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Court deals Microsoft setback

A federal judge issues a temporary order forbidding Microsoft from requiring licensees of Windows 95 to carry Internet Explorer.

    A federal judge has issued a temporary order forbidding Microsoft (MSFT) from requiring Windows 95 licensees to carry the Internet Explorer Web browser.

    U.S. District Judge Thomas Penfield Jackson ordered the company See special report: MS-DOJ case in court to "cease and desist" from the practice, which is at the heart of a case the Justice Department brought against the company in late October. At that time, the government requested that Microsoft be found in contempt of court and fined $1 million a day.

    In the 19-page ruling, Jackson denied for the moment the request, saying the government has yet to prove its case. But he went on to say that the government "appears to have a substantial likelihood of success" in the case and issued the preliminary injunction pending a resolution, which isn't likely for at least six months.

    A major question that has loomed in the case is whether the action will apply to Windows 98, which is slated for release in the second quarter of next year. Many of the facts in the case hinge on the specifics of Windows 95, leading some to wonder if the legal outcome will have any long-term significance.

    Those concerns have been put to rest for now because of the extraordinarily broad wording of Jackson's injunction. It forbids Microsoft from "licensing the use of any Microsoft personal computer operating system software (including Windows 95 or any successor version thereof) on the condition, express or implied, that the licensee also license and preinstall any Microsoft Internet browser software (including Internet Explorer 3.0, 4.0, or any successor versions thereof) pending further order of the court."

    Nevertheless, both sides publicly praised parts of the ruling by highlighting selective points. "We're pleased Judge Jackson has agreed with Microsoft that more facts are necessary," Microsoft spokesman Greg Shaw said. He added that the company is viewing the decision as "preliminary," meaning that Jackson's injunction ultimately would be rescinded.

    Doug Melamed, the No. 2 attorney in the Justice Department's antitrust division, said he, too, was pleased with today's action. "It's a judicious ruling," he told CNET's NEWS.COM. Jackson "wasn't prepared to make a final decision, but by the same token, he showed he is well aware of the competitive significance of the conduct we're talking about."

    The ruling does, in fact, give both sides some reason to celebrate. Contrary to arguments by Microsoft critics that the company is in clear violation of the decree, Jackson said the mountain of evidence submitted so far is still not enough to prove the case.

    "Given the present record, the court cannot conclude by 'clear and convincing evidence' that Microsoft violated a 'clear and unambiguous' prohibition found in the consent decree," the judge wrote.

    He went on to say the company's contention that a provision in the consent decree allowed it to integrate products was a plausible defense. The company provides "a reasonable explanation for [the] understanding that the consent decree did not preclude Microsoft's insistence that [original equipment makers] accept IE as part of Windows 95," he said.

    But in a boost to the government, Jackson was quick to note that Microsoft clearly is not out of the woods yet. "Although the government has not satisfied the evidentiary burden necessary to sustain a finding of contempt, it does not necessarily follow that Microsoft's licensing practices are, in fact, in compliance with the terms of the [consent decree]," Jackson wrote.

    Even though Microsoft's interpretation of the decree is plausible, the judge added, he "is also not convinced that the interpretation is the correct one."

    In court documents, Microsoft has argued that a provision allowing the company to integrate products gives it "unfettered" discretion about what it includes with its operating systems. But Jackson agreed with arguments the Justice Department has made in its court papers, writing that "adopting Microsoft's interpretation would appear to render [the decree] essentially meaningless."

    In issuing the preliminary injunction, Jackson noted Microsoft's plans to require all PC vendors to preinstall IE 4.0 by February as a condition of licensing Windows 95, adding that the potential for Microsoft to abuse its monopoly in the operating system is too great.

    "The probability that Microsoft...might also acquire yet another monopoly in the Internet browser market is simply too great to tolerate indefinitely until the issue is finally resolved," Jackson wrote.

    The judge has also said he will appoint an expert in computer law to conduct a lengthy fact-finding phase before reaching a final decision. The "special master" will have until the end of May to gather further evidence in the case and issue a recommendation to the court. Pending the report by Lawrence Lessig, a University of Chicago law professor now on leave at Harvard Law School, Jackson is likely to take no further action in the case.

    Jeffrey Kingston, an antitrust attorney at San Francisco's Brobeck, Phleger, & Harrison who has done battle with Microsoft before, applauded the ruling. "The interesting thing here is the horrible tragedy that has been averted had [the decision] come out the other way," he said. "Microsoft would have been incredibly emboldened if they had won."