly by either side,” said William E. Kovacic, an antitrust expert and law professor at George Washington University. “Neither side can pull any rabbits out of their hats at this juncture,” he said. “These filings are the principal occasion to pour a cement foundation for the factual record.”

After reviewing the filings, Jackson will draft his own findings of fact, which will form the basis for conclusions of law. His conclusions are particularly important, experts say, because appeals courts seldom question a judge’s findings of fact.

If it is found to have violated the law, Microsoft could face sanctions ranging from fines to a breakup of the company.

In its court papers, the government asserted that Microsoft “possesses a dominant, persistent and increasing share of the market for operating systems” for PCs.

Quoting often from the testimony of many of the trial’s 30 witnesses, the government said Microsoft’s market share reflects “monopoly power.” That power, the government argued, was fortified by an anti-competitive campaign that began on June 21, 1995, when Microsoft allegedly proposed an illegal division of the Web browser market with rival software firm Netscape Communications.

Since then, Netscape has been purchased by America Online--a point that Microsoft argued bolstered its claims of competition in the Internet browser market.

But the government said that Microsoft’s campaign broadened to “curtail other actual or potential . . . threats to its operating system monopoly.” Other targets included Sun Microsystems’ Java computer programming language, Apple Computer’s QuickTime multimedia program and software that Intel was developing to provide sound and video support for PCs, the government alleged.

Microsoft denied any market-division proposal was made, saying that the meeting between its executives and Netscape officials focused on “technical issues.”

Noting that Netscape Chief Executive Jim Barksdale appeared “forceful” and “confident” while testifying in the antitrust trial last fall, Microsoft went on to observe in its filing that “it is hard to imagine that such a person would sit through a purported ‘market-division’ proposal . . . and then calmly participate in hours of essentially dry technical discussions.”

But Microsoft lawyers think one of their strongest arguments may be that the government failed at trial to even identify what software components make up the Explorer browser. Microsoft argues that Internet Explorer is so integrated into Windows that it cannot be removed without damaging the operating system.

Microsoft shares fell 88 cents Tuesday to close at $82.94 in Nasdaq trading.