Clear Win for Software Giant

The nine states seeking wider restrictions against Microsoft Corp. tried to put an upbeat face on a federal court decision Friday that largely rebuffed their efforts, upholding a settlement that had been reached by the Justice Department and other states.

But for all their pronouncements, Friday’s ruling was a clear victory for the Redmond, Wash., software giant, said antitrust experts, Microsoft competitors and others who had a stake in the outcome.

“The decision is a huge disappointment for those that would want to restore competition to the monopolized marketplace,” said Mitchell S. Pettit, head of the Project to Promote Competition and Innovation, a Washington lobby group that opposes Microsoft. The breakthrough Internet Web browser Netscape “was the greatest innovation in the 1990s. Microsoft kills it off and this judge says that’s OK. I find that astonishing.”

In a conference call with reporters, five attorneys general said their arguments and the evidence they introduced during 32 days of trial earlier this year persuaded the court to make some adjustments to “improve the settlement.”

But even they acknowledged that they came up short. California Atty. Gen. Bill Lockyer said the states urged the court to “look ahead, to look into new areas” of Microsoft domination. “Basically, the court said, ‘I can’t do that. If you want to go there, file a new lawsuit.’ ”

Given that the case already has dragged on for four years, it’s unlikely that California, eight other states and the District of Columbia would appeal, experts said, though the states’ top law enforcers indicated they would consider such an option while they study the 344-page opinion.

“We’ve been litigating long enough to know that you get some things and some you don’t,” said Iowa Atty. Gen. Tom Miller, who led the coalition challenging the settlement.

Connecticut Atty. Gen. Richard Blumenthal said the states, which have spent several million dollars pursuing Microsoft, will be reimbursed by the company for their costs under Judge Colleen Kollar-Kotelly’s ruling.

“We will continue to oversee and make sure that Microsoft follows the law,” Blumenthal said.

The states believe they won the judge’s ear on three issues, pointing particularly to one that sets up a compliance committee. Though consisting of three Microsoft board members who aren’t employees or officers, the committee would be run by a non-company compliance officer who would report violations of the settlement to the attorneys general, among others.

“The court made it clear that it will impose accountability at the highest levels,” Blumenthal said. With such a body reporting violations, added Massachusetts Atty. Gen. Tom Riley, “the final chapter is not written.”

The attorneys general also noted that Kollar-Kotelly closed some loopholes that could have let Microsoft flex monopolistic muscles. And she added “threat of retaliation” to a list of prohibitions against any Microsoft reactions to competitors.

The biggest change, however, may well be Kollar-Kotelly’s decision to assert continuing supervision of the settlement, say antitrust lawyers and experts, who debated whether she intended to assume a role similar to that of the late U.S. District Judge Harold Greene in the mid-1980s in supervising the breakup of the AT&T; Corp. telephone monopoly.

“In the ruling she expanded her powers to give her constant jurisdiction over the case,” said Ernest Gellhorn, an antitrust expert and a law professor at George Mason University law school in Fairfax, Va.

Dartmouth University professor and lawyer Carey Heckman said the judge’s expanded role gives everyone another place to take their complaints.

However, Gellhorn and other experts said the expansion of oversight authority was more a preventive measure than a punitive one. They believe that in all other respects Microsoft won nearly a complete victory.

“I don’t think she anticipates that this [oversight] will be a quasi-regulatory role for her,” said Philip Beck, a Chicago lawyer hired by the Justice Department to serve as special trial counsel in the Microsoft case. “She won’t be the czar of personal computers. But she wants every tool at her disposal to make sure Microsoft complies with her order.”