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Microsoft, DOJ back in court

Microsoft and the Justice Department square off in a federal appeals court over the company's Internet Explorer browser.

WASHINGTON--Microsoft and the Justice Department squared off in a federal appeals court today over the high-profile antitrust action surrounding the software giant's Internet Explorer Web browser.

The main point is a preliminary injunction, issued by U.S. District Court Judge Thomas Penfield Jackson, requiring Microsoft to offer licensees a version of Windows 95 without bundling Internet Explorer. Microsoft also is challenging the appointment of a "special master" assigned to the case.

Redmond attorney Richard Urowsky told a three-judge panel today that Jackson's decision was riddled with procedural errors, such as a lack of notice that the judge was considering issuing such an order, as well as a lack of support.

"These errors are fundamental," Urowsky said.

Meanwhile, Justice Department attorney Doug Melamed argued that Jackson had "inherent authority" to make his ruling.

The 90-minute hearing this morning was dominated by arcane discussions of legal case law relating to circumstances in which judges can issue preliminary injunctions and appoint specially trained court officers to help guide cases. The panel gave no indication as to when it might release a ruling.


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Very little discussion was devoted to the June 25 release of Windows 98, the next-generation operating system that has the potential to make much of the current case moot. As previously reported, the Justice Department and 11 state attorneys general are considering filing suits that would take aim at the marketing of Windows 98 as well as at other Microsoft business practices.

The crux of Microsoft's argument today before the U.S. Court of Appeals for the District of Columbia Circuit was that Jackson was not in a legal position to issue the injunction. Because the government's petition centered on whether the company was in contempt of court, the case ended when Jackson ruled that Microsoft's position was plausible. In addition, Microsoft raised a host of challenges based on alleged procedural errors.

"The district court converted this [contempt] proceeding after argument into a proceeding different than the one the government sought," Urowsky argued, adding that as a result, Microsoft never got to argue who would suffer more--Microsoft if the injunction was issued or consumers if it was not. The issue of hardships is crucial to the issuance of preliminary injunctions.

What's more, Urowsky noted, since January--when Microsoft offered a version of Windows 95 that carries no Internet Explorer icon--not a single major computer vendor has shipped it. Had company attorneys known Jackson was considering issuing a preliminary injunction, "we would have proved that no one would have taken it," he claimed. "We had no opportunity to present evidence."

Melamed, who holds the No. 2 position in Justice's antitrust division, countered that the standards for Jackson to order a permanent injunction--which is what his department's petition sought--are the same as the standards for issuing a preliminary injunction. He added that in any event, Jackson's order had a significant effect on PC vendors--also known as original equipment manufacturers, or OEMs--many of whom he argued since have begun to offer Netscape Communications' Navigator browser in addition to Internet Explorer.

The argument prompted a number of skeptical responses from the judges. Stephen Williams quipped: "Is there any indication of extreme mousiness on the part of OEMs?" He added that it was "very hard to see any advantage" in getting Microsoft to offer Windows separately for Internet Explorer.

Judge Patricia Wald noted that she had never heard of a case in which a preliminary injunction had been granted without an explicit request. She also asked Melamed why the Justice Department had not asked for a preliminary injunction if it was so convinced that it was entitled to one. Melamed said that Jackson had "inherent authority" to issue such rulings and to make clarifications, adding that Microsoft had addressed potential hardships "repeatedly" before Jackson issued the injunction.

Headed by Wald, an appointee of President Jimmy Carter, the panel frequently interrupted both attorneys as they presented their cases today. The judges seemed to focus their questions on the underlying issue: whether Windows and Internet Explorer are one or two products.

Under questioning, Melamed argued that as long as Microsoft continues to market a product separately, it is in violation of the consent decree by folding that product into Windows. He added that it would be permissible for Microsoft to add a product if it didn't separately market it. Judge Raymond Randolph responded by asking Melamed: "How does that help consumers? Why does that make any sense?"

The judges directed similar questions to Urowsky, asking him if Microsoft believes it has the right to put anything into Windows it believes would be attractive to consumers. Urowsky said yes. Asked to give examples of nonintegrated Microsoft products, Urowsky pointed to Windows NT, Word, and numerous computer games.

"What the...consent decree was directed at was tying any of these products to a covered product [such as Windows]," Urowsky elaborated.

The DOJ originally brought its action against Microsoft in October, alleging that the software giant was in contempt of court for violating the 1995 consent decree. Specifically, the government alleged, requirements that Windows 95 licensees preinstall Microsoft's Internet Explorer browser flouted terms forbidding the bundling of separate products.

Microsoft has fought the action vigorously, saying that Internet Explorer is integrated into Windows and that the consent decree--which Microsoft and the government negotiated to head off an earlier antitrust fight--expressly allows such integration.

In December, Jackson ruled that Microsoft's position was "plausible" and that he could not decide whether Microsoft was in contempt without a more thorough inquiry. He appointed Harvard Law School professor Lawrence Lessig--a noted expert in computer and Internet law--to gather evidence and recommend a legal conclusion in the case.

At the same time, Jackson also ruled the government was likely to prevail in the case, and on that basis barred Microsoft from conditioning the licensing of Windows on the preinstallation of IE while the case was being litigated.

While Microsoft's legal briefs have focused a great deal of attention on Lessig's alleged bias toward Microsoft, that issue never surfaced in court today. Instead, what little discussion was devoted to the special master issue involved whether the case carried the "exceptional circumstances" that federal law requires before such an appointment can be made.