A federal judge tells the software giant that it must disclose portions of the Windows source code, including XP and XP Embedded, to nine litigating states and the District of Columbia.
U.S. District Judge Colleen Kollar-Kotelly delivered her order during a conference call between the parties, potentially expanding the amount of source code available to trustbusters. The states had access to some Windows source code during the liability and settlement phases of the trial.
Access to the newest version of Windows, which was not included in the original trial, potentially ups the ante in the nearly 4-year-old antitrust case. After a June appeals court ruling, which upheld eight separate antitrust violations against Microsoft, state attorneys general talked tough about including Windows XP in a remedy--a position from which they later backed off.
"Bringing Windows XP back into the picture could be tough on Microsoft," said Gartner analyst Michael Silver. The operating system is one of the linchpins of Microsoft's .Net Web services strategy.
The two sides are expected to put together a protective order governing use of the source code, but how much would be accessible to the states--particularly for flagship product Windows XP--remained uncertain Saturday.
"The parties will work together to govern the use of the source code," Microsoft spokesman Jim Desler said Saturday.
Still, analysts warned that Microsoft must take serious precautions to make sure Windows XP source code does not fall into the hands of competitors, which have been working closely with the nine states and the District of Columbia. In separate legal briefs filed during the last few weeks, Microsoft charged that competitors AOL Time Warner and Oracle had a hand in crafting the states' remedy proposal that could change how Microsoft develops and deploys software.
"The question is giving the source code to the states like giving it to Microsoft competitors," Silver said. "They would have to hire experts to go through the code, so you would have to see what precautions you need to make sure there is an appropriate safeguard put on there."
Silver also predicted Microsoft would be very careful about how much code is released.
"You're airing your clean and dirty laundry and nobody really wants that," he said.
The states asked for source code access in part because they want Microsoft to sell a stripped-down version of Windows, without the so-called middleware technologies, such as Web browsing, instant messaging and media playback. The software giant contends this is technically impossible.
Settlement vs. remedy
The battle over the Windows source code spotlights two dramatically different remedies before Kollar-Kotelly. In November, the Justice Department and nine states settled with Microsoft, while nine other states and the District of Columbia continued with the litigation.
The Justice Department settlement would place restrictions on Microsoft's business practices, but the Windows operating system, at the heart of a court ruling branding Microsoft a monopolist, would emerge largely unchanged. And Windows XP, once a focal point of further proceedings, would be free of any significant restrictions.
The litigating states, by contrast, want restrictions affecting Microsoft software. In their December remedy proposal, the 10 attorneys general asked Kollar-Kotelly to compel Microsoft to give away the source code to Internet Explorer, to through auction license Office for competing operating systems, and to carry Sun Microsystems' Java in Windows for 10 years.
The tone of the states' position has grown harsher in recent weeks, leading to some speculation that California Attorney General Bill Lockyer has taken a more prominent role in the case. Lockyer, whose state is home to some of Microsoft's largest competitors, has been a vocal advocate of extending the remedy to include Windows XP.
California's position has changed since the Justice Department dropped out of litigation. With $3.7 million set aside for the legal battle, California is now in the strongest position to dictate the case's direction.
Kollar-Kotelly will hold a March 6 hearing about the settlement, as part of her evaluation of whether the proposed deal is in the public interest. The Nixon-era Tunney Act mandates antitrust settlements be in the public interest and that no backroom political deal making influenced the process. Kollar-Kotelly has indicated she will not rule on the settlement before the remedy hearing commences March 11.
Sixty days of public comment over the settlement proposal concluded Jan. 28, with about half the 30,000 comments opposing the settlement. On Thursday, the Justice Department posted the 47 most exhaustive comments, including those from Microsoft competitors AOL Time Warner, Palm and Sun Microsystems; more than a dozen trade groups; and consumer advocate Ralph Nader, among others.
Technically, Kollar-Kotelly does not have to review the settlement and remedy proposals against each other, but that is an option open to her. Settlement approval is not contingent on the outcome of the remedy process. The judge also has the option of rejecting the settlement and simply imposing a remedy.
This apparently is a position of the litigating states, which in comments to the Justice Department asked the settlement be withdrawn.
Ironically, such action would diminish the role of Lockyer and his counterparts.
"Be careful what you ask for," said Emmett Stanton, an antitrust lawyer with Fenwick & West in Palo Alto, Calif. "If she rejects the settlement and there is no appeal, then ironically the state attorneys general are pushed to the sidelines because the federal case takes precedence again."
Rolling up their sleeves
Kollar-Kotelly's source code order capped off a week of brutal legal fighting between Microsoft and the litigating states. The parties fired a barrage of legal briefs, sometimes five a day, as both sides prepared for the March 11 remedy hearing. Among other things, the states sought to limit Microsoft's number of witnesses, and the software giant charged that Oracle had colluded with attorneys general to draft a remedy proposal favoring competitors, not competition.
On Monday, the states filed an emergency motion asking Kollar-Kotelly to strike 18 people from Microsoft's list of potential witnesses, which includes Chairman Bill Gates and CEO Steve Ballmer. Eleven other Microsoft executives and 21 third-party witnesses also are on Microsoft's list.
The litigating states initially assembled 16 witnesses, making up a "Who's Who" list of Microsoft competitors to testify at the remedy hearing, including executives from AOL Time Warner, Novell, Palm, RealNetworks, Red Hat and Sun. A Gateway executive also will testify on behalf of the states.
Interestingly, Microsoft listed the only Oracle witness.
In a legal brief contending that Oracle refused to deliver subpoenaed documents, Microsoft alleged that Oracle Vice President Ken Glueck was one of the "prime movers" in the states' drafting their remedy proposal. Trustbusters had pulled the Oracle executive from their final witness list, but Microsoft apparently planned to call Glueck, presumably to discuss his role in the states' proposal.
On Valentine's Day, Microsoft informed the court that the discovery dispute with Oracle had been resolved.
The states' request for access to the Windows source code dominated the latter half of the week's legal filings and conference calls between the judge, Microsoft and the litigating parties.
"Microsoft cannot base its defense on the design of its source code and simultaneously deny the litigating states the opportunity to test those arguments by interrogating the code," the states argued in a midweek legal brief. The filing asked the court to appoint a technical committee to review the source code.
In a Friday filing, Microsoft rebutted that the states first raised the source code issue in a Feb. 9 phone call, but should have made a formal request by the Dec. 14 document deadline.
"The Court should deny the non-settling States' motion in its entirety," Microsoft's brief contended.
An unrelated drama quietly unfolded behind Microsoft and the states' weeklong legal fight. Major media organizations, including The Associated Press, CNN and The New York Times, had petitioned the court to make public depositions for the remedy process. A deposition is sworn oral testimony generally available only to the parties in the action.
But in yet another blow to the news organizations, Kollar-Kotelly on Thursday denied a request for an expedited hearing on the matter. Depositions in the case started Jan. 22. The news outlets had asked for access to five depositions and deposition transcripts.