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Microsoft antitrust response due today

A battered but confident Microsoft for the first time is expected to officially respond to harsh antitrust findings issued by a federal judge.

A battered but confident Microsoft today for the first time will officially respond to harsh antitrust findings issued by a federal judge.

Microsoft will present its proposed conclusions of law later today to U.S. District Judge Thomas Penfield Jackson in the landmark antitrust case brought by the U.S. Justice Department and 19 states.

In November Jackson concluded in his findings that Microsoft wielded immense monopoly power and had illegally acted to preserve it. The findings are not a final ruling in the case.

The government filed a similar brief last month where it concluded Microsoft violated two sections of the Sherman Act.

Microsoft must base its brief on the findings of fact Jackson issued on Nov. 5. While on the surface Jackson's findings appear to have delivered the government a great victory, the findings leave plenty of wiggle room for Microsoft to turn near-certain defeat into a quasi draw, said legal experts.

"When the findings came out, we all thought it would be a clean sweep for the government," said University of Baltimore School of Law professor Bob Lande. "But when read another way, it is not so certain."

That uncertainty may be enough to guarantee the government will fail should it attempt to break up Microsoft, said legal experts. The government asserts Microsoft violated antitrust law by illegally maintaining a monopoly; attempting to monopolize the browser market; tying browser sales to the operating system; imposing exclusionary contracts; and imposing boot-up screen restrictions on computer makers.

If Jackson were to rule against Microsoft on the majority of the allegations, the government would almost certainly ask that Microsoft be broken up rather than try to enforce "injunctive relief," said Glenn Manishin, an antitrust attorney with the law firm Patton Boggs in Virginia.

Microsoft in its brief will attack five basic allegations by using areas of Jackson's findings favoring its actions, wielding an appeals court ruling in an earlier case, and highlighting mistakes made by the government in its conclusions of law, said Lande and George Washington University Law School professor Bill Kovacic.

If Microsoft can successfully convince Jackson--or later an appeals court--to throw out even two of the claims, the software maker might bring the government to a quasi draw, Lande said. Jackson could still rule against Microsoft, as many legal experts predict, but not with enough grounds to warrant divestiture. A lesser remedy could be an acceptable victory for Microsoft given it will almost certainly lose the overall case.

While Jackson's findings attacked Microsoft's behavior viciously, he also praised Microsoft for helping to accelerate the Internet's adoption and in other ways spurring innovation.

"The judge concluded that in many areas Microsoft's behavior was acceptable up to a point," Kovacic said. "Then it becomes a matter (of) where do you draw the line. Obviously Microsoft and the government will draw that line differently."

The U.S. Court of Appeals for the District Microsoft's day in court of Columbia Circuit, which has sided with Microsoft before, could also draw that line differently, something Microsoft will take into account in its brief, Kovacic said. Microsoft will rely on 20 years of pro-defendant precedents to show its behavior, in legal terms, did not violate antitrust law.

"Microsoft's conclusions of law will emphasize the precedents and that the government's facts don't establish a violation," Kovacic said. "One of Microsoft's approaches will be, even if you accept these facts as a true statement of the world as it is, their legal significance is not what the government says. Therefore, there's no violation."

Microsoft will also likely use paragraphs 384 and 385 of Jackson's findings to show there was no attempted monopolization of the browser market. That section indicates Jackson may not have embraced the government's contention Microsoft crushed browser rival Netscape Communications, now owned by AOL.

Jackson's findings also state that Microsoft illegally tied Internet Explorer to the Windows operating system as a way of dominating the Web browser market. There Microsoft could benefit from a ruling the District of Columbia Circuit issued in an earlier case.

Jackson in 1998 had ordered Microsoft to separate Internet Explorer from Windows 98, citing the action violated a 1995 consent decree with the government. But the appeals court struck down Jackson's injunction for procedural and other errors. The appeals court also set a different standard than a 1984 Supreme Court decision for tying two products together--in this case Internet Explorer and Windows 95 and 98.

"Microsoft should quite clearly wrap itself around the D.C. Circuit opinion, which says that if there is any plausible, acceptable benefit from the tie, it's enough," Lande. "Microsoft will likely say that tying is integral to all of the government's claims, relying heavily on the standard set by the D.C. Circuit Court," Lande said.

The government in its conclusions of law separated the tying issue from other main claims, such as monopoly power and attempts to monopolize the browser market, recognizing its weakness on appeal.

Simply by invalidating the tying and attempts to monopolize the browser market arguments, Microsoft could almost certainly avoid divestiture, Lande said. "The only alternative would be to show a pattern of predatory behavior, and I'm not sure the government could do that," he said.

The government's conclusion of law could have used better precedents and ignored some obvious arguments--both areas Microsoft is likely to exploit, Kovacic said. Separating the tying argument is one potential foible, as are some of the cases the government used to legally justify its arguments.

Legal experts also predict Microsoft in some way will attack Jackson's findings on monopoly power, arguing that changing market conditions demonstrate it is not a true monopoly. Microsoft could cite the recent proposed merger between AOL and Time Warner as one example of how it is impossible to maintain a monopoly in the fast-changing high-tech industry.

"That's a huge issue, because if your market power really is transitory, then you don't have monopoly power as defined by antitrust law," said Rich Gray, an intellectual property attorney with Outside General Counsel Silicon Valley.

The government on Jan. 25 will file a rebuttal brief to Microsoft's conclusions of law, and the software maker will file a similar document on Feb. 1. Additional oral arguments are scheduled on Feb. 22, with Jackson's ruling expected sometime in March.

Remedy hearings would then follow in April and May with Jackson taking action against Microsoft by summer, said legal experts. The software maker would then appeal to the District of Columbia Circuit, with the Supreme Court likely hearing the case within two years.