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Government proposal leaves room for Microsoft counter

The government lays out a compelling argument describing how Microsoft violated federal and state antitrust law, but its approach leaves lots of room for the software giant at the trial level and on appeal, say legal experts.

The government today laid out a compelling argument on how Microsoft's conduct violated federal and state antitrust law, but its approach leaves lots of room for the software giant at the trial level and on appeal, say legal experts.

This maneuvering room and antitrust precedent could mean the government may not be at liberty to effect a breakup of Microsoft.

In its 71-page proposed conclusions of law, the government offered no surprises in asserting Microsoft violated two sections of the Sherman Act.

As expected, the Justice Department and 19 states explained how Microsoft, by tying the Internet Explorer Web browser to Windows and through exclusive agreements with Internet service providers (ISPs), violated Section 1 of the act. The government contended Microsoft violated Section 2 by illegally maintaining its Windows monopoly, leveraging that monopoly into the browser market, and dictating first "boot-up" screen restrictions to PC makers.

The government made noMicrosoft's day in court major mistakes, said Emmett Stanton, an antitrust lawyer with Fenwick and West in Palo Alto, Calif. "Nothing leapt out at me as being overreaching on the government's part," he said.

Maintaining monopoly and exclusive agreements are strong areas for the government, Stanton said.

But the government also chose to push forward several arguments antitrust experts contend the government may not win, or may lose on appeal. Particularly suspect are the arguments that Microsoft violated antitrust law by tying Internet Explorer to Windows and by extending the Windows monopoly into the browser market. The problem with proving these aspects of the case lies in the high burden of proof.

In his Microsoft trial - Conclusions of Law findings of fact issued on Nov. 5, U.S. District Judge Thomas Penfield Jackson wasn't wholly behind the argument that Microsoft used Windows to leverage Explorer into the browser market, said University of Baltimore School of Law professor Bob Lande. "If you look at paragraph 384 and 385 of the findings of fact, it's uncertain whether the judge supports the government on that issue," he said.

According to the legal definition, "there must be a dangerous probability of success for the government to win this point," Lande explained. By the government's definition, that 60 percent of new browser users choose Internet Explorer over Netscape Communicator "is good enough for dangerous probability," Lande said.

But George Washington University Law School professor Bill Kovacic said conventional antitrust doctrine is on Microsoft's side, not the government's, on this point. "There is a notion in antitrust law that even if you elbow your competitors in the head, as long as they stay on their feet and keep moving, the behavior, though unattractive, is not necessarily harmful," he said.

Microsoft did not obliterate rival Netscape, which could be enough for the U.S. Court of Appeals for the District of Columbia Circuit to side with the software maker, Kovacic said.

The appeals court could also reject the tying argument as well, particularly since it has done so before. In an earlier case, the District of Columbia Circuit overturned Jackson's preliminary injunction compelling Microsoft to unbundle its Web browser from Windows.

At issue is whether the browser and operating system are two separate products. The tying of a monopoly product to a product from another market is illegal under antitrust law. In an unusual move, the government separated this argument out from the others.

"By singling the tying out, the government is saying even if they lose there, they still have enough to win," Lande said.

The government put forth two arguments justifying its position: that it met the standard for separate products established by the Court of Appeals--the same appeals court that could eventually hear this case--and met another standard established by a 1984 Supreme Court case.

By the Supreme Court's definition, separate products exist if they have separate demand, but the District of Columbia Circuit sets a stiffer standard.

Said Kovacic: "So they played that one both ways. 'If that's the bar we have to clear, we cleared it. But in case we did not clear it, the bar is set too high.'"

To win the antitrust case, the government need only win any one area and have that ruling stand on appeal, which could reach the Supreme Court. But to obtain authority to implement a "structural remedy," which could mean the breakup of Microsoft, the government needs to win three or four areas, Lande said.

Microsoft's illegal maintenance of monopoly and use of exclusive agreements are strong areas for the government, but that may not be enough, Lande said.

Kovacic said the government's conclusions of law have another problem, which Microsoft is sure to exploit when it offers its conclusions on Jan. 17. "In a number of areas, the government is asking the judge to embrace the jurisprudence in the Supreme Court and lower courts, but the strand they're asking the judge to embrace is not necessarily the dominant strand in those decisions," Kovacic said.

"Microsoft will be able to offer a competing view of the universe that also enjoys a lot of support in the cases," he said.