Microsoft files last word in landmark trial

As reported earlier, the software giant, in a court filing yesterday afternoon, repeated its stand that breaking the company into two pieces is extreme and exceeds the trial record.

Microsoft further tried to amend the government's proposal to open some of its Windows software source code to the public. The suggestions are essential to protecting its intellectual property rights, the company said.

Yesterday's filing revises an earlier proposal by the software giant and marks the last word by Microsoft and the Justice Department in the two-year trial. U.S. District Judge Thomas Penfield Jackson is expected to issue a final ruling tomorrow, though his decision could be handed down as early as today.

Microsoft is expected to appeal the decision, and the case is likely to end up in the Supreme Court as early as this year or as long as two years from now.

In April, Jackson issued his initial ruling, largely siding with the government. The judge determined that Microsoft abused its monopoly in the operating system market to thwart competition for other products, notably the Internet browser from Netscape Communications. Jackson's final judgment will represent his solution for preventing Microsoft from further abusing its monopoly.

"The government's proposed final judgment is defective in numerous respects, making the document vague and ambiguous," Microsoft lawyers wrote in yesterday's filing. "The government conceded (in May) that Microsoft had raised some 'legitimate questions of interpretation' regarding the proposal to split the company."

Microsoft also contended it was denied due process. "Suffice it to say that it was Microsoft's position and understanding that the hearing on May 24, 2000, was to be the beginning--not the end--of proceedings on the issue of relief...Microsoft believed, and still believes, that its position and understanding were well-founded in both law and fact."

Perhaps the most important portion of yesterday's filing offers corrections to the government's proposal for opening the source code of Windows.

During a court hearing a week ago, Microsoft lead attorney John Warden said the government's proposal, as written, would allow competitors free access to the source code to Windows and Office. Warden identified 14 ambiguous terms in the government's first draft of the proposal that troubled the Redmond, Wash.-based software maker.

"You can't hem in the source code once it's disclosed," he told Jackson last Wednesday.

While Microsoft asserts the government's entire remedy plan is excessive, its proposed changes are acceptance of an inevitably harsh ruling and the possibility that some restrictions will be placed on it during the appeals process, said University of Baltimore Law School professor Bob Lande.

"Some or all of the conduct restrictions could go into effect pending appeal, so they want to define it," he said. "That's so much the logical thing to do if you're Microsoft. There's at least some chance an appellate court might not stem all of it or some of it pending appeal."

Microsoft also offered a cover brief that addressed the government's perception of an "Offer of Proof" the software maker introduced last week in court.

In the filing, made immediately after Jackson refused Microsoft's request for more time to review the government's proposal, the company asked for up to six months to review affidavits the government used in drafting its remedy proposal and to depose government experts.

In apparently laying some of the groundwork for an appeal, the document states that Microsoft was not given enough time to address the government's remedy proposal and covers some issues it would have addressed during an extended remedy proceeding. Yesterday, Microsoft submitted additional Offers of Proof with its filing.

"Microsoft has essentially given up on this judge, and they're addressing the appeals court here," said Rich Gray, an intellectual property attorney with Outside General Counsel Silicon Valley in Menlo Park, Calif.

The government also said Microsoft appears to be focused on the appeals process. "This is another effort to posture for appeal," and "the submission is patently irrelevant to the question before the court," said Justice Department spokeswoman Gina Talamona.

"The filing does not come to grip with the fact that Microsoft has been found to repeatedly engage in serious legal violations, and serious remedies are required to restore competition and prevent similar violations in the future."

Yesterday's filing by Microsoft is a response to the government's final remedy plan, or revised proposed final judgment, that was filed last Friday. The Justice Department and 17 of 19 states would like to break the software giant into two companies--one controlling operating systems and the other software applications--and impose additional restrictions on the Windows operations business practices.

Jackson could issue his final judgment as early as today, which would be 60 days from his ruling and the arbitrary period he set up for concluding the remedy process. But if Jackson plans to substantially change the government's remedy plan or issue an opinion with it, he could take longer.

But the government's proposal is ready to sign, if Jackson so chooses, and to be entered as the final judgment in the case. The judge could also delete sections he thinks are inappropriate, or accept some or all of Microsoft's changes.

Based on last week's hearing, Jackson appears to be leaning toward breaking up the software company. He even expressed interest in a three-way split. Any changes he would make to the government's proposal are not likely to free Microsoft from divestiture, Lande said.

Overall, Lande said Microsoft "did an excellent job, and this is a document that has to be taken very seriously by the judge. Some of the specific comments look pretty good, and some look silly."

He noted, for example, that Microsoft "makes good arguments" to support lengthening the proceedings, "like they do business in 75 countries and need more time."

In its revisions, Microsoft also changed to 12 months from four months the amount of time needed to submit its plan for breakup. In its remedy proposal, the government left the fine details of the breakup to the software giant.

Gray, however, was less impressed than Lande.

"If this is Microsoft's best shot as to why the judge needs to slow down, they're shooting blanks. It's pretty weak," Gray said. "The judge can almost accept Microsoft's offering of proof today and still go ahead and do whatever he wants to do. There's not much there that's terribly helpful to Microsoft's position."