Appeals court ponders Microsoft antitrust suit

The six judges did not say whether they would approve the trial judge's order or toss it out in favor of proposed harsher remedies. These include such measures as requiring Microsoft to publish the proprietary source code of Internet Explorer, or to divest itself of its Office software, or asking the trial court to appoint a technical expert to oversee compliance. The judges did, however, sharply question claims that the lower court's decision did not adequately protect consumers from future anticompetitive actions by the world's largest software maker.

Under the terms of the approved settlement, Microsoft agreed to give computer makers more flexibility in configuring Windows and to disclose more details about Windows' innards with other software makers. It has also created an antitrust compliance committee.

Tuesday's arguments represent something of a last stand for critics of the settlement. If the appeals court upholds Kollar-Kotelly's decision, it could mean the end of the case was nigh. Massachusetts Attorney General Tom Reilly and the two trade associations that are hoping to overturn Kollar-Kotelly's ruling could ask the U.S. Supreme Court to hear an appeal, but the justices would be under no obligation to do so.

Massachusetts and the trade groups--the Computer and Communications Industry Association (CCIA) and the Software and Information Industry Association (SIIA), both representing Microsoft's rivals--are enmeshed in two cases that are technically separate. Yet they share a common goal: to overturn Kollar-Kotelly's decision by arguing that it is not in the "public interest" and can do little to stave off predatory acts by Microsoft.

Robert Bork, a former judge who is being paid by CCIA and SIIA to challenge the settlement, argued in court Tuesday that the deal was vague and ambiguous. A technical expert, called a "special master," must be appointed to collect complaints about and publicize alleged violations in the future, Bork said.

Judge David Sentelle replied by suggesting that the consent decree, which Microsoft is already following, was no more ambiguous than any similar document. "Some find ambiguity in a 'No Smoking' sign," Sentelle said.

CCIA and SIIA had unsuccessfully tried to persuade the courts to carve Microsoft up into three parts responsible for operating systems, software applications and Internet products, respectively. CCIA's members include AOL, Sun, Red Hat and Oracle, and it distributed a recent study that said Microsoft software was a hazard to the economy and to national security.

Massachusetts' proposed remedies
Steven Kuney, an attorney for Massachusetts, called Kollar-Kotelly's decision "ineffective in mandating any significant change in Microsoft's market conduct going forward." Because the states proved that Microsoft was misusing its monopoly power, Kuney said, "there should have been an appropriate and meaningful remedy."

Massachusetts is also asking for a special master. It had previously made that same request during the remedies phase of the antitrust trial, when it also suggested that Internet Explorer be made open source and Microsoft be required to auction Office licenses, which could move the software to the Linux platform.

Kollar-Kotelly rejected all three requests, saying Microsoft had not abused its market power in that area. In addition, she said, Massachusetts' proposed remedies were so outlandish that they amounted to an "unjustified manipulation of the marketplace" designed to give competitors such as Sun Microsystems, Apple Computer and Red Hat an "artificial advantage."

Complicating matters is that, of the 20 states that joined the Justice Department in its suit in 1998, Massachusetts is the only one still pursuing Microsoft through the courts. The others have settled or given up the chase.

Microsoft attorney Steven Holley said the role of the appeals court was "not try to decide whether it is the settlement that would best serve society," but decide only whether it lies "within the reaches of the public interest."

Under the Tunney Act, which affects antitrust cases brought by the Justice Department, Kollar-Kotelly was required to determine that the settlement "is in the public interest." The law says a judge may weigh "the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration or relief sought, anticipated effects of alternative remedies actually considered," and so on.

Judge A. Raymond Randolph questioned Holley about whether the remedy would adequately restore the competitive landscape. "It doesn't restore the status quo," Randolph said.

Imagine that Microsoft had been making intentionally telling lies about a competitor, Randolph said. "The only remedy is an injunction preventing Microsoft from spreading false statements?"

During more than three hours of sparring with attorneys, the judges also questioned whether the settlement would prevent the "commingling" of Microsoft's Internet Explorer and Windows code to the detriment of Java and Netscape Navigator, and to what extent Microsoft must disclose technical information about Windows APIs (application program interfaces).

Lawsuit history
Depending on how you count, this is the third or fourth time that the U.S. Court of Appeals for the D.C. Circuit has considered elements of Microsoft's antitrust cases, and earlier decisions have been mostly favorable to the company.

Microsoft's latest legal woes began almost exactly six years ago, on Oct. 20, 1997, when the Clinton administration accused the company of violating an earlier antitrust settlement that took effect in 1995. The allegations focused on a hot topic at the time: the browser war between Netscape Navigator and Internet Explorer. Microsoft was about to begin telling computer makers that if they wanted Windows 95, they needed to install Internet Explorer 4.0, the Justice Department's original complaint said.

That line of attack failed, with the same appeals court that heard arguments Tuesday rebuffing the argument that Microsoft had violated the original settlement deal. The Justice Department and state attorneys general responded by filing a new lawsuit in May 1998.

The case was assigned to U.S. District Judge Thomas Penfield Jackson, who eventually ordered that Microsoft be carved into two companies. But after Microsoft appealed, the U.S. Court of Appeals for the D.C. Circuit upbraided Jackson for violating judicial codes of conduct by chatting with reporters, and it removed him from the case. The appeals court tossed out the breakup order, but did agree with Jackson that Microsoft had violated antitrust laws and should face the consequences.

Jackson had appointed Stanford professor Larry Lessig as a special master, but the appeals court removed him too, after Lessig was discovered to have apparently likened Microsoft to Satan and to have chatted with colleagues about suing the company.

To successfully challenge the November 2002 settlement, the two trade associations must first join the lawsuit as "intervenors," meaning they would become parties to the case. There is some precedent for this in an antitrust case: In the early 1980s, Judge Harold Green ordered that AT&T's competitors be allowed to intervene in the case for appeal purposes.

But Kollar-Kotelly denied the request, so the trade groups are asking the appeals court to overturn that decision as well. Justice Department official Deborah Majoras on Tuesday said that intervention should not be allowed because "it's important not to provide a disincentive to settle cases."

Majoras also stressed that the settlement was the result of painstaking negotiation. "To say it does nothing to remedy the conduct for which Microsoft was found liable is simply wrong," Majoras said.