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MS hardball backfires, analysts say

Legal observers say some of the more aggressive measures taken by Microsoft in its antitrust case may have done more harm than help.

Following two key developments yesterday in the closely watched antitrust battle between Microsoft and the Justice Department, legal observers tend to agree that some of the more aggressive measures taken by the software giant may have done more harm than help.

As previously reported, U.S. District Judge Thomas Penfield Jackson denied Microsoft's request to have a computer law adviser disqualified from the case. MS and the $1 million question The harsh wording of the order, which called Microsoft's accusations "trivial" and "defamatory," surprised a number of pundits, who had predicted earlier that Microsoft was on solid legal ground in asking for the dismissal of "special master" Lawrence Lessig.

The order was issued just hours after the close of a two-day hearing, in which the government argued Microsoft was flouting a preliminary injunction issued in December requiring it to distribute its Internet Explorer browser software separately from its Windows products. On several occasions, during which he raised his voice, Jackson grilled Microsoft's attorneys and its expert witness.

The order upholding the appointment of Lessig, a visiting Harvard Law School professor, and the frequent verbal sparring between Jackson and Microsoft are leading some court observers to speculate the company may have shot itself in the foot. They say the company's aggressive measures in the case may have alienated Jackson and ultimately may lead the jurist to side with the government on some pivotal issues.

"It really seems as though he's annoyed with Microsoft," said William Kovacic, a professor specializing in antitrust issues at the George Mason University School of Law, of Jackson. "[The events] suggest that he is greatly disposed to sustain the Justice Department's position and to issue an order that says, 'I really meant it the last time when I said you've got to unpack these two [software] items.'"

Rich Gray, an antitrust attorney at Bergeson, Eliopoulos, Grady, & Gray in San Jose, California, went even further: "I think [Jackson's] going to slam Microsoft hard." He explained that the wording of the judge's order had "amazed" him because he had believed Microsoft's basis for showing a possible bias on Lessig's part was reasonable and defensible.

Specifically, Gray noted Jackson is likely to agree with the government that Microsoft violated the court's preliminary injunction by separating the Internet Explorer browser only from dated or "dysfunctional" versions of Windows, while requiring that the most recent version to carry the software. The DOJ asked for a ruling holding the company in contempt of court and a fine of $1 million for each day it defies the order.

The government also asked for an order requiring a number of other things, including that Microsoft do the following:

  • Offer its most recent version of Windows "from which Microsoft has removed the Internet icon and other aspects of the Internet Explorer browser that are visible to the user or allow the user access to the browser, without impairing any operating system functionality."
  • Give the Justice Department 30 days notice whenever it intends to release any new version of its operating system.

    "Given the attitude the judge demonstrated in the hearing and the special master ruling," Gray added, "he is highly likely to give the Justice Department everything it asked for."

    Clearly, not everyone believes Microsoft's measures are likely to hurt its standing in the case. "This is not some kind of knee-jerk, antibusiness judge to begin with," said Robert Lande an antitrust professor at the University of Baltimore School of Law. "The temptation is to say he's ruled against Microsoft on all these little matters, but I don't think that shows how he'll rule on the big matter."

    Jackson is also free to follow a course that neither the Justice Department nor Microsoft has suggested, as he did when he issued the preliminary injunction. He could, for instance, rule that Microsoft's interpretation of the preliminary injunction was reasonable but nonetheless incorrect and then explain exactly what Microsoft must do in order to comply.

    The Justice Department brought the case in October, alleging that Microsoft's requirement that Windows be shipped with Internet Explorer violated terms of an antitrust settlement. Microsoft responded that the 1995 consent decree specifically allowed it to integrate new products. In December, Jackson appointed Lessig to gather evidence and recommend a legal outcome and ordered Microsoft to separate the software in the meantime.

    In challenging Lessig in such a public way, legal observers say Microsoft has risked angering not only Jackson but also the special master. Following yesterday's order denying Microsoft's motion to disqualify him, Lessig's job is now back on track and may even have been made lighter given the extensive testimony that both sides presented this week.

    George Mason's Kovacic added that Microsoft's ace in the hole may be a panel of higher-court judges named to hear Microsoft's appeal of Jackson's preliminary injunction. They include Lawrence Silberman and Stephen Williams, both appointed by Ronald Reagan, and Raymond Randolph, appointed by George Bush. The judges sit on the U.S. Court of Appeals for the District of Columbia Circuit.

    Noting the conservative orientation and skeptical inclination of government regulation on the part of all three judges, Kovacic said: "If Microsoft could have gone down the list of the court's membership and picked sympathetic observers, they couldn't have done much better than this." A hearing on the appeal is scheduled for late April.

    Jackson has ordered both sides to file briefs on the issue of contempt by Monday and to make closing arguments Thursday next week. The judge has not indicated when he might rule, but given the speed with which Jackson has ruled in past matters in the case, a ruling by the end of next week is not unlikely.

    It's likely that time frame is not lost on Microsoft, who one legal observer speculates is now weighing its options.

    "I'm predicting that Microsoft is in a heated debate over whether to cut its losses or to keep doubling the ante," said John Steele, a high-tech litigator at Fenwick & West. "They're making a tough call right now."