Court to Hear Microsoft Appeal

WASHINGTON -- A federal appeals court has agreed to hear an appeal of the settlement in the Microsoft Corp. antitrust case, raising hopes among some of the company’s adversaries that jurists may impose stiffer controls on the way the software giant does business.

The U.S. Court of Appeals in Washington told attorneys representing Massachusetts and West Virginia this month that it would hear their appeal of a lower court ruling that signed off on most of the provisions in a controversial settlement between Microsoft and the Justice Department.

That Nov. 1 ruling by U.S. District Judge Colleen Kollar-Kotelly capped a nearly four-year-long antitrust battle between the Redmond, Wash.-based company, the federal government, 18 states and the District of Columbia. Massachusetts and West Virginia appealed the ruling after deciding that the penalties in the settlement weren’t sufficient to rein in the practices of the world’s biggest software company.

Michael Morris, senior vice president and special counsel for Microsoft archrival Sun Microsystems Inc. said Wednesday that he “was pleased that the matter is going to be heard” and held out “hope ... that the case is still alive.”

A Microsoft spokesman, however, described the appeal as “simply a procedural matter” and predicted nothing would come of it.

“Parties have the right to appeal,” spokesman Jim Dessler said. “It’s really nothing beyond that. The district court thoroughly went over these issues months ago. Our focus now is on fully complying with the terms of the judge’s order.”

To prevail in the U.S. appeals court, Massachusetts and West Virginia would have to show that the remedies imposed by Kollar-Kotelly are insufficient to encourage competition in the market for personal-computer operating software. Microsoft’s flagship Windows product runs more than 90% of all PCs.

Kollar-Kotelly imposed relatively mild sanctions on Microsoft that required the company to release more technical information about its software products to competitors and refrain from punishing computer makers that install non-Microsoft programs for tasks such as surfing the Internet or listening to digital music.

The provisions in the settlement Kollar-Kotelly incorporated into her ruling can’t be thrown out, but the appeals court could impose additional sanctions on top of them.

In a March 13 order that was overshadowed by news of the war in Iraq, the appeals court said it would grant an “en banc” hearing, meaning all 11 judges will be asked to hear the case at once. The three-page order requested final briefs from Microsoft and the states by Aug. 6 and set oral argument for Nov. 4.

Although the appeals court is required by law to reconsider Kollar-Kotelly’s decision, legal observers said it was unusual for all of the court’s judges to sit in judgment of the ruling.

Antitrust expert Ernest Gelhorn, a law professor at George Mason University in Fairfax, Va., said the en banc hearing represents a significant break for the states that are still fighting the case.

“If I were the plaintiffs, I’d be encouraged,” he said.

Others, however, focused on the fact that the court isn’t rushing to hear the case.

“If they are not hearing the case on an expedited basis, I wouldn’t attach much significance to it,” said Andrew Gavil, a Howard University law professor and antitrust expert.

Doug Davis, an assistant attorney general for West Virginia, said the court schedule was “fairly close” to the timetable his state and Massachusetts requested. “Our office is very pleased.”

In February, the Justice Department signaled that it would make a court filing in opposition to the appeal being pursued by the two states. Microsoft is also fighting a broad new antitrust complaint filed by Sun and other powerful technology companies with the European Commission.

Microsoft shares dipped 24 cents to close at $25.25 in Nasdaq trading Wednesday.