The U.S. Supreme Court rejects the software giant's request to overturn an earlier ruling that the company violated U.S. antitrust laws.
The Redmond, Wash.-based company had appealed not on the merits of the case but because of comments that U.S. District Judge Thomas Penfield Jackson had made to the media.
"We're disappointed that our petition is not one of the few the Supreme Court chose to review this term," said Microsoft spokesman Vivek Varma. "We will continue to move forward with the case at the District (Court) level and comply with the court's order to work in good faith with the government to settle the case."
Varma said that the company hopes the process will lead to a quick resolution of the remaining issues "in the interest of consumers, so we can do our part to keep the economy moving forward."
Prosecutors said the case is where it belongs now. "We're pleased with the court's decision," said Justice Department spokeswoman Gina Talamona. "We'll continue our progress in the District Court."
Microsoft made the request for appeal in May, arguing that statements Jackson made behind closed doors to the media warranted throwing out his two-part ruling. Jackson, whom the Court of Appeals removed from the case, started holding the meetings about two months before issuing his scathing findings of fact in November 1999.
"This (decision) was expected," said University of Baltimore School of Law professor Bob Lande. "Only Microsoft thought the Supreme Court would take this case."
Lande characterized the matter as a "fact-oriented issue" that the Court of Appeals had analyzed thoroughly. "Why would the Supreme Court get into these messy facts? It made no sense for them to take it," he said.
Many legal experts had concluded that attacking Jackson was Microsoft's only real chance at successfully appealing the case. The strength of the Court of Appeals ruling--seven judges unanimously upholding eight separate antitrust violations against Microsoft--limited the company's options on appeal.
"We are not surprised the Supreme Court did not take up the matter, because the decision by the D.C. Court of Appeals was unanimous and very well-reasoned," Iowa Attorney General Tom Miller said in a statement. Miller is one of the leaders of the 18 states joined with the U.S. Justice Department in opposing Microsoft.
The Supreme Court's decision clears the way for settlement talks to continue between the Justice Department, the states and Microsoft, advancing the urgency of another deadline in the case.
U.S. District Judge Colleen Kollar-Kotelly had given both sides until Friday to reach a settlement or show progress toward one. If they cannot come to terms, the judge said she would assign a mediator to the case in anticipation of reaching agreement by Nov. 2.
Kollar-Kotelly has asked the parties to negotiate "24 hours a day, seven days a week" until that November deadline. If the two sides have not settled by that date, she will begin hearings on the matter in March.
"We are pleased that the Supreme Court has declined to take up the Microsoft case and that the case will proceed on the schedule set forth by Judge Kollar-Kotelly," Miller said.
Given the widespread expectations that the Supreme Court would not hear the appeal, Lande said, the effects of its decision on the talks will be minimal. "I really don't think it will affect settlement discussions much at all," though "it does remove that cloud," he said.
During a Sept. 28 court hearing, Kollar-Kotelly left no doubt she wanted both sides to resolve their differences rather than continue with proceedings to determine a new remedy.
But legal experts are divided on whether the two sides can settle before the judge's Nov. 2 deadline. Should the two sides fail to settle, the government is scheduled to file its proposed remedy by Dec. 7, with a Microsoft response by Dec. 12. A hearing on remedies would commence March 11.
Rich Gray, a Silicon Valley-based lawyer who is closely following the trial, believes Microsoft's troubles with the European Union make settlement in the United States a must-accomplish task.
"I think it is very dangerous for Microsoft to keep fighting this battle while at the same time they're fighting a battle at the EU," he said. "I think it is so doable to resolve this thing in a way that they can live with it and then turn their attention to, in some ways, the more dangerous EU proceedings."
The European Union investigation "is a very, very serious issue," Lande said. "It's a real big deal."
While the U.S. case focuses on Windows, the EU is more concerned with how Microsoft is using desktop software to sell server software.
"Microsoft knows that people don't have a choice for desktop operating systems and productivity applications," said Gartner analyst Neil MacDonald. "Microsoft knows that by linking the desktop applications to the back-end applications that they're making it more difficult to look for alternatives on the server side."
Different laws in Europe also will let trustbusters focus on the impact on competitors caused by Microsoft's activities, which broadens the scope of their investigation and possible actions against the software giant.
But Andrew Gavil, a professor of antitrust law at Howard University in Washington, believes that Microsoft has plenty of reasons for dragging out the U.S. case, particularly after the Justice Department decided not to pursue a breakup of the company.
"With the breakup off the table, the only fear they have is the judge might impose more harsh conduct restrictions than the government would be willing to negotiate," he said. In fact, it could take at least seven months before the case moves ahead far enough along for Kollar-Kotelly to issue business restrictions against Microsoft.
"You have to weigh the value of immediate restrictions of seven or eight months of no restrictions whatsoever before some slightly harsher restrictions might be implemented," Gavil said. If Microsoft successfully convinced the Court of Appeals to delay, or stay, those restrictions pending an appellate decision, the process could stretch out even longer.
"It could be that even if the government is offering a better deal, a year with nothing is worth more than a year with limited restrictions," Gavil concluded.
With Microsoft launching Windows XP later this month, the issues at the crux of the case need to be resolved, warn legal experts, particularly as some quarters argue settling the case could benefit the economy.
But some legal experts and PC analysts believe settling the case too quickly and on terms too easy for Microsoft could in the long-term hurt the economy.
"In the current environment, with Microsoft operating the way it does, all roads ultimately lead to Microsoft," said IDC analyst Roger Kay. "In the monopoly rent picture, the monopoly extracts extraordinary value from the economy...It takes a lot of value out of the economy that might otherwise go elsewhere."
Gavil also sees Microsoft's lock on Intel-based operating systems stifling competition in the PC market.
"The manufacturers themselves have been forced to sell toasters," he said. "They can't differentiate products. No matter what they do with the hardware, the hardware has become fairly generic. To the extent the differentiation might take place in packaging and putting together non-Microsoft software, they're totally frozen in place."
In evaluating Windows XP's impact on the economy, Kay says he sees it as "less all the time." Since the Sept. 11 attacks against the United States, Kay has revised U.S. 2001 PC growth projections to minus 15 percent from minus 13 percent year over year.