Prosecutors Brace for Reversal of Microsoft Breakup Order

After a second day of tough questioning by a skeptical appeals court, government prosecutors began bracing Tuesday for a reversal of their hard-won order to break up Microsoft Corp.

In oral arguments before a seven-judge panel of the U.S. Court of Appeals for the District of Columbia, several judges challenged the government’s claim that Microsoft attempted to monopolize the market for Internet browsers. Questions and comments from four of the judges indicated they might scale back the government’s case and send it to a lower court for additional proceedings.

The court telegraphed its skepticism so clearly during parts of the oral arguments that Microsoft’s lead lawyer, Richard Urowsky, waved off the court’s offer of rebuttal time, confident that the judges had done his work for him.

Court observers said the appeals court’s criticism of the government’s case represented one of the most relentless attacks on a federal antitrust effort in recent memory.

“It’s been a tough two days,” said Kevin J. O’Connor, an assistant Wisconsin attorney general, who wrote many of the government briefs in the case.

“I don’t think we are going to see a breakup,” said George Washington University law professor William E. Kovacic, who has followed the case. “This is not the kind of reception the government would want.”

The Justice Department, joined by 19 states and the District

of Columbia, sued Microsoft for alleged antitrust violations. In June, District Judge Thomas Penfield Jackson ruled in favor of the government and ordered Microsoft split in two.

After his ruling, Jackson compared Microsoft’s proclamation of innocence to those by four members of the Newton Street Crew who were convicted in a racketeering, drug-dealing and murder trial over which he had presided. He also compared its billionaire chairman, Bill Gates, to Napoleon.

Microsoft appealed, and Jackson’s order was delayed while the appeal went forward. The appeals court has issued no timetable of action, but former independent counsel Kenneth Starr, who served on the appeals court from 1983 to 1989, said the seven judges are likely to meet as early as this week to hash out their sentiments about the case and could deliver a written opinion within the next few months.

In reaching a decision, the appeals court must determine at least four issues argued by the government and Microsoft over the last two days:

* Did Microsoft bully rivals to protect its dominance in the market for personal computer operating systems?

* Did Microsoft try to monopolize the market for Internet browsers?

* Did the company compete unfairly against archrival Netscape by illegally bundling its Internet Web browser with its ubiquitous Windows software?

* Do any of Jackson’s controversial statements warrant removing him from additional proceedings?

Government lawyers sought unsuccessfully to keep Jackson’s comments out of the appeal. “I’m not sure how you can ask us with a straight face” not to consider possible bias in Jackson’s comments, Judge David Sentelle told John Roberts Jr., the Washington antitrust attorney hired by the District of Columbia and the 19 states.

The court also could determine which sanctions should attach to any finding of antitrust violations by Microsoft. Or the court could send this issue back to the district court.

Kevin Arquit, a former general counsel for the Federal Trade Commission who supports the government’s case, said he was heartened by comments from several judges who indicated some support for the government’s monopoly-maintenance claim. Arquit said that despite the appeals court’s misgivings about Jackson’s handling of the case, it is unlikely the appeals court would overturn Jackson’s entire ruling solely on the basis of his alleged bias.

But Sentelle indicated that Jackson’s handling of the case called for more proceedings to correct procedural oversights.

“If there isn’t a proper finding . . . we would have to at least send this back for some trial judge to weigh the facts, wouldn’t we?” Sentelle asked.

Steven Holley, a Washington lawyer hired by Microsoft to argue the remedies issue, told the appeals court Tuesday that a breakup and other restrictions on Microsoft’s business practices ordered by Jackson were not warranted because Microsoft was not given an opportunity to rebut the government’s recommended remedies.

“There was a rush to judgment,” Holley said.