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Next steps mulled in Microsoft case

A day after the initial hearing in the Justice Department's antitrust case against Microsoft, legal experts are trying to pin down just what the next moves in the case may be.

WASHINGTON--A day after the initial hearing in the Justice Department's antitrust case against Microsoft (MSFT), legal experts are trying to pin down just what the next moves in the case may be.

In a memorandum filed with the U.S. District Court over the weekend, Microsoft requested a pretrial schedule to deal with the department's petition to find Microsoft in contempt of court, arguing that "the DOJ thus may not prevail on its petition on the basis of affidavits and uncross-examined deposition testimony."

Yesterday, Judge Thomas Penfield Jackson approved the first steps Microscope on Microsoft in Microsoft's proposed schedule by allowing the company to submit a response to the petition by November 10 and requesting that the government file its reply by November 20. The judge scheduled the next hearing for December 5.

"This suggests that we are likely to see a more extended court battle," said Joel Davidow, former director of policy planning in the Justice Department's antitrust division and a partner at the Washington firm of Ablondi, Foster, Sobin, and Davidow. "But it will really depend on the evidence presented."

In its formal response, Microsoft will be presenting additional arguments and evidence beyond the material presented in the memorandum.

If the judge continues to approve Microsoft's proposed schedule, the step after the department files its reply might be a period of discovery. Microsoft suggests that it be given "prompt document discovery from the DOJ followed by 60 days for depositions."

If, however, the court finds enough evidence during the December 5 hearing, the judge may find Microsoft in contempt of court and order the software giant to cease all actions deemed to violate the 1995 consent decree by a certain date. If Microsoft fails to do so, then he could apply the $1 million-a-day fine recommended the department for every day that Microsoft remains in violation.

In this case, the department has the burden to prove that Microsoft should be held in contempt of court for violating the 1995 consent decree, which broadly states that Microsoft cannot use its dominance in the operating system market to leverage the sale of its other software products but does not prohibit Microsoft from developing integrated products.

To do that, federal attorneys will have to convince the judge that Windows 95 and Internet Explorer are two distinct products and not one "integrated" technology, as Microsoft argues.

"To prove that it is an integrated product, Microsoft has to show that the product is sold at one time, at one price, and that there is some efficiency to that," Davidow said. "The DOJ will have to show that historically the two products were sold separately."

"The big question will be whether the evidence shows that Microsoft is forcing people to do something they don't want to do [buy Windows and Internet Explorer as a package]," Davidow added. "And if, as Microsoft will argue, that is the case then why are there customers resisting and why does Microsoft have to threaten them."

Faced with highly technical language and explanations, the judge may be forced to rely on market history and perceptions in formulating his decision.

Davidow points out that the judge may view this case as similar to Microsoft's licensing practices before the consent decree when the company forced computer manufacturers to buy its operating system even if it wasn't installed on the machine being sold.

"If it looks like the company is doing what it was accused of doing in the first place," Davidow said, "the judge would be somewhat inclined to think about contempt of court.

But if the issues are not clear-cut--and, as a result, the two sides become engaged in a protracted battle--department attorney Phillip Malone worries that the government will not be able to take action before February, when PC makers are expected to ship Windows 95 with the Internet Explorer 4.0, the latest version of the browser.

"This point is specious," said Mark Murray, Microsoft's corporate public relations manager. "Ten out of ten computer manufacturers have already elected to ship Windows 95 with the IE 4.0 long before any contractual obligations."

The problem for the department in this case is that the consent decree is not written very clearly, Davidow said. And the court may spend some time looking into the intent of the parties who wrote it at the time.

"We believe that this issue deserves a process that allows both sides to present significant evidence," Murray said. "It cannot be decided by one filing of the DOJ. We will want to look into what people were thinking at the time of the consent decree and what was meant by it."

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