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No clues in Microsoft hearing

As a federal judge hears further argument from the Justice Department and Microsoft, it remains unclear what actions he would take in this case.

    WASHINGTON--As U.S. District Judge Thomas Penfield Jackson heard further argument today from the Justice Department and Microsoft (MSFT), it remained unclear what actions he would take in the case.

    Jackson heard from department attorney Philip Malone and from Microsoft lawyer Richard Urowski in an attempt to get a handle on the details of the government's petition against Microsoft.

    Malone told the court on behalf of Justice that although it was awash in See special report: MS-DOJ case in court papers and filings, there were still few genuine disputes about facts. "The fundamental issues in this case are not factual," he said. "The real question is whose interpretation of the consent decree is correct, Microsoft's or the government's."

    He added that the only interpretation of the consent decree that is straightforward is the government's, since it is the only one that "gives full meaning to all parts of the prohibition and proviso in Section IV (E)(i)."

    Malone insisted that the decree allows certain conduct and prohibits other conduct. He argued that Microsoft's interpretation "allows everything and prohibits nothing."

    Jackson questioned Malone at some length over what constituted an integrated product and whether Microsoft could simply integrate--beyond the company's definition--Internet Explorer with Windows 95 and sell it in compliance with the consent decree.

    Malone conceded that this would be possible under the consent decree as long as the product was not treated, at the same time, as a separate product--as the government alleges it is.

    "I have an intellectual problem in this case," Jackson declared. "The product may be separate today but in accordance with the proviso it can be developed into an integrated product. Are you [Justice] suggesting the court tell [Microsoft] not to do that?"

    Malone answered that if a product exists as a separate product, then by all means it should be prohibited by the consent decree.

    In addition, he touched on a broader issue: whether Microsoft, through its dominance in the operating system, and potentially the browser market, could be able to foreclose the opportunity of other browser developers to develop applications where it doesn't matter what operating system they sit on. Malone said that the software giant, concerned with losing the "browser wars," fears a time when it will no longer be essential for consumers to have the Windows OS.

    Microsoft continued to maintain that not only are all versions of Internet Explorer integrated with Windows and have been since signing the consent decree, but also that the company's actions are in keeping with the 1994 agreement.

    Urowski argued that the definition of a separate product is not relevant to the government's petition; rather it is a question of integrated, covered, and other products only. He said that prior Supreme Court decisions relevant to the Sherman Act (antitrust law) are not relevant in this case--only the language of the consent decree and the negotiations that led up to it are.

    "Integrated products are not subject to the prohibition of the consent decree," Urowski contended. "That is not to say that they couldn't be challenged separately under the Sherman Act. But what the government may not do is challenge the integrated product under the consent decree."

    Urowski said that the precedent the government set during the Tunney Act proceeding--a challenge by Micro System Options that Microsoft was integrating graphical software in Windows--blows holes in the DOJ's petition.

    The government, he added, found at the time that developing an integrated product means developing new products or merging existing ones.

    Still considering the matter of separate products, Jackson repeatedly asked Urowski whether Internet Explorer 4.0 could be considered separate. Urowski explained that for original equipment makers that was not possible, and that versions of IE 4.0 available in retail channels are only an upgrade of an "integrated product."

    After hearing arguments from both sides for a little under two hours, Jackson stood up abruptly, said the matter was "considered submitted," and gave no indication when he might present his ruling.

    A senior Justice Department official characterized today's hearing as "good for the two parties to verify their positions." He added that the judge was aware of the time-sensitive nature of this matter--given that OEMs will be required to ship Windows 95 with IE 4.0 by February--and that he was sure the judge was taking that into consideration.

    "We hope that the judge's rulings will indicate that there will be no need for further discovery," the Justice official said.