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Drama unfolds in wake of judge's ruling

Microsoft meets with U.S. District Judge Thomas Penfield Jackson for the first time since the release of his harsh findings nearly two weeks ago in the ongoing antitrust case.

Microsoft today meets with U.S. District Judge Thomas Penfield Jackson for the first time since the release of his scathing findings nearly two weeks ago in the antitrust case.

The meeting today, which includes government lawyers, is scheduled to be a discussion of small matters regarding how to proceed during the next stage of the trial.

But behind the scenes a drama is unfolding regarding Microsoft's fate. Talks have taken place on possible settlement terms, and the sides are divided on how Microsoft could potentially be broken up, sources said.

Jackson released on Nov. 5 his findings of fact in the landmark antitrust trial, in which the Justice Department and 19 states allege Microsoft used its Windows monopoly to crush browser rival Netscape Communications, now owned by America Online.

Jackson's 207-page findings of fact set the stage for a government victory, with the judge accepting almost every argument made against Microsoft. Many antitrust experts--among them University of Baltimore Law School professor Bob Lande and Blumenfeld & Cohen high-tech antitrust attorney Glenn Manishin--say a government victory is essentially a foregone conclusion.

During the meeting today, Jackson, Microsoft and government lawyers will hammer out the logistics for the next stage of the trial, called the conclusions of law. The government is scheduled to deliver its conclusions of law to the judge on Dec. 6, and Microsoft will hand over its conclusion on Jan. 17.

Jackson could also receive motions for reconsideration, should either side wish to contest any portion of his findings of fact, no matter how small. The judge, who has advocated settlement, is also expected to assess where the parties stand on this matter.

In the wake of the findings of fact, Microsoft and the government share one thing in common: indecisiveness. Neither side can completely resolve its strategy for moving forward.

Microsoft's biggest problem is deciding whether to settle or appeal. On the surface, the software giant has been sending out signals it wants to talk settlement. Yesterday, Microsoft chairman Bill Gates said as much during an interview on ABC's "Good Morning America."

"We are very serious about any sort of resolution that could come along; we'll sit and be willing to discuss that," Gates said in the interview. Earlier in the week, in a Time magazine interview, Gates twice refused to rule out breaking up the company to settle government antitrust charges.

Microsoft's day in court But Microsoft spokesman Jim Cullinan is emphatic the media is misreading Microsoft executives.

"We think it's inappropriate to discuss remedies at this point with the conclusions of law still going," Cullinan said. "We also believe it would be unfair for such draconian measures as dismantling one of the leading companies in the country or giving away our intellectual property."

If Microsoft is sending signals it wants to put the case behind it, the Justice Department and states may be too busy considering their options to hear. Part of the government's problem is that it doesn't know what to do with the colossal hand dealt to it by Jackson, said Georgetown University law professor Bill Kovacic.

"There's no way you could have convinced the Justice Department or the states when they started this case [that] they would get this kind of response from the judge, that he would buy into essentially all their arguments," Kovacic said.

Getting 19 states and federal trustbusters to agree on a single strategy for dealing with Microsoft is no easy matter, said sources close to both sides. The government must reach some consensus within before reaching one with Microsoft, they added.

One of the most contentious issues, said the sources, is opening up the Windows source code. While there is near consensus in the government camp on breaking up Microsoft, some states believe that only by giving away the Windows source code can competition be truly restored.

In the meantime, no serious settlement discussions have taken place, said sources close to the government and Microsoft. And if the parties are going to talk settlement at this point, it will take some serious prodding from the judge, legal experts said.

Microsoft is also considering an appeals strategy, fueled in part by its reception from conservative politicians on Capitol Hill. Rep. Tom Bliley, R-Va., chairman of the House Commerce Committee, for example, is one of among 20 or so top legislators publicly backing Microsoft in its battle against trustbusters.

Microsoft may be hoping for a Republican victory in the 2000 presidential election, which could put a more friendly administration and attorney general in power, said antitrust experts.

Any appeal would Full text of Judge Jackson's findings of
fact likely end up in Supreme Court in two years, Lande said.

But that strategy is risky, Kovacic said, who pointed out two of the Supreme Court's most conservative justices are rumored to be considering retirement after the election.

"If a Democrat takes the White House and two more liberal justices are appointed, the change in the makeup of the court could go badly for Microsoft," Kovacic said.

Microsoft also faces a whole litany of lawsuits should it go the appeals route. Once the judge rules on the case, the findings of fact become admissible in civil antitrust trials, said legal experts.

Whether Microsoft is ready to talk settlement or not may have more to do with personality than good business judgment, said Lande.

Asked Lande: "Will Bill Gates' ego triumph or will he say, 'OK, we lost this one, I'll lick my wounds, settle this thing on OK terms, and get on with the business of making computer software.' Or will his ego get in the way?"

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