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Findings back Microsoft into a corner

Judge Thomas Penfield Jackson's stinging 207-page findings of fact in the Microsoft antitrust trial opens a Pandora's box of legal problems for the software giant.

A settlement may not be just the best option for Microsoft. In many ways, it may be the only option.

Judge Thomas Penfield Jackson's stinging 207-page findings of fact in the Microsoft antitrust trial, released Friday, opens a Pandora's box of legal problems for the software giant. The harsh tone of the document strongly indicates that a breakup of the company, and even legislation, could emerge as the most likely remedies if the case proceeds. In addition, the document serves as a factual record that others could use in private civil suits.

A settlement, which many authorities say Jackson has been pushing for, could circumvent these problems, said legal experts. Others, however, have said that Jackson may have gone so far in his findings that Microsoft has little room to maneuver.

"Just the monopoly power is significant alone, because just that findings of fact creates a shortcut for follow-on litigation," said Dana Hayter, an intellectual property and antitrust attorney with Fenwick & West in San Francisco.

"If someone feels they've been damaged during the time period these findings of facts cover, they don't even have to prove that anymore. The government has done it for them," Hayter said.

Once the judge issues his conclusions of law, essentially a verdict, the findings of fact could be used for a wide range of civil cases against Microsoft, University of Baltimore Law School professor Bob Lande said.

Microsoft also faces the possibility of a harsh remedy imposed by the judge, said antitrust experts.

"A structural remedy is preferred as a matter of antitrust law, because the Supreme Court has held as far back as the Standard Oil case that injunctive relief--relief that says 'thou shalt do this or thou shalt not do that'--is insufficient when dealing with a durable and pervasive monopoly," said Glenn Manishan, an attorney at Blumenfeld & Cohen.

A structural approach, such as breaking up Microsoft, is also the most conservative approach, Manishan said. "If the court were to opt for an injunctive decree, then the entire software industry could face a decade or more of detailed, intrusive judicial regulation."

According to Lande, "Any judge with enough guts to write such a strong opinion has enough guts to break up Microsoft." That is something Microsoft had better worry about, he added.

In an earlier case, Jackson preliminarily ruled against Microsoft on the bundling issue only to be harshly rebuffed by an appeals court.

"The judge wrote Microsoft's day in courtthis opinion because he got reversed last time," Lande said. "I think the judge said to himself, 'I'm going to write an opinion that can't be reversed. I'm going to write such a clear and strong findings of fact that unless they want to say I'm clearly erroneous in a hundred different ways, they're not going to reverse me.'"

Appellate courts tend to give judges a lot of leeway on findings of fact, particularly if the judge is well respected, said antitrust experts. Jackson, who oversaw the drug and perjury trial of former Washington, D.C. mayor Marion Barry, is considered beyond reproach.

"The judge's findings fully comply with the D.C. Circuit [Court] in the consent decree appeal," said Donald Falk, an antitrust and intellectual property attorney at Mayer, Brown & Platt in Washington, D.C. "[Jackson] found facts that, according to the standard set out in that opinion,...easily meet the criteria for violation."

But other industry watchers think Microsoft may look to the appellate process, where it has done well in the past.

A long appeals process could put the case before the Supreme Court within two years, some estimate.

In that instance, Microsoft could pursue a strategy of stretching out the appeals process for as long as it can. In two years it could argue that the record is no longer valid because of changes in the technology industry, said legal experts.