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Appeals court rejects Microsoft, DOJ requests

A federal appeals court issues setbacks to both Microsoft and the government in their long-running antitrust battle.

A federal appeals court on Thursday issued setbacks to both Microsoft and the government in their long-running antitrust battle.

The U.S. Court of Appeals for the District of Columbia Circuit rejected Microsoft's request that it reconsider its June decision that the software giant commingled the code for its Internet browser with its Windows operating system.

The court, in the tersely worded brief, also denied a request by the Justice Department and 18 states to forgo the normal waiting period before returning the case to a lower court. The government sought to avoid a mandated 52-day waiting period, dated from the appeals court's June 28 decision, before returning the case to the District Court.

The government's request to speed up the case was seen as a necessary step should it seek an injunction that might delay the scheduled Oct. 25 release of Windows XP, the company's new operating system, antitrust experts said.

In June, the appeals court upheld eight separate antitrust violations against Microsoft. The Redmond, Wash.-based company asked for rehearing on one: commingling.

The appeals court found that Microsoft's commingling of Internet Explorer code with Windows 95 and 98 was an anticompetitive act.

In the court order issed Thursday, the appellate judges denied Microsoft's request for a rehearing, and wrote that: "Nothing in the court's opinion is intended to preclude the District Court's consideration of remedy issues."

"We're pleased that the rehearing was denied," Justice Department spokeswoman Gina Talamona said.

"Microsoft had no chance of succeeding with their motion for rehearing before the Court of Appeals," said Bob Lande, an antitrust professor with University of Baltimore School of Law. "The odds of the Court of Appeals admitting they made a mistake a month ago were infinitesimally small."

Antitrust law experts said the order means that the District Court has free rein to choose a remedy in the case. "That last sentence (of the order) suggests that the District Court has complete discretion to decide what is the right remedy," said Kevin Arquit, an attorney with the firm Clifford, Chance, Rogers & Wells. "The court of appeals was not telling the District Court that a breakup was off the table."

"We appreciate the court?s review of our petition on this matter," Microsoft spokesmen Vivek Varma said. "We remain committed to moving forward promptly in the legal process and we continue to remain open to resolving any remaining issues in this case as quickly as possible. We continue to review our options with regard to Supreme Court review."

In a July 20 petition, Microsoft indicated it had not yet ruled out a Supreme Court appeal.

One legal expert said a Supreme Court appeal is unlikely. "It would be far-fetched for Microsoft to appeal to the U.S. Supreme Court because Microsoft doesn't disagree with the law, they just disagree with the facts that both the Court of Appeals and the District Court have unanimously found to be the facts," said Arquit. "It would be pretty thin reasoning for Microsoft to think that the Supreme Court is going to dig into the record and say there is no factual basis."

The denial of the government's request to speed up the case could derail any movement to delay the shipment of Microsoft's Windows XP operating system.

Microsoft's victory special coverageA growing number of critics have called for a delay in the release of Windows XP. Competitors argue that Microsoft uses the operating system to dominate the market for other technology; Microsoft contends that it simply is adding features people want.

Last Tuesday, Sen. Charles Schumer, a Democrat from New York, called on the Justice Department and 18 states to consider taking action that would delay Windows XP's release.

The same day, software maker InterTrust filed an injunction asking a California court to stop Windows XP from shipping. The company alleges that Microsoft's controversial product-activation technology violates four InterTrust patents.

Also last week, more than 10 privacy organizations filed a complaint with the Federal Trade Commission asking the agency to prevent Windows XP's scheduled release. The groups allege that Windows XP's poor implementation of security and privacy provisions constitutes unfair and deceptive trade practices.

The largest threat to Windows XP could come from federal and state trustbusters, who may want to make the new operating system part of new court proceedings. In its decision, the Court of Appeals threw out a federal judge's order to break Microsoft into two companies. A lower court will hold hearings on a new remedy after a new judge is randomly assigned.

Lande described Microsoft's request for rehearing as a "delaying tactic. They might try a further delaying tactic of taking the case to the Supreme Court. Then they have a good argument to stave off any remedy until after whether the Supreme Court decides to hear the case." That, he added, "would make getting an injunction against XP more difficult."

In its July 20 petition, Microsoft said it would take seven days after the court's decision on rehearing to decide on whether or not to make an appeal to the Supreme Court. The move would keep the case from returning to the trial court, where the government could ask for an injunction against Windows XP. Otherwise, in just under the three weeks, the court is expected to issue the mandate returning the case to the trial court.