Microsoft back on the stand in antitrust trial

During two days of presentations, antitrust experts say appeals judges--who hold the power to potentially determine the future of the world's most powerful technology company--will grill both sides fiercely.

Those interested will be able to follow the arguments online, as the Court of Appeals has in an unprecedented move allowed media outlets to stream the proceedings over the Web. Proceedings begin at 6:30 a.m. PST.

"I think you're going to see a lot of vigorous questioning," said Andy Gavil, an antitrust professor with Howard University School of Law. He added that because of the streaming decision, "The judges are acutely aware that lots of people are listening."

The U.S. Court of Appeals for the District of Columbia Circuit will handle the appeal. At issue is whether Microsoft will be broken into two separate companies, one that focuses on the software company's operating system business, the other on software applications.

In June of last year, U.S. District Judge Thomas Penfield Jackson issued the breakup order after earlier ruling Microsoft violated two sections of the Sherman Act.

The appeals court last year agreed to hear the case before a full panel of eligible judges. Of the court's 10 jurists, three recused themselves for conflicts of interest. Typically only three judges hear appeals.

Four of the seven judges are appointees of Republican presidents Ronald Reagan or George Bush: Douglas Ginsburg, Raymond Randolph, David Sentelle and Stephen Williams. Democrats Jimmy Carter or Bill Clinton appointed the remaining judges: Harry Edwards, Judith Rogers and David Tatel.

George Washington University School of Law professor Bill Kovacic described the panel "as a good draw for Microsoft because of the large conservative makeup," which generally favors a hands-off government approach to business matters.

How the judges question both sides during the proceedings is expected to foreshadow how they might eventually rule on the case--and that, say antitrust experts, is something to closely watch.

But Gavil warned to expect "shifting majorities. One of the things you'll be looking for is divisions by the judges on the various issues."

Tough questions
According to Emmett Stanton, an antitrust attorney with Fenwick & West in Palo Alto, Calif., the time allotted by the court for oral arguments is almost unprecedented. "The idea of a two-day hearing in the Court of Appeals is very, very unusual," he said.

During the first day, Microsoft and the government--the Justice Department and 19 states--will each get 75 minutes on issues surrounding Microsoft's alleged involvement in maintaining a monopoly in operating systems and 45 minutes to address Microsoft's attempted bundling of software products.

On Tuesday, both sides will each get 15 minutes on Microsoft's alleged attempts to extend its influence in operating systems into other markets and 45 minutes on how the conduct should be dealt with, or remedied. Additionally, both sides will have 30 minutes to address Judge Jackson's conduct of the original trial and extrajudical statements.

Jeffrey Minear, John Roberts and David Frederick will represent the government, while Richard Urowsky, from New York-based Sullivan Cromwell, and Steven Holley will present most of Microsoft's oral argument.

The appeals court increased the times originally requested for arguments by Microsoft and the government. In addition, the court added time for a discussion of Jackson--something neither side had asked for.

At issue are post-trial comments made by Jackson, some of which were leveled at the Court of Appeals. Kovacic characterized the statements as "unjudical" and "a sign of poor judgment."

"The Court of Appeals has lost respect for Judge Jackson, and they want to see if there is even a basis for his factual conclusions," said Bob Lande, an antitrust professor with the University of Baltimore Law School. "That's why they allotted more time."

Lande said the overall addition of time could be bad for the government, and "suggests the judges will question them on multiple points one by one." Lande predicted that with seven judges, and the amount of questions they might ask, "the schedule could go out the window."

He added: "Some of these judges are going to want to retry some of this evidence. At a minimum, they are going to want to feel comfortable before they rely on Judge Jackson's facts."

Outcome uncertain
Microsoft is expected to hammer hard on Jackson's "findings of fact," his distillation of what was true during 76 days of testimony in the landmark antitrust case.

Typically findings of fact are sacrosanct, but because of Jackson's out-of-court statements the appeals court "can't help but give less difference to the findings of fact than they otherwise would," Stanton said.

Jackson's findings of fact are the basis for his ruling that Microsoft violated antitrust law and also back up his suggested remedy to split the software giant.

Gavil said without question Microsoft will attack Jackson's interpretation of the facts, as well as his application of law. "They have to. They can't just rely on the judge's application of law. There are some critical findings."

Microsoft is expected to push hard on the bundling claim--that it illegally integrated Internet Explorer to Windows 95 and 98 for the purpose of extending its operating system monopoly to Web browsers. Because the appeals court ruled in favor of Microsoft on this point in an earlier proceeding, "Microsoft could win" on the bundling question, Kovacic said.

"That alone would be enough to ensure there would not be a breakup," he added.

Whether Microsoft can convince the appeals court to overturn enough parts of the case to negate the government's win is uncertain. But legal experts are beginning to handicap in favor of Microsoft.

Lande said that if asked after Jackson's ruling which side would win, he would have picked the government. "There was no question then the government would win the legal argument," he said. "I would have given 70-30, maybe 2 to 1, for the government."

But Lande now favors Microsoft. "Any reasonable person might say it is somewhat more likely that Microsoft will win, because the findings cannot be relied on." Jackson's post-trial comments clearly undermined the government's victory, he added.

Stanton agreed. "The signals from the Court of Appeals indicate Microsoft's chances on appeal are better than I would have said," he explained. "What surprises me is that my own view has shifted about how likely they are to prevail on appeal." Stanton now believes the government will walk away with a remnant of its original victory.

The Court of Appeals is expect to issue a decision as early as April or May, when the Bush administration will have to decide whether to appeal the case to the Supreme Court.