Year in review: Microsoft's case

Microsoft used 2002 to turn the tide in its nearly 5-year-old antitrust battle with the Justice Department and 18 states.

The Redmond, Wash.-based company started the year with its nemesis--the Justice Department--as an unlikely ally, the result of a settlement reached in November 2001. But Microsoft spent most of 2002 convincing U.S. District Judge Colleen Kollar-Kotelly that the deal was in the public interest and that stiffer remedies requested by nine nonsettling states were not necessary.

The objecting states spent more than two months in court offering testimony and evidence supporting their call for a stiff remedy. The states argued that a stinging June 2001 Court of Appeals ruling against Microsoft warranted changes to the company's software. Among other things, the states asked that Microsoft be compelled to offer a second version of Windows with so-called middleware removed, and to give away the source code, or blueprint, to its Internet Explorer browser software.

But following a string of courtroom procedural gaffes made by the states and three days of testimony by Chairman Bill Gates, Microsoft successfully weakened the states' arguments. After more than four months of deliberations, Kollar-Kotelly approved the settlement with minor modifications and imposed a revised version of the deal as her remedy in the plaintiff states' case. The ruling stunned many legal experts, who questioned whether the states could successfully appeal.

Still, even as Microsoft claimed victory in its larger antitrust case, setbacks in other court proceedings and the filing of additional private antitrust cases created new legal problems.

U.S. District Judge J. Frederick Motz started the year by rejecting a settlement that would have given free Microsoft software to needy schools. Critics had called the proposed settlement, which would have ended more than 100 private consumer lawsuits, a way for Microsoft to thwart competition by seeding schools with its software.

Motz also held a three-day hearing in December on one of several separate antitrust cases filed by Microsoft competitors. Sun Microsystems, which along with AOL Time Warner's Netscape division had sued Microsoft earlier in the year, asked Motz to order Microsoft to carry the Java Virtual Machine in its Windows XP operating system.

As Motz held his hearing in Baltimore, two states--Massachusetts and West Virginia--prepared to appeal Kollar-Kotelly's remedy ruling. (Seven other states accepted nearly $30 million from Microsoft for legal fees rather than join the appeal.)

Across the Atlantic, the European Union's Competition Commission prepared its preliminary ruling on a separate antitrust investigation into Microsoft. The European Commission's case focused on allegations that Microsoft used its dominance in desktop operating systems to gain unfair advantage in the market for server software.

Judge tosses schools settlement
A federal judge in Baltimore rejects a controversial settlement that would have ended more than 100 private class-action lawsuits against Microsoft, dealing the software maker its second legal setback in less than a week.

Software giant heavily courted
Netscape finally gets around to suing Microsoft for damages caused by the browser wars, registering its chagrin over the Justice Department settlement and triggering a snippy back-and-forth between the software juggernaut and Netscape parent AOL Time Warner.

Microsoft, DOJ tweak settlement terms
In expected legal filings, the Justice Department and Microsoft rebuff some of the stiffest critics of their landmark antitrust settlement. They also have some concessions to offer as they again make minor modifications to their early November settlement deal.

Groups vilify settlement
SBC Communications and four trade groups tell a federal judge that Microsoft's landmark antitrust settlement is not in the public interest. Meanwhile, the Association for Competitive Technology defends the settlement during the afternoon session of a hearing that could determine the deal's fate.

Experts: Sun lawsuit reaches too far
In filing an antitrust lawsuit, Sun Microsystems says it's partly trying to stop the software giant from using .Net to set up "Microsoft-controlled choke points to Internet access." Legal experts say the suit may be overreaching.

Gateway exec: Microsoft too powerful
Anthony Fama, Gateway's group counsel, says in testimony submitted by nine states and the District of Columbia that Microsoft can still use Windows licensing agreements and other contractual provisions to extract concessions from PC makers.

Gates vs. states: Who came out on top?
Microsoft Chairman Bill Gates clearly dominated the courtroom during his three days on the witness stand, legal experts say. But states' attorney Steven Kuney still manages to give the judge in the case some clues as to how an acceptable antitrust remedy could be crafted.

States' slip-up could be costly
The software giant's decision to withdraw Chief Executive Steve Ballmer and other witnesses from testifying in the ongoing antitrust trial may be a move to exploit a potentially costly mistake made by the litigating states' attorneys.

States missed a break in trial
Another procedural error on the part of the plaintiff states in the Microsoft antitrust trial prevents evidence from getting into court. That evidence, involving a specialized operating system called Windows XP Embedded, could have made the states' case.

Judge: Case closed
A federal judge largely approves a proposed settlement in the years-old antitrust case. The government praises the decision, while critics say the case should have looked at what Microsoft's up to now.

Microsoft antitrust ruling faces appeal
Massachusetts officials say they will appeal a recent ruling in Microsoft's long-running antitrust case, while seven other states intend to drop their opposition. "This appeal is necessary to protect consumers," says state Attorney General Tom Reilly.