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Microsoft comes out swinging in antitrust appeal

In a legal brief filed in federal court Monday the software giant argues that the judge presiding over the antitrust case misinterpreted the law in his decision to split the company.

WASHINGTON--Microsoft dropped the legal equivalent of a bomb on a federal court Monday in a legal filing that argues that the judge presiding over the software maker's antitrust case misinterpreted the law in his decision to split the company.

The Redmond, Wash.-based software giant's brief is the first of written arguments due over the next three months, ahead of oral presentations by Microsoft and the government to the court, scheduled for late February.

In June, U.S. District Judge Thomas Penfield Jackson ordered Microsoft to be broken into separate operating systems and software applications companies for violating two sections of the 1890 Sherman Act. He stayed the breakup order pending appeal, which is before the U.S. Court of Appeals for the District of Columbia Circuit here.

The Justice Department and 19 states will respond to Microsoft's brief in a filing scheduled for Jan. 12.

In the first legal filing of its antitrust appeal, the software maker Monday sought to lay the government's entire case to waste.

The brief's largest sections focused on how Jackson applied antitrust law, tying Internet Explorer to Windows, maintenance of monopoly and attempted monopolization of the browser market.

Whether Microsoft can devastate the government's case is uncertain, but the likelihood of a forced breakup diminished with the 150-page legal brief issued Monday, say antitrust experts.

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Bill Kovacic, George Washington University
"There will never be a breakup," said Bill Kovacic, a professor at George Washington University Law School. "My expectation is that the government's victory will be much diminished, but I don't expect them to come away with nothing."

In the filing Monday, Microsoft attacked the government's case and Jackson's ruling on multiple fronts. The most interesting argument may revolve around Jackson's devastating findings of fact, or his distillation of what was true during the 76 days of testimony.

Jackson in that document found Microsoft to be a dangerous and predatory monopoly. In Monday's filing, the company's lawyers argued that even if Jackson interpreted the facts correctly, he misconstrued their meaning and misapplied antitrust law to Microsoft's business behavior. Under U.S. antitrust statutes, being a monopoly does not necessarily constitute a violation of the law.

Kovacic sees this as an effective approach that's likely to appeal to the seven appellate judges. "Those are the issues--how Jackson applied the law--the court will engage directly and most seriously," he said.

Microsoft also argued, as it has in the past, that Jackson interpreted what it called "pro-competitive behavior" as anti-competitive. The software maker contended Jackson found anti-competitive business practices that simply do not exist under antitrust law.

The software company also marshaled a broader assault on Jackson, how he conducted his courtroom, and apparent bias on his part.

"The judgment is well supported by the evidence offered during a 78-day trial, including thousands of pages of Microsoft's own documents," said Justice Department spokeswoman Gina Talamona. "We are confident in our case and look forward to presenting it to the Court of Appeals."

Legal experts are divided on the merits of this approach, which essentially argued that Jackson changed the rules, or legal standards, for the proceeding. Among other things, Microsoft contended, this allowed the government to substantially broaden its case midway through the process.

Bob Lande, a professor at University of Baltimore School of Law, dismissed Microsoft's argument of a flawed process. "The original complaint was vague enough it could encompass almost anything," he said. "I don't think they'll get anywhere on that one."

Microsoft laid out a rush-to-judgment argument, claiming that Jackson pushed the case along too quickly in a way that unfairly penalized the software maker.

"I don't think those are frivolous points, but looking at them as an independent basis for brushing aside what Jackson did, I don't think Microsoft will be successful," Kovacic said.

But the antitrust professor sees the remedy portion of the case--where Jackson cut the proceeding to 60 days--as one area where Microsoft's flawed-process argument will stick.

"I think the judge made such a hash of the remedy process that it is destined to get bounced back to the District Court," Kovacic said. "Jackson's findings of fact is not going to lock in the remedy."

Jackson is expected to either step down or be removed by the Court of Appeals should any portion of the case be sent back to the District Court.

Microsoft left the bulk of its argument for the issue of whether the company is indeed a Special coverage: Breakup monopoly or used its market might in operating systems to thwart competitors, mainly Netscape Communications. America Online, which owns Netscape, next month will join three trade groups filing a brief on the government's behalf.

Microsoft played its strongest card to a potentially receptive audience, arguing that integrating a Web browser with Windows enhances the operating system and does not thwart competition.

The government alleged, and Jackson ruled, that Microsoft illegally tied Internet Explorer to Windows 95 and 98 for the purpose of extending its monopoly in one market to a second one: Web browsers.

But in an earlier case, the same court hearing Microsoft's appeal sided with the software maker on this issue. In that proceeding, the Court of Appeals chastised Jackson's issuing a preliminary injunction forcing Microsoft to separate Internet Explorer from Windows 95.

"Sustaining the tying claim will be difficult, particularly because of the Court of Appeals' earlier decision," Lande said.

In Monday's filing, Microsoft chiseled away at other conduct claims, using Jackson's ruling, or conclusions of law, to bolster its argument. In his conclusions, Jackson determined that Microsoft's business practices did not prevent Netscape from effectively distributing its browser as contended by the government.

The surprise concession potentially creates a gaping hole in the case Microsoft tried to exploit. The issue--whether or not Microsoft tried to "foreclose" Netscape's ability to distribute its Web browser--is one of the central pillars of the contention that Microsoft illegally maintained its monopoly. Extending this point beyond Jackson's interpretation would greatly undermine the government's case, say legal experts.

"I think what Jackson might have been doing there was throwing Microsoft a consolation prize," Kovacic said. "He should have been more careful how he wrapped it."

Microsoft's legal brief is not the only one the appeals court will be reviewing. Two pairs of trade groups--the Association of Competitive Technology and the Computing Technology Industry Association and the Association for Objective Law and the Center for the Moral Defense of Capitalism--filed two joint "friend of court" briefs on Microsoft's behalf.