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MS, DOJ hearing looms

Microsoft gears up for another round before Judge Thomas Penfield Jackson as it faces charges of allegedly violating his order in the antitrust case.

Microsoft (MSFT) is gearing up for another round before Judge Thomas Penfield Jackson tomorrow as it faces contempt charges over allegations that it violated a court order by continuing to require computer vendors to bundle its Internet Explorer browser with its Windows operating system.

Tomorrow's hearing, scheduled for 11 a.m. ET, will decide whether Microsoft will have to pay $1 million--the predetermined fee that will be imposed on the software giant should it be found in contempt of court--for each day that has passed since the judge issued the temporary injunction December 11. (See related coverage)

Also stepping into the ring is the Justice Department, which got the antitrust case rolling in October last year when it filed an enforcement action against Microsoft for violating a 1995 consent decree. The decree forbids the software giant from tying sales of one product to another.

The hearing in the high-profile case comes as the dispute between the world's largest software firm and the government has become intense, with each party criticizing the other's arguments and intentions in court filings, releases, and press conferences. The hard-line strategy has backfired somewhat for Microsoft, as comments by its chief executive today show.

"We need to show great respect for the government," Microsoft's Bill Gates said during a keynote speech Saturday at Las Vegas's Consumer Electronics Show. "But we need to make sure that we retain the flexibility to enhance our products."

Gates added: "I think, given the way our priorities work, we'll find a way to soften this thing up a little bit and find a way to move on and do what we care about, which is software innovation."

Each party in the case is allowed to present one "expert" witness in its arguments tomorrow. Today, the Justice Department said that Denver-based computer consultant Glenn Weadock, president of Independent Software and a specialist in office automation, will testify on its behalf at tomorrow's hearing, which is expected to last two days.

Microsoft has said previously that company vice president David Cole would be its expert witness.

Antitrust attorneys are divided in their predictions of outcome of the contempt hearing. Rich Gray, an antitrust attorney with Bergeson, Eliopoulos, Grady, & Gray in San Jose, California, believes Microsoft may not have a good day in court.

"The odds that Microsoft is in contempt of the preliminary injunction are high, and the chances that the judge will impose some sort of sanction are high," Gray said. "I think the monetary sanction will be in at least the six-figure range, perhaps the seven figures. But it will likely be a one-time fine rather than $1 million for every day they were in violation of the order."

Ronald Katz, an antitrust attorney at Coudert Brothers, said that if Judge Jackson issues a fine or an otherwise drastic ruling, he may end up staying or holding the order until a federal appellate court has heard the case.

"I think this judge would be cautious," he added.

Gray maintained that the software giant must prevail on a very specific issue in order to claim victory tomorrow. "The only defense Microsoft will have is if the judge determines his order was imprecise on what had to be separated from Windows 95."

Microsoft has argued that removing the browser from the operating system will render Windows inoperable. The company said it nevertheless will give computer makers a list of the files that have to be removed to take the browser out or ship them an older version of Windows that does not come bundled with the Internet Explorer browser.

During an earlier hearing in the case, Judge Jackson found that he was able to disable the IE browser within 90 seconds by removing the browser icon from his desktop.

On a related note, Microsoft today filed final documents today objecting to the special master assigned to the case, reiterating its allegations that the special master is biased and as a result should be removed.

Judge Jackson has assigned Harvard Law School professor Lawrence Lessig to bring his technological and legal expertise to bear in gathering and sorting through evidence in the antitrust case. Lessig has been charged with making recommendations to the court by the end of May.

Although the issue regarding Lessig's appointment is not on tomorrow's agenda, Microsoft attorneys reiterated their arguments against the special master and backed them up with references to previous federal court decisions.

"This filing is reaffirming a number of points from our brief of December 23," Microsoft spokesman Mark Murray said. "This is first time we've had to formally raise our concerns [about Professor Lessig] to the court."

For example, to rebut the DOJ's contention that an appointment of a special master is necessary for quick resolution of the case, Microsoft referred to a 6th Circuit Court statement that such appointments of outside parties in fact often delay cases.

Microsoft also argued that there are no grounds for the professor's appointment to the post. "The DOJ's referral of central issues in the case to someone who's not a judicial authority is not warranted," Murray said. "The proper procedures were not followed. There's strong precedent for revoking this kind of referral in case law."

In addition to its claim that a special master is not necessary, Microsoft contended that Lessig will wield too much influence. Furthermore, the company alleged that previous appointments of advisers and special masters have been approved by both appellant and defendant. Lastly, Microsoft said that Professor Lessig is biased against the company and should recuse himself.

Reuters contributed to this report.