Government Won’t Block Windows XP’s Release

Concerned about a possible backlash, federal and state antitrust officials are not planning to ask a court to block the impending shipment of Microsoft Corp.’s controversial new operating system, Windows XP, government sources said.

Though the strategy could change, attorneys at the Justice Department and 18 states that are already pressing antitrust charges against Microsoft fear they would be criticized for hurting the ailing computer industry, which is counting on Windows XP to boost PC sales later this year, the sources said.

Government attorneys remain concerned about Windows XP. But rather than try to block its release with a preliminary injunction, they plan to raise the issue in coming hearings about how to punish Microsoft for its illegal behavior, according to the sources. Alternatively, the government could insist that Windows XP be addressed in any voluntary settlement.

The question of whether to seek a court order against Windows XP has been hotly debated since the June 28 ruling by the U.S. Court of Appeals in Washington, which found Microsoft had violated the Sherman Antitrust Act by abusing its power to maintain a monopoly over computer operating systems.

Windows XP is scheduled to be shipped to computer manufacturers later this month and released to the public Oct. 25. Some computer makers, including Compaq Computer Corp., said they might begin selling the software as early as September. That timetable means the government would have to move quickly if it wanted to stop Windows XP before its release.

Rivals of the Redmond, Wash.-based software company, including AOL Time Warner and Eastman Kodak, worry that Microsoft will be able to leverage its operating-system monopoly into other markets by bundling Windows XP with new features, including instant-messaging, a music and video player and digital photography software. A similar bundling of Microsoft’s Internet Explorer Web browser with the operating system was the core of the government’s original antitrust suit.

Last month, Democratic Sen. Charles E. Schumer of New York--the home state of AOL Time Warner and Kodak--called on the Justice Department and the states to take legal steps to block Windows XP unless Microsoft made changes, which the company had steadfastly refused to do.

But after weighing the issues, government antitrust attorneys are worried that seeking a short-term court order to block Windows XP would distract them from the more important goal of reaching a long-term resolution to the case, sources said.

Instead, the government plans to raise the issue in the remedy phase of the new trial, even if that means modifications can be made only to future versions of the product.

“There’s a consensus that Windows XP should be dealt with in the final negotiation,” said a government source familiar with the case, speaking on the condition of anonymity. “We don’t want to do anything that might appear to be anti-competitive.”

A spokesman for Iowa Atty. Gen. Tom Miller said the states had not made a final decision about whether to take any action regarding the release of Windows XP.

A Justice Department spokeswoman declined to comment.

The government would face significant legal hurdles if it attempted to block the shipment of Windows XP. To persuade a judge to issue a preliminary injunction, the government would need to show that the immediate consumer harm outweighed any potential benefits, attorneys said.

“It’s a demanding standard,” said UCLA law professor John Shepard Wiley Jr. He said the issue is further complicated by the fact that Windows XP is not yet available, making it difficult to prove how it might hurt competition.

It’s a dilemma the government has faced before. In 1998, the government tried to force Microsoft to separate its Internet Explorer Web browser from then soon-to-be-released Windows 98. Antitrust officials won a preliminary injunction to block the release of Windows 98, but an appeals court later overturned it.

Three years later, the government has the June 28 monopoly ruling to bolster its position. But Microsoft--which is appealing that decision to the U.S. Supreme Court--vigorously denies that features in Windows XP are affected by the ruling. And courts remain reluctant to take actions that might stifle innovation or interfere with the design of software.

“The government would take a huge political hit if they tried to block Windows XP,” said James Gattuso, vice president for policy at Competitive Enterprise Institute, a free-market advocacy group that has supported Microsoft.

Even staunch critics of Windows XP worry an attempt to block it might backfire by upsetting computer manufacturers.

“Every single PC company would be up in New York with a big press conference,” said a lobbyist for a technology firm. “You would lose some attorneys general over it.”

But David Turetsky, a Washington antitrust attorney who worked in the Clinton Justice Department, said that if the Justice Department and the states believed Windows XP was anti-competitive, “they have a duty to try to block it, before Microsoft gets a chance to dig in.”

It’s also possible, though unlikely, that one or more of Microsoft’s rivals might file a private lawsuit seeking a preliminary injunction to halt Windows XP.

Software maker InterTrust Technologies, based in Santa Clara, Calif., has already asked a federal court to delay Windows XP, claiming the operating system violates InterTrust’s patents.

But legal experts say courts would be even more reluctant to act on behalf of a private competitor, which would have to demonstrate that the release of the product would cause it immediate irreparable harm.