An Unexpected Source Gives Microsoft a Lift

The chief economics witness for the states in the Microsoft antitrust trial Monday refused to endorse key portions of their plan to punish the software giant as the states rested their case on a lackluster note.

Under cross-examination by Microsoft attorney Michael Lacovara, UC Berkeley economics professor Carl Shapiro said he didn’t endorse a state proposal that would require Microsoft Corp. to give rivals rights to the MSN Explorer browser used by subscribers of a Microsoft Web service that competes with America Online.

He said the disclosure “would be an inappropriate taking of Microsoft’s intellectual property.”

Shapiro also said a similar state proposal that would require Microsoft to publicly disclose the software code for Windows, Internet Explorer and some other products for 10 years risks slowing innovation and creating incompatible software.

Citing the experience of Netscape, which began disclosing its source code in 1998, Lacovara got Shapiro to acknowledge that the states’ remedy was potentially harmful to innovation.

“Some reviewers said that [open source] Navigator was the worst piece of software that year,” Lacovara said.

Shapiro, a onetime Justice Department economist, acknowledged Netscape’s experiment “didn’t come out very well.”

Although Shapiro did embrace some other state sanctions, his reservations about several of their key proposals represented the biggest blow yet to the nine states that refused to go along with the Justice Department’s antitrust settlement with Microsoft.

“It seems to me he didn’t help the states a whole lot,” said Robert H. Lande, a University of Baltimore law professor who listened in on Shapiro’s testimony Monday and has been sympathetic to the states’ case.

The states’ setback was tempered somewhat later in the day, when the Justice Department filed a brief supporting the right of the holdout states, led by California and Iowa, to continue their case.

In November, the Justice Department joined nine other states in reaching an out-of-court settlement with Microsoft and ended their litigation against the software giant.

But the antitrust dispute lives on in an unusual remedies trial that began March 18 before U.S. District Judge Colleen Kollar-Kotelly.

The trial was ordered by a federal appeals court that last year upheld a lower court ruling that Microsoft violated antitrust laws by using its flagship Windows software--which runs 90% of all personal computers--to thwart competition from Netscape Navigator, a rival Internet Web browser.

The trial, which is expected to last for two months, is being held to determine what additional punishment, if any, Microsoft should face.

The states argue that the software giant should face tougher remedies than have been proposed in the Justice Department settlement accord.

But Microsoft argues that the states suffered no “state-specific” antitrust injury and that permitting them to proceed with their remedies claims runs contrary to the notion of the federal government as the enforcer of U.S. antitrust law.

In its 32-page brief, however, the Justice Department said Judge Kollar-Kotelly may “properly inquire” into “whether a small group of states are the parties best situated to obtain relief of such broad reach and implication.”