In appealing the court's temporary injunction, Microsoft says it would comply with the ruling and outlines how it intends to do so.
The company's new terms give OEMs (original equipment makers) the option of shipping the original version of Windows 95, which has no IE functionality and lacks other improvements that Microsoft has added in the past two years, such as support for large hard drives. If an OEM still wants to ship IE 3.0 or 4.0 with Windows 95, it must keep the IE icon on the Windows desktop. Stripping out the IE 3 files from Windows 95, according to Microsoft, would make Windows 95 inoperable.
Meanwhile, the software giant shipped the third and likely final beta of Windows 98 today, the upgrade to Windows 95 that will have the Internet Explorer browser "even more tightly integrated," said Microsoft spokesman Mark Murray. Murray and other executives insisted that Jackson's order will not affect the Windows 98 schedule or design.
However, it's not clear if the judge's order will carry over to Windows 98 by the time the upgrade ships in the second quarter of next year.
"If there are any orders that impact Win98, we'll deal with those when we get there," said Microsoft vice president Brad Chase.
Microsoft's Brad Chase on the judge's order
The company has maintained, even before the Justice Department filed its lawsuit last October, that it has no contingency plans for an eventual separation of the browser and operating system.
As part of its announcement, Microsoft said today that OEMs could ship Windows 3.51, an older version of its server-side operating system without any browser functionality that is not explicitly part of the judge's order.
"We don't think the order addresses NT, but we just want to be cautious about this," added Chase.
In detailing the reasons for filing the appeal, Microsoft's senior vice president for law and corporate affairs William Neukom argued that Jackson had overstepped his bounds in issuing the injunction.
"The matter before the court was whether Microsoft could be held in contempt for violating a consent decree entered in 1995," he said in a statement. "The court denied the Justice Department's petition for contempt. The case should have ended there. But on its own initiative, the court proceeded to treat the matter as a tying case, and, without giving Microsoft notice or an opportunity to defend itself, issued a preliminary injunction. It is inappropriate for the court to unilaterally expand the case beyond the scope of the government's petition."
Jackson ruled last Thursday that neither side in the case had yet presented conclusive evidence but issued a temporary "cease-and-desist" ruling that forbids Microsoft from requiring PC makers to package Internet Explorer with Windows 95.
The ruling commenced a months-long examination into the case, with a final decision expected no sooner than next June.
In the latest tit-for-tat in the case, a source at the Justice Department told Reuters that Microsoft's terms of compliance with a federal judge's ruling aren't adequate.
"We don't think they've announced a course of conduct that complies with the court's order," a Justice Department official who asked not to be identified told Reuters. The department did not say what action the government would announce next.
In setting the terms of its compliance, Microsoft warned PC makers that stripping out IE 3 files from more recent versions of Windows 95 would leave them with a system that doesn't boot. That basically forces OEMs to choose between the status quo--IE 3 on the Windows 95 desktop--or the original version of Windows 95, which is still available on retail shelves. Early indications show that OEMs will opt for the former.
The notice brought immediate criticism from one industry association. "I'm disappointed that they're embracing a tactic of making customers and the public suffer as pawns in the battle," said Ed Black, president of the Computer and Communications Industry Association, which represents 36 high-tech and telecom companies, including AT&T, Sun Microsystems, SBC Communications, Tandem Computers, and Hitachi PC Corporation.
"The intent of the court was not for Microsoft to hold out an option that is so undesirable to users," he added. "It's Microsoft's attempt to bring public scorn and outrage on who's responsible, and it's saying the court is responsible."
A Microsoft representative took issue with Black's statement. "That is not accurate," said spokesman Greg Shaw. "The court precisely followed the approach requested by the DOJ. By providing the retail version of Windows, we're doing exactly what the court and the DOJ recommended."
Reuters contributed to this report.