AOL becoming `behemoth,' Microsoft says in plea

Time Warner merger proves competition, says final written argument

February 02, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Microsoft Corp., insisting that it faces intensifying rivalry from a looming software giant, America Online, argued yesterday that it has no power to dominate the industry.

In its final written defense against sweeping antitrust charges by the Clinton administration and 19 states, Microsoft sought to stave off the prospect that U.S. District Judge Thomas Penfield Jackson would rule that the company is a lawbreaker and thus drastic remedies must be imposed.

The company's main plea was that America Online, in the process of a merger with Time Warner, is becoming "a corporate behemoth," so powerful a competitor that "there is no chance" that Microsoft could gain a monopoly in supplying consumer users with a browser for searching the Web.

America Online offers Netscape Navigator, the rival browser that the lawsuit accuses Microsoft of trying to destroy.

In a surprising development, the company's legal fortunes in the case got a big potential boost from a most unusual source: a professor -- whose role as an adviser to Jackson has infuriated Microsoft -- laid out a legal theory that could absolve the company of one of the charges against it.

The professor, Lawrence Lessig of Harvard Law School, suggested that antitrust law governing the case could be interpreted in a way that would undercut the charge that Microsoft illegally forced computer users to accept its Internet Explorer browser if they wanted its nearly universally installed Windows operating system.

That alleged linkage, the lawsuit contends, amounted to an illegal effort to use Microsoft's Windows monopoly to sell customers a browser that was not as good as Netscape Navigator.

But the professor's brief, which the judge had asked him to file, added that a different interpretation of the law might support that charge. He did not recommend one way or the other. But the fact that Lessig suggested a pro-Microsoft option amounted to a considerable breakthrough, considering the long-running feud between him and the company over his role as a "special master" advising the judge.

The legal briefs yesterday from Microsoft and the professor were part of a flow of written arguments submitted to Jackson in the last round of such filings before he decides whether Microsoft has violated the Sherman Antitrust Act.

The Justice Department, the 19 states and Microsoft each drew fervent support from "friend-of-the-court" briefs filed by organizations in or closely related to the software industry. The judge had invited each side in the case to recruit that kind of outside support.

Next on Jackson's schedule will be a Feb. 22 hearing at which lawyers for both sides will make one last effort to shape the decision he must make: whether Microsoft has created and maintained an illegal monopoly in computer operating systems and has built up a commanding position in browsers.

If Jackson rules that the Sherman Act has been violated, the judge would then move on to fashion remedies that could go all the way from mandated changes in Microsoft's business behavior to a breakup of the company into two or more companies.

The case will not move on to its later stages, however, if an out-of-court settlement is reached -- an apparently unlikely prospect. U.S. Circuit Judge Richard A. Posner of Chicago is overseeing settlement negotiations, at the request of Jackson.

Microsoft actually filed two legal briefs yesterday: a final rebuttal to the main charges of violations of federal antitrust law, and a final answer to the charges by Maryland, 18 other states and the District of Columbia that the company has repeatedly violated state antitrust laws, too.

In again answering the federal charges, the company depicted a software industry in which competition is robust and in which Microsoft must continuously face the prospect that someone else will invent and sell a better-designed operating system.

Replying to the states, the company pleaded with Jackson to include in his coming ruling a finding that the states have violated the company's civil rights by trying to interfere with its copyrighted designs for software code.

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