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Microsoft expected to have friendlier court in appeals process

The Redmond juggernaut may have lost its antitrust trial, but legal experts predict an aggressive appeal that could undercut much of the government's victory.

    WASHINGTON--Microsoft may have lost its antitrust trial, but legal experts predict an aggressive appeal that could undercut much of the government's victory.

    Appearing for the first time in what it considers to be a favorable venue, Microsoft is expected to portray the trial as a process out of control, before a biased judge and rife with procedural mistakes.

    The arguments aren't new; Microsoft made some of them briefly when asking the Supreme Court to pass jurisdiction to the appeals court. But the audience of seven judges is new, and that could make a tremendous difference going forward, say legal experts.

    "Four conservative jurists out of seven is a good panel for Microsoft," said Bill Kovacic, an antitrust professor with the George Washington University School of Law. But, Kovacic warned, "None of these judges like to be stereotyped or put in categories."

    If Microsoft can successfully challenge enough of the case, it could essentially nullify the government's victory.

    At issue is U.S. District Judge Thomas Penfield Jackson's order that Microsoft be broken into separate companies handling operating systems and software applications. Jackson earlier ruled the company violated antitrust laws.

    The U.S. Court of Appeals for the District of Columbia Circuit, which is hearing the appeal, set a schedule on Wednesday, with first legal brief due Nov. 27 and oral arguments set for next February.

    With a schedule set and the appeals process finally in motion, Microsoft will take on one of the most important antitrust decisions in U.S. history. The company's approach is expected to be as much philosophical as argumentative, say legal experts, appealing to the largely conservative makeup of the appeals court. Along those lines, the software maker is expected to argue that Jackson overstepped the bounds of nearly 30 years of largely pro-business antitrust rulings.

    Based on documents filed before the Supreme Court, it appears that four broad areas will dominate Microsoft's appeals argument: Jackson's "findings of fact" are flawed; Jackson showed bias against Microsoft; Microsoft was denied due process during the trial's remedy phase; and Jackson misapplied the law in his ruling.

    Attacking Jackson's findings of fact is Microsoft's greatest challenge, but "it nonetheless seems certain Microsoft will try to climb that very difficult mountain and spend a considerable amount of time to do that," Kovacic said.

    Findings of fact are essentially the judge's assessment of what is true based on court testimony. Typically findings of fact are sacrosanct, with the appeals court largely ignoring challenges to the document.

    Jackson based his ultimate ruling against Microsoft, or "conclusions of law," on the findings of fact.

    "One argument they will rely on, based on what they filed with the Supreme Court, is that the essential foundation for a number of key findings was inadmissible," Kovacic said.

    Jackson: Microsoft's ace in the hole?
    Much of Microsoft's attack on the findings of fact will be waged against Jackson, focusing on how he handled courtroom procedures and public statements he made following his breakup order, say legal experts. The assault on Jackson is expected to be a strong undercurrent of the appeal, particularly his judgment to move the trial forward quickly.

    John Smith, an antitrust attorney with Nixon Peabody here, explained: "It's what I like to call the rush to judgment: the only five months of discovery on the antitrust trial of the century (and) the failure to conduct a hearing on the relief," he said.

    That Jackson denied the software company due process during the remedy portion of the trial is perhaps Microsoft's strongest argument, Smith said. Rather than giving the company the extended period it had asked for to prepare for the remedy phase, Jackson cut short that portion of the trial to 60 days.

    "Another month would have made a lot of difference with the Court of Appeals," said Bob Lande, an antitrust professor with the University of Baltimore School of Law.

    Microsoft is expected Special coverage: Breakup to argue that even if the appeals court upholds the government's entire case, the remedy portion should go back to the appeals court for review. Such action could lead to a different remedy, something other than the breakup order.

    The bulk of Microsoft's energy, legal experts say, will be spent attacking Jackson's "conclusions of law" ruling, in which he found that the software giant had violated antitrust law. Microsoft's strategy will be to show Jackson applied the wrong prevailing legal principle to the company's behavior. Conclusions of law are the application of existing case law to the findings of fact.

    Legal experts predict Microsoft will play on the appeals court's sentiments to get the tying claim--that Microsoft illegally bundled Internet Explorer with Windows 95 and 98--thrown out. Microsoft's advantage is an earlier appeals court ruling on bundling that sided with Microsoft.

    "One approach is simply to assert that (the judge) incorrectly identified the controlling legal principles--that he misstated the rule to be applied," Kovacic said. "The second approach on the conclusions of law is to assert that even where he correctly identified the rules, he misapplied them--that a different application of the rules would have generated a different outcome."

    As example, Kovacic referred to a June 1995 meeting between Netscape and Microsoft, where "Judge Jackson characterized their behavior as attempting to monopolize the browser market in a collusive scheme."

    Microsoft will try to show that the judge wrongly viewed this and other activities as anticompetitive rather than normal but aggressive business behavior, he said.