Gates, Ballmer may testify at hearing

Microsoft discloses plans to bring its chairman and CEO to testify at a remedy hearing and accuses AOL Time Warner and Oracle of helping to draft a harsh remedy proposal.

5 min read
WASHINGTON--Microsoft is set to bring out the big guns for its antitrust showdown, disclosing plans to have Chairman Bill Gates and CEO Steve Ballmer testify at a remedy hearing.

The software maker also is accusing rivals AOL Time Warner and Oracle of working behind the scenes to help draft a harsh remedy proposal hanging over its head.

The Redmond, Wash.-based company fired a barrage of legal briefs Friday, some expected by the court and others not. In all of them, Microsoft made it clear that the only acceptable resolution to the nearly 4-year-old antitrust trial would be a settlement deal cut in November with the Justice Department and nine states. Nine other states and the District of Columbia rejected the deal and have returned to litigation.

A hearing about the Justice Department settlement is tentatively scheduled for the week of March 4. A separate remedy hearing involving the nine non-settling states commences March 11. Both proceedings are moving on separate tracks that could merge in the coming months, a circumstance Microsoft hopes to prevent, say legal experts.

Lawyers representing Microsoft and the Justice Department appeared Friday before U.S. District Judge Colleen Kollar-Kotelly, who indicated she might delay ruling on the settlement until after completing the remedy hearing.

Microsoft's worst-case scenario: Kollar-Kotelly rejecting the settlement proposal and imposing some form of the harsher remedy demanded by the litigating states.

"You can be sure Microsoft will muster all its resources to try and prevent an outcome of that kind," said Rich Gray, a Silicon Valley-based lawyer closely following the trial.

"The judge wants finality, and she is going to do her job to see if this settlement is in the public interest," he added. "She does not want to put her seal of approval on something that could get shredded at the appellate level. And she is also certainly aware that anything she does is going to be passed over in the court of public opinion. So she will proceed slowly, cautiously."

If the 30,000 comments about the settlement received by the Justice Department are a gauge of public sentiment, then the majority of people oppose the proposed deal by a 2-to-1 margin. About 15,000 comments were against the settlement, while 7,500 favored the deal.

Sixty days of public comment concluded Jan. 28 as mandated by the Tunney Act, a Nixon-era law that requires a review of antitrust settlements to ensure that they are in the public interest.

But an Ipsos-Reid survey touted by Microsoft supporters found 70 percent of Americans felt the U.S. economy would benefit from the settlement; only 24 percent favored continued litigation. Ipsos-Reid did not directly ask the 1,000 adults polled if they supported the settlement, however.

Microsoft's offensive
Friday's legal barrage indicates that Microsoft does not want a replay of its settlement disaster involving more than 100 private, consumer-centered antitrust cases. A federal judge in Baltimore rejected a proposed settlement in which Microsoft would have donated $1 billion in money, software, services and training to needy schools. The judge agreed with critics calling the giveaway anti-competitive.

"Microsoft doesn't want a repeat performance of the class-action settlement," said Emmett Stanton, an antitrust lawyer with Fenwick & West in Palo Alto, Calif. "Microsoft won't let go of the Justice Department settlement without a fight."

In an expected legal brief, the litigating states and Microsoft detailed their differences over the facts of the case in preparation for the remedy hearing. These differences indicate a wide gulf between the two sides. The non-settling states and Microsoft laid out more than 850 facts of the case, only a handful of which are agreed upon by the two sides.

In an unexpected filing, Microsoft accused Oracle Vice President Ken Glueck of being one of the "prime movers" in the states' drafting their remedy proposal. The company made a similar accusation against AOL Time Warner in another brief filed last month.

Microsoft made charges against both companies in legal briefs asking the court to compel the competitors to turn over requested documents as part of the discovery phase for the remedy hearing. Discovery ends Feb. 22. Microsoft later resolved its differences with AOL Time Warner, but not before accusing the media titan of submitting to the litigating states a 39-page remedy that closely resembled the states' proposal to the court.

Microsoft has long charged competitors with trying to interfere with the legal process, particularly on the side of the states, either directly or indirectly through a number of trade groups, such as ProComp. Both AOL Time Warner and Oracle back ProComp. Microsoft contends that interference and not the merits of the case led to the states' December remedy proposal.

The Justice Department settlement would restrict Microsoft's business practices but have little impact on software development or deployment--areas the litigating states contend require stiff oversight. They argue that a unanimous, seven-judge appeals court ruling, which last year upheld eight separate antitrust violations against Microsoft, demands tougher sanctions. Among other things, the states want Microsoft to give away the source code to its Internet Explorer Web browser.

Microsoft argues that such restrictions would be more to the benefit of competitors than to consumers and that Oracle is withholding information to the software giant's benefit. In its Friday filing, Microsoft argued that the documents Oracle is withholding "are likely to contain factual information about Microsoft, Microsoft's competitors and various markets as a whole."

The witness list
Microsoft on Friday also filed with the court its final witness list. The list includes Glueck, who presumably will discuss his role in the states' drafting their remedy proposal.

The company also tentatively plans to bring top decision makers to testify, but it left an out for Ballmer and Gates depending on the outcome of the evidentiary presentation made by the litigating states. Gates has yet to testify in the antitrust case brought in May 1998, although he appeared during the original trial in a taped deposition that legal experts say largely hurt Microsoft.

Other key executives also are tentatively scheduled to testify, but with the possibility of being removed from the list: Jim Allchin, group vice president for Windows; Linda Averett, product unit manager for the Windows Digital Media Platform Division; Chris Jones, corporate vice president with the Windows Client Division; Will Poole, vice president with the Windows Digital Media group; and Brian Valentine, senior vice president with the Windows Division.

Six other Microsoft executives are listed to testify, as well as 21 third-party witnesses, including executives from Best Buy, Compaq Computer, Quest Communications International and Unisys. Advanced Micro Devices CEO Jerry Sanders also is on the list.

"The states' proposals, if adopted, would harm many companies in the PC industry as well as small businesses and consumers," said Microsoft spokesman Jim Desler. "Our witnesses represent this broad range of interests."

The states offered a sparser list of 16 witnesses, including one-time Netscape CEO James Barksdale. Barksdale, whose former company was at the heart of the antitrust case, has remained a fixture of the case. In December, a Barksdale letter introduced during a Senate Judiciary Committee hearing on Microsoft galvanized lawmakers.