Microsoft Dispute Enters Final Phase
After nearly four years of litigation and legal brinkmanship that reverberated from Silicon Valley to the European Union, the landmark antitrust case against Microsoft Corp. is entering its closing phase today.
The antitrust dispute between the world’s largest software company and the federal government, 18 states and the District of Columbia has been a seesaw battle that has defied resolution--even after a federal court declared Microsoft an illegal monopoly in 2000.
But today, U.S. District Court Judge Colleen Kollar-Kotelly begins an unusual set of parallel proceedings to finally determine how to punish Microsoft. Her goal is to find sanctions that prevent the software giant from abusing its monopoly power by leveraging its flagship Windows software--which runs more than 90% of all personal computers.
Experts say resolution of the biggest antitrust case since the breakup of Standard Oil a century ago could establish important legal precedents and influence the development of Information Age technology.
“The Windows platform is not only a platform for how we work our computers but, increasingly, for how we communicate with each other,” said Blair Levin, a former chief of staff of the Federal Communications Commission and now a technology analyst for Legg Mason Wood Walker Inc.
The quest for closure starts with a hearing today to examine a settlement reached in November between the Justice Department, half the states and the Redmond, Wash.-based software giant.
On Monday, Kollar-Kotelly is scheduled to begin a separate proceeding with nine dissenting states, including California, and the District of Columbia that say the settlement is full of loopholes.
On Tuesday, Microsoft asked for a delay in those proceedings.
How Kollar-Kotelly will take these two conflicting paths to reach a resolution has legal scholars scratching their heads. Besides the two proceedings, the judge also must consider about 30,000 public comments on the settlement accord.
“We are talking uncharted territory here,” said Ernest Gelhorn, an antitrust professor at George Mason Law School in Fairfax, Va. “This case is going to be a challenge to resolve.”
The antitrust case dates back to 1998, when the Justice Department and state regulators filed their suit against Microsoft.
U.S. District Judge Thomas Penfield Jackson presided over the case and, after nearly two years of trial, issued findings that Microsoft was in violation of antitrust laws.
In the penalty phase of the trial, Jackson ordered the company broken into two.
After a year of more legal maneuvering, the U.S. Court of Appeals in Washington threw out Jackson’s breakup ruling and ordered a new penalty phase.
It also disqualified Jackson from presiding over the proceedings because of “repeated, egregious and flagrant” violations of judicial ethics. Judge Kollar-Kotelly was named in August to replace Jackson.
In November, the Justice Department and nine states agreed to settle the antitrust case. But nine other states and the District of Columbia refused to join the accord, arguing for tougher antitrust penalties.
Now, it is up to Kollar-Kotelly to resolve the conflict. In court today, lawyers for Microsoft and the Justice Department’s antitrust chief, Charles A. James, will urge Kollar-Kotelly to endorse their settlement as the best way to ensure competition and innovation in the software industry.
Under the federal Tunney Act, the judge must find the accord is in the “public interest.”
The settlement calls for Microsoft to disclose the technical details of the Windows computer code that enables the PC operating system to work with products from rival software developers.
In addition, Microsoft no longer will be able to bar computer makers from installing or displaying certain non-Microsoft software--such as Web browsers and a few other programs--on the Windows desktop computer screen or start menu.
Microsoft also must license its software on uniform terms and is barred from retaliating against any rival for “developing, distributing, promoting, using, selling or licensing” certain software that competes with Windows.
The Tunney Act hearing on the settlement accord is expected to be wrapped up in a matter of days.
But Kollar-Kotelly has penciled in more than five weeks of hearings on the additional antitrust sanctions the nine dissenting states are seeking.
With a reputation as a careful jurist, Kollar-Kotelly is likely to reserve final judgment in the Microsoft antitrust case until late spring or early summer, experts say.
The dissenting states say the Justice Department settlement doesn’t go far enough in reigning in Microsoft’s monopoly power.
They want the company to produce a modular version of Windows that would allow PC makers and consumers to substitute rival software products for Microsoft programs without impairing the Windows computer operating system.
“The revisions don’t change the fundamental nature of the settlement--nor the fundamental flaws so many have found in it,” Iowa Atty. Gen. Tom Miller, one of the leaders of the dissenting states, said after the modifications were announced.
To press their case in the trial with the dissenting states, Microsoft has hired former Iran-Contra prosecutor Dan K. Webb.
The high stakes of the proceeding with the dissenting states also are reflected in the breadth and high profiles of scheduled witnesses. The witnesses range from academicians to telephone and computer executives and also may include Microsoft Chairman Bill Gates.
In contrast to the first antitrust trial, during which he did not take the stand, Gates recently has indicated his eagerness to testify.
Microsoft executives have acknowledged their need to change their business practices. But they staunchly defend their ability to add new features to Windows as crucial to the vitality of the personal computer industry.
“The proposal put forward by the non-settling states would not be a decree that I would know how to comply with,” Microsoft Chief Executive Steven A. Ballmer said in a deposition last month. “I actually think we would need to withdraw the Windows product from the marketplace.”
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Times staff writer P.J. Huffstutter contributed to this report.
