U.S., Microsoft make their cases to judge

Filings are step closer to possible settlement

August 12, 1999|By Jay Greene | Jay Greene,SEATTLE TIMES

Microsoft Corp. and the federal government may wind up settling their antitrust case, but if their legal filings this week are any indication, they've got a long way to go.

Both sides filed proposed "findings of fact," essentially suggestions for U.S. District Judge Thomas Penfield Jackson to consider as he draws up his own factual findings. For the most part, though, what is fact to one side is fiction to the other.

In its filing, the federal government and 19 states said the facts show Microsoft has "engaged in a broad pattern of unlawful conduct with the purpose and effect of thwarting emerging threats to its powerful and well-entrenched operating system monopoly."

Microsoft argues that deals such as America Online Inc.'s recent acquisition of Netscape Communications Corp. proves that the software industry is dynamic and that no company holds a monopoly.

"The world is changing very quickly, and the changes that are taking place are inconsistent with the notion that Microsoft possesses durable monopoly power in a narrowly defined market protected by high entry barriers," Microsoft said.

The divergence of opinion is less a matter of dogmatic intransigence than legal strategy. The filing is the government's first attempt to lay out its case since testimony ended in the trial.

Microsoft, on the other hand, had less pressure to state its defense since both sides now get an opportunity to revise their proposed findings.

"Microsoft gets to see what the Justice Department's best case is," said Rich Gray, a Silicon Valley lawyer. "Justice had to put its best cards on the table. Microsoft could hold back."

The revised findings are due Sept. 10. Then, on Sept. 21, the two sides will argue their case before Jackson. He'll issue his findings of fact, possibly as early as October.

Then the sides go through the same process to draw up "proposed conclusions of law," after which Jackson would rule. If he finds Microsoft violated the law, he would then decide on a remedy.

This week's filings unveiled little that is new. Their real significance is that they mark a milestone as the case moves closer to resolution.

Jackson's decision on factual findings would be the first solid indication of his thinking in the case, something trial watchers expect to push both sides to talk in earnest about a settlement.

"I still think this is a case that should settle," Gray said.

While Microsoft spokesman Jim Cullinan declined to comment on that possibility, he said the company believes the government's case is weak.

"When you look at what the facts have to show, the government doesn't have a leg to stand on," Cullinan said. "I would love someone to start challenging us on the facts of the case."

Justice Department spokeswoman Gina Talamona declined to comment on the filings.

The government's nearly 800-page filing focuses on Microsoft's alleged actions to thwart Netscape.

It includes everything from a meeting to allegedly divide the market for Internet browsers, to Microsoft's decision to incorporate its Internet Explorer browser into its Windows operating system, to contracts with computer makers and online companies that limited distribution of Netscape's Navigator browser.

The government also details alleged bullying of other companies -- Apple Computer Inc., Intel Corp. and Sun Microsystems Inc. -- to show what is calls a broad pattern of antitrust abuses.

The government disputes that AOL's acquisition of Net-scape proved dynamism in the software business.

"Rather than demonstrating that the Net-scape/AOL combination is a robust platform threat, AOL's acquisition of Net-scape itself evidences the harm to Net-scape's browser business caused by Microsoft's predatory campaign," the government argues. "Netscape was acquired because it had been damaged by Microsoft's campaign."

For its part, Microsoft denies that it is a monopoly. Its filing, which runs nearly 450 pages, also contends that distribution of Navigator has not been hindered, pointing to Netscape news releases boasting that consumers have down-loaded tens of millions of browsers over the Internet in the past few years. And Microsoft argues that consumers have never been harmed by its actions.

"Indeed, the benefit to consumers and to the nation's economy of the widespread adoption of Windows as an industry standard has been enormous," Microsoft claims.

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