Government attorney David Frederick was peppered with questions from three judges, who suggested that Netscape was not significantly harmed by Microsoft's actions. The government has claimed, and an earlier judge found, that Netscape suffered damage from Microsoft's monopolistic actions in the browser market.
The issue in the second day of hearings was over whether Netscape was just a maker of browsers or was involved in the greater endeavor of creating an Internet platform in direct competition with Microsoft's efforts with Internet Explorer.
Because browsers were given away, several judges suggested they would have a difficult time finding that Netscape was harmed since there was barely a market for the product.
"It's hard to say in this sort of situation you can define a distinct market for Web-browsing software," said Judge David Sentelle, who seemed supported in his questioning by Chief Judge Harry Edwards and Judge David Tatel.
But Frederick countered that Netscape was moving toward development and extension of the browser into a platform and that Microsoft attempted to monopolize that area. "That's where the value of the product was," Frederick said.
The judges also questioned whether they had the authority to find that Microsoft's actions had damaged the competitive marketplace, given that U.S. District Judge Thomas Penfield Jackson's findings had failed to clearly define that market.
In the first hour of the hearing, the court also heard arguments on Judge Jackson's sweeping breakup decree against the software maker.
Microsoft attorney Steve Holley argued that Judge Jackson's order was entered into without giving the company a chance to challenge its assumptions. "That was a clear abuse of discretion," Holley said.
In addition, Holley argued that Jackson based his decree on hearsay and exhibits never entered into evidence. "No account was taken on the great harm this decree would inflict on Microsoft and a wide range of third parties," Holley argued.
Judge Jackson's out-of-court statements
Later on Tuesday, the courtroom focus is expected to shift from Microsoft's controversial actions in the marketplace to Jackson's actions outside the courtroom. The judge made extensive out-of-court statements critical of Microsoft to several reporters including Ken Auletta, who later wrote a book on the case. Microsoft argues that Jackson's personal opinions affected his ruling.
During an all-day hearing Monday, judges discussed Jackson's famed findings of fact and how much of a role they should play in the current hearing. The findings, a 200-plus-page document issued last year, ultimately led to Jackson's ruling that the company violated several aspects of antitrust law and needed to be broken up.
The seven-judge panel is considering Microsoft's appeal of Jackson's ruling, which came down last June. Jackson ordered a breakup of the software giant, finding that Microsoft engaged in a pattern of predatory behavior and that remedies were needed to restore competition.
Although Microsoft appears to have won some judges to its side, Monday's hearings were not one-sided. Both Microsoft and the government appeared to have won victories for parts of their cases. In highlights from Monday:
Microsoft seemed to have the upper hand in convincing the seven judges that a breakup of the company would be a drastic measure and might actually impair the balance of competitiveness in the software industry.
At least one jurist, Chief Judge Harry Edwards, questioned one of the government's basic assertions that Netscape was a competitive threat to Microsoft. He said Netscape lacked the "interest in or capacity to serve as a middleware platform." Middleware is software that sits between the applications and the hardware. Microsoft controls its development in PCs.
The government regained footing in Monday afternoon's session with its argument that Windows and Internet Explorer are two separate products and could be separated with little technical difficulty, court observers said.
Judges also seemed largely unwilling to rehear some of the basic findings in the earlier case, an approach Microsoft lawyer Richard Urowsky seemed to be requesting.
Judges struggled with some of the government's most basic assertions, one being that consumers must have a right to remove the browser from the operating system. Microsoft hotly contests that the two products are separate. "It makes absolutely no sense" that customers would not want IE integrated into Windows, said Judge Stephen Williams, who added that government lawyers were taking antitrust doctrines on product tying "into new and interesting territory...You're a pioneer. Take credit for it."
News.com's Joe Wilcox contributed to this report.