December court hearings and legal filings underscore an aggressive strategy by Microsoft to garner at the settlement table what it failed to achieve in court: victory.
The Redmond, Wash.-based company is gearing up for a series of important December court and legal-brief filing deadlines that could end many of the software giant's legal woes.
The December hearings and legal filings underscore an aggressive strategy by Microsoft to garner at the settlement table what it failed to achieve in court: victory. But settling the cases is only the first step. Microsoft also must get judges to approve the deals. There, say legal experts, the company faces some serious challenges.
"Usually these settlements are no-brainers, but there are...interested groups against these deals," said Hillard Sterling, an antitrust lawyer with Gordon & Glickson in Chicago. "There are strong arguments that these settlements really have no effect on Microsoft's continued dominance."
On Dec. 7, nine states and the District of Columbia will present their proposed remedy to a federal judge, addressing Microsoft's antitrust violations. This group chose not to sign on to a settlement earlier this month with the Justice Department, nine other states and Microsoft regarding the company's antitrust violations.
Three days later, Microsoft will return to court in Baltimore to defend a controversial settlement that could dispatch more than 100 private cases against the company. By Dec. 12, Microsoft must respond to the states' proposed remedy. On the same day, the Senate Judiciary Committee is scheduled to begin hearings to examine the credibility of the settlement hammered out between the Justice Department and nine of 18 state attorneys general.
Microsoft had been scheduled to appear before the European Commission on Dec. 21 and Dec. 22, but last week the company told the regulatory body it would forgo the hearing. Microsoft instead encouraged the EC to adopt the settlement negotiated with U.S. federal and state trustbusters.
Meanwhile, a 60-day period of public comment is under way pursuant to the Tunney Act, a federal law requiring the presiding judge to strictly review settlements proposed by the Justice Department and antitrust violators.
The Dec. 10 and Dec. 12 hearings were announced Tuesday. Despite a nearly 12-hour marathon hearing to determine whether a settlement in more than 100 private cases was justified, not all parties could be present evidence or witnesses. U.S. District Judge J. Frederick Motz scheduled an additional hearing for Dec. 10, where Microsoft and other parties will be able to make presentations.
The Dec. 12 hearing before the Senate's powerful Judiciary Committee could put U.S. Assistant Attorney General Charles James in the hot seat, as he could be compelled to justify the Justice Department's settlement with Microsoft.
"These settlements can only be described as a string of victories," said Jonathan Jacobson, an antitrust lawyer with Akin, Gump, Strauss, Hauer & Feld in New York.
"Microsoft has negotiated an extremely favorable settlement with the Justice Department and several of the states and has adopted a strategy of trying to lock in the benefits of that settlement and resolving all of its other litigation as much as it can with minimal impact," he said. "This is a sound strategy."
During an interview with CNET News.com last week after his retirement announcement, Microsoft General Counsel William Neukom made it clear the company would pursue settlement wherever possible.
"I think we are becoming much more proficient at finding common ground and settling differences without having to litigate all of them to the bitter end," he said.
Holding on to victory
But Microsoft's settlement strategy entails some risk, particularly in Europe. The company's decision to forgo its Dec. 21 and Dec. 22 hearings with the European Commission, where it could defend its business practices, is a goodwill effort with no guarantee of success.
"We've always said that we were anxious to put the investigation behind us," said Microsoft spokesman Dan Leach. "We prefer to waive our right to an oral hearing and focus on continuing our constructive dialogue with the commission."
Rich Gray, a Silicon Valley-based antitrust lawyer closing following the case, warned that "the European investigation is particularly dangerous to Microsoft."
The EC is looking into whether Microsoft used its market dominance in desktop operating systems to gain market share in server software. In August the regulatory body extended its investigation to include media player software.
EC spokeswoman Amelia Torres would not directly discuss the olive branch of settlement offered by Microsoft.
"A defendant has the right be heard both in writing and orally," she said. "If they forfeit that right, that is their decision. The investigation will continue normally whether or not these hearings take place. It doesn't change the situation much."
Political pressure or posturing?
Meanwhile, Microsoft must battle its U.S. antitrust case in two courts: those of law and public opinion. The Dec. 7 filing by the nine states and District Columbia will give a clear indication of what they believe would be a fair remedy for Microsoft's behavior. Days later, Senate Judiciary Committee hearings will shine a spotlight on the legitimacy of the settlement negotiated with the other states and the Justice Department.
Legal experts describe the Senate hearings as "posturing," as Congress cannot conceivably affect the case's outcome without first enacting new legislation. But hearings could put pressure on U.S. District Judge Colleen Kollar-Kotelly as she reviews the settlement and considers whether to approve it.
But even with political pressure mounting, the judge has little wiggle room regarding the proposed settlement. In 1994, the Justice Department and Microsoft hammered out a consent decree in an earlier case. U.S. District Judge Stanley Sporkin refused to sign the document and was later removed by the U.S. District Court of Appeals for the District of Columbia Circuit.
The standards governing the Tunney Act proceeding and put forth by the earlier appeals court ruling "are very stringent and very difficult to get past, although certainly not impossible," Jacobson said.
Then there is Microsoft's settlement in the 100-plus civil cases, which is opposed by a large group of plaintiff attorneys from California. Under terms of the deal, Microsoft would set up a private foundation to aid needy schools and donate an estimated $1 billion in funding, software, services and training over five years. Microsoft also would provide Windows licenses for refurbished computers donated to the schools.
But trade groups and Microsoft competitors, among them Apple Computer, have called the deal anti-competitive.
"The settlement involving the furnishing of computers to schools was particularly clever, but has been spotted for what it is, which is an effort to dislodge Apple and move even further into one of the areas where Apple has had some strength," Jacobson said.
Even so, the judge must reach a "high hurdle" to reject the settlement, Gordon & Glickon's Sterling said.
If Motz does approve the deal it would be tantamount to the court "bolstering Microsoft's monopolist stranglehold," Sterling said. "Arguably these giveaways only entrench Microsoft only deeper into these (educational) markets."