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U.S. to detail charges in final phase of Microsoft case

The government presents its proposed conclusions of law, which will lay the groundwork for U.S. District Judge Thomas Penfield Jackson's conclusions of law in the final phase of the landmark antitrust case.

It's the government's turn to play its hand in the high-stakes antitrust poker game with Microsoft.

Today the government presents its proposed conclusions of law to U.S. District Judge Thomas Penfield Jackson. That document, the final phase of the government's case, will lay the groundwork for Jackson's conclusions of law, in essence his verdict, expected as late as March.

If trustbusters overplay their hand, they could lose everything, even after the government's long winning streak, say legal experts.

The Justice Department and 19 states may be holding high cards after Jackson's findings of fact presented on Nov. 5. But the government must now play to a new dealer: the U.S. Court of Appeals for the District of Columbia Circuit.

Microsoft's day in court Until now, the government has presented its case to a seemingly sympathetic judge, but it must now think about the appeals court, which in the past has sided with Microsoft and not Jackson. It must also contend with antitrust law, which in many areas may favor Microsoft over trustbusters.

"It's important to understand who the audience for the conclusions of law are. This really is where the audience is the Court of Appeals," said Emmett Stanton, an antitrust lawyer with Fenwick & West in Palo Alto, Calif.

Jackson's findings of fact--his distillation of what is true based on 76 days of testimony--are virtually invulnerable to appeal, experts said. Unless the case is settled, the D.C. Circuit Court will likely pick apart Jackson's conclusions of law, which he will largely base on two briefs presented today by federal and state trustbusters, said antitrust experts.

"If there is an area where the government can create vulnerability for Judge Jackson, it's in the conclusions of law," Stanton said. "This ironically is the government's moment of greatest vulnerability. Mistakes at this stage are the ones the Court of Appeals can really latch onto, and reverse what Judge Jackson does," Stanton said.

The government's task now is to present its view on how Microsoft's conduct violated the law and to explain the legal significance of the facts found by Jackson.

That could be a daunting task because so much is interpretation and in so many areas antitrust favor plaintiffs, say legal experts. In several of Jackson's findings, he said Microsoft acted acceptably up to a point, but then went too far.

How far, and whether that means too far under antitrust law, may mean one thing to the government and another to the conservative D.C. Circuit Court, said George Washington University Law School professor Bill Kovacic.

"The judge in his own conclusions of law will have to specify what is not far enough and what is too far. That's where an appellate court owes him no deference at all. In a number of instances, drawing that boundary is an extremely hard thing to do. He will be relying on the government to help him draw it in a way that is sustainable on appeal," Kovacic said.

Jackson has in many areas given the government a clear road map to follow. Typically, judges ask both sides to submit their proposed findings of fact and conclusions of law at the same time. But Jackson chose to separate the process, giving the government and Microsoft the chance to see his findings of fact first.

Jackson's findings, on the surface, appear to be a great victory for the government by painting Microsoft as a malevolent monopoly that aggressively and illegally sought to preserve its Windows franchise.

That success could be the government's undoing, if, giddy from winning the first round, it goes too far playing this next hand, Stanton said. "In the findings of fact, the government could ask the judge to make really the most extreme findings the evidence would support. Here they have to be careful not to overreach and cause the judge to build in some reversible error," he said.

The government is expected to present two overarching violations of the Sherman Act: illegally maintaining a monopoly and illegally extending the operating system monopoly into Web browsers.

On the first point, Jackson's findings give the government a strong hand. "But we're now moving into an arena where Microsoft has some very high cards to play, because a lot of antitrust doctrine over the last 25 years has been quite favorable for defendants," Kovacic said.

Kovacic and other legal experts expect the government, in part, to support the argument with evidence of exclusive contracts with PC manufacturers and others to preserve Microsoft's Windows franchise.

The second point, extending the Windows monopoly into the browser market, is a much tougher sell. Based on paragraph 384 of Jackson's findings, "I'm not even sure the judge completely sides with the government on that one," University of Baltimore School of Law professor Bob Lande said.

According to the legal definition, "there must be a dangerous probability of success for the government to win this point," Lande explained. That Microsoft did not completely obliterate Netscape as a competitor means the government may not be able to sustain this area on appeal.

The tone of the government's conclusions of law could greatly affect settlement talks, which started last week in Chicago. If Microsoft detects the government has overplayed its hand and created a potential vulnerability, it could take a more aggressive posture during negotiations or bag them in favor of an appeals strategy, say legal experts.

Now much depends on the government being conservative and cautious in its conclusions of law. "The best approach is to present broad conclusions rather than build up a series of smaller arguments, where if the court of appeals disagrees with any one, the whole wall tumbles down," Stanton said.

Redmond, Wash.-based Microsoft will present its conclusions of law on Jan. 17, when it is expected to emphasize legal precedents that show the government's facts do not establish a violation of antitrust law.

Kovacic explained: "One of Microsoft's approaches will be, 'Even if you accept these facts as a true statement of the world as it is, their legal significance is not what the government says. Therefore, there's no violation.'"