DOJ: Microsoft in contempt

The Justice Department today asked a federal judge to find Microsoft (MSFT) in contempt of court, accusing the software giant of flouting the terms of an order issued just six days ago.

The order, issued by U.S. District Judge Thomas Penfield Jackson, forbids the software giant from requiring PC vendors to carry its Web browser as a condition of licensing the Windows operating system. On Monday, Microsoft announced it would appeal the order but promised in the meantime to honor it by allowing original equipment makers, or OEMs, to choose an older version of Windows 95 that is stripped of Internet features.

At the same time, the company said, it would continue offering a more updated version of the operating system that OEMs could license only if they carried Microsoft's Internet Explorer.

Those plans, today's Justice Department filing argues, "flouted" Jackson's order. Government attorneys again asked Jackson to fine Microsoft $1 million for every day it violates the order.

"Microsoft's 'options' leave OEMs with no option at all and have the practical effect of perpetuating the very conditioning the court enjoined," the brief states. "Microsoft's transparent attempt to rewrite the injunction to permit precisely what it precludes constitutes a flagrant disregard of this court's lawful authority and warrants holding Microsoft in civil contempt."

A Microsoft spokesman maintained that the company is in full compliance with Jackson's order and said any confusion about the matter is based on the inherent difficulty of separating Internet capabilities from Windows. "The court order created a difficult dilemma because it ordered us to do something technically unfeasible," said the spokesman, Tom Pilla. "IE is an integral part of the operating system, and the operating system wouldn't work when we removed that code at the order of the court. That creates a problem because it is not a viable option for our customers."

Mark Lemley, a professor at the University of Texas School of Law, said the Justice Department's allegations seem to be well-founded given Microsoft's pledge, made in a press conference on Monday, to offer the separate versions of its operating system.

"They call it a compliance plan, but it strikes me more as a defiance plan," noted Lemley, who specializes in computer and antitrust issues. "I don't see how Microsoft can reconcile the proposed approach with the language of the court's order."

The judge's injunction is surprisingly broad, forbidding the licensing "of any Microsoft personal computer operating system software...on the condition...that the licensee also license and preinstall any Microsoft Internet browser software." Lemley added that Microsoft's promise to offer any version of an operating system that is married to IE--whether or not a separate OS is made available--appears to violate the language of the injunction.

In addition to asking Jackson to find Microsoft in contempt of court, the Justice Department brief also asks that two new restrictions to be placed on Microsoft. One would require it to offer the most current version of Windows 95 that has the IE icon and other "visible" Internet features removed.

The other would require Microsoft to give the Justice Department 30 days notice before the commercial release of any operating system or Internet browsing products, including upgrades to existing products, and to spell out exactly how the products comply with Jackson's order.

The question of just how easily Microsoft can disable browsing capabilities in recent versions of Windows 95--or whether Windows will even run without certain IE code in it--is open to intense debate. In appealing Jackson's order with a higher court yesterday, Microsoft attorneys argued that "removing the code identified by the district court will result in a program that will not even start and will be deficient in a number of other critical ways. By forcing Microsoft to license such a dysfunctional product to computer manufacturers under the trade name 'Windows,' the district court's order will irreparably injure Microsoft's reputation."

Today's filing by the Justice Department attempts to dismiss that argument, noting that an uninstall feature included in some versions of Windows 95 allows PC users to deactivate IE simply and "without harming the underlying operating system." Microsoft could easily implement a similar feature in all versions of Windows, today's Justice Department brief argues.

Over the last two days, the two sides have also debated the issue privately in letters that Microsoft has made public. In a letter dated December 16, Justice Department attorney Phillip Malone warned Microsoft that he would file today's action if the software giant didn't agree to provide the most recent version of Windows 95 with the IE icon and other browser features removed. Microsoft attorney David Heiner responded today the Justice Department's proposal was unworkable and, in any event, would not comply with Jackson's order.

Heiner went on to say that the debate may be moot because it focuses on IE 3.0 when the majority of PCs being shipped today already carry the latest 4.0 versions Microsoft's browser. "All or nearly all of the leading computer manufacturers will be installing Internet Explorer 4.0 over the next few months lest they be left behind in the race to deliver the latest technology to consumers," Heiner added.

It is unclear whether Jackson has the authority to modify last week's injunction while it is on appeal. If the Washington appellate court grants Microsoft's motion for an expedited hearing of the matter, court briefs will likely be due early next week.

Reporter Suzanne Galante contributed to this report.