It’s Microsoft’s Turn as Defense Is Set to Open Case This Week

After weeks of plodding cross-examination of 12 government witnesses, Microsoft Corp. plans a swift counterattack when it begins its defense against federal antitrust charges this week.

Before Microsoft even begins to call its own lineup of 12 witnesses, company lawyers will ask U.S. District Judge Thomas Penfield Jackson to dismiss the case. The software giant will argue that America Online Inc.’s planned $4.2-billion purchase of Microsoft archrival Netscape Communications Corp. proves Microsoft faces ample competition and makes the antitrust trial moot.

Microsoft’s bid to bring a quick end to the trial will undoubtedly be rejected by Jackson, who has been unsympathetic to similar tactics earlier in the case. But the expected move symbolizes how events in the fast-moving technology industry are dramatically affecting the case, which is widely regarded as the biggest business trial since the breakup of the AT&T; telephone monopoly.

As a result, experts say they expect a much faster-paced and more rancorous proceeding as the Justice Department, 19 states and the District of Columbia confront Microsoft witnesses in hopes of proving the company has used its dominance of the software industry to stifle competition in Internet technologies.

Experts say Microsoft will try to keep its witnesses--nine of whom are company employees--from delivering the kind of damaging performance Chairman Bill Gates has given in videotaped testimony. On the tapes, which have been played throughout the 10-week-old trial, Gates has been forgetful and uncharacteristically hesitant.

“Microsoft’s executives will face vigorous cross-examination on these damaging [company] documents that the government has already introduced and that seem difficult to explain,” said Hillard M. Sterling, a Chicago-based antitrust lawyer. “Microsoft must walk the fine line between making its executives available, but really keeping the most sensitive executives and documents under wraps.”

Microsoft will begin its defense by calling its most important witness, Massachusetts Institute of Technology economist Richard L. Schmalensee. He will testify that Microsoft is not a monopoly and will attempt to paint its aggressive business tactics as not unlike those used by other companies in highly competitive industries.

Schmalensee is likely to be questioned about the AOL-Netscape deal, which he himself has spotlighted in the more than 300 pages of written testimony he has submitted to the court. He will argue that the deal, which also includes alliances with Microsoft archrival Sun Microsystems Inc., proves that Microsoft’s position of software dominance isn’t sustainable.

Microsoft’s selection of an economist as its first witness is a departure from the strategy of the government, which put its two economists on the stand toward the end of its case to bolster and recapitulate the testimony of its other witnesses.

“It is traditional to put the economist at the end of the trial,” acknowledged David Heiner, a Microsoft senior corporate attorney. “But we decided to put our economist up front. We’ve had six, seven, eight months of the government’s case and thought this was the best way to put our overall case into context.”

But some experts believe choosing Schmalensee to testify first could backfire if the government can discredit his theories or Microsoft employees testifying later in the trial fail to back him up.

In particular, government lawyers are said to be salivating at the prospects of cross-examining Paul Maritz, group vice president for Microsoft’s platforms and applications and the highest-ranking official from the company scheduled to take the witness stand.

Maritz is the author or recipient of numerous e-mails the government has introduced in the trial to illustrate Microsoft’s alleged predatory business practices. And Maritz, who will testify after Schmalensee, is likened to Gates as a thin-skinned and prickly executive who under provocation is prone to angry outbursts.

“There really is no upside to Paul Maritz,” said Rob Enderle, a senior analyst for Giga Information Group, a Santa Clara, Calif., consulting firm. “He could absolutely kill” Microsoft.

“It would have been helpful for the company to have more third parties to tell their story” of how Microsoft’s conduct benefits the market, agreed William E. Kovacic, an antitrust expert at George Washington University who has generally sympathized with the software giant.

But Microsoft attorney Heiner disagreed. “It’s more direct and persuasive to bring in the most senior guy involved with the day-to-day responsibility” of the activities in questions.

The arrival of Microsoft witnesses will intensify the courtroom spotlight on lead Justice Department lawyer David Boies.

A celebrated and respected New York antitrust attorney, Boies burnished his reputation defending IBM Corp. a generation ago during Big Blue’s protracted antitrust battle with the Justice Department.

Boies has argued that the AOL-Netscape deal “represents the elimination of a competitor to Microsoft” and is unlikely to lead to more competition for Microsoft in the computer and Internet software markets that are the focus of the case.

That notion piqued Jackson’s attention last week when the jurist--citing a Washington Post interview with AOL President Steve Case--raised questions about whether the deal would indeed foster more competition.

“The thrust of the article is that there is no intention on the part of the AOL-Netscape-Sun consortium to compete with Microsoft,” Jackson said.

In the article, Case was quoted as saying that “AOL’s merger with Netscape has no bearing on the Microsoft case, as nothing we’re doing is competitive with Windows.”

Addressing government witness Franklin M. Fisher last week after citing the article, Jackson asked the economist, “Assuming these quotes are accurate, is this consistent with your understanding of what the impact of this consortium is likely to be?”

“Certainly is,” Fisher replied, adding that “it won’t do anything to dislodge the Windows monopoly.”

Times staff writer Jube Shiver Jr. can be reached via e-mail at jube.shiver@latimes.com.