Microsoft requests protection

Last filing seeks to safeguard software codes

Final remedy is near

Justice Department says firm adopting posture for appeal

Antitrust trial

June 01, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON - With a corporate breakup order looming, Microsoft Corp. made a last-minute plea yesterday to a federal judge to give it strong protection against letting rivals use its secret software codes to clone Microsoft products before any split occurs.

The huge software company repeated, in strong terms, its basic argument that it should not be split up. The plan by the Justice Department and 17 states to break Microsoft into two companies, it said, "is extreme and unjustified."

But most of the company's final filing assumed a breakup is inevitable and focused on ways to protect Microsoft's inventions and its secrets in the meantime.

Under the plan submitted by the federal and state governments, Microsoft's corporate behavior would be restricted for a three-year period, pending completion of a breakup plan. If the breakup then occurred, the behavior limitations would continue only for the new company that took over Microsoft's Windows operating system software.

The primary safeguards Microsoft suggested for the interim period were that, if its software rivals were given access to its codes and other secret innovations, they would have to pay royalties, would not be able to use what they learn to copy Microsoft products, and would not be able to share what they learn with others.

The Justice Department immediately denounced the company's new filing, saying Microsoft "does not come to grips" with the reality of its repeated violations of antitrust laws. It said the company was adopting a "posture" for its coming appeal.

Yesterday's filing was the last document to be entered by either side in the 2-year-old antitrust case, thus setting the stage for U.S. District Judge Thomas Penfield Jackson to move soon toward issuing his most significant order in the case.

That will be a mandate of remedies for the illegal acts by Microsoft that Jackson recited in a ruling two months ago. When the judge does select the remedies, Microsoft will then begin a complex and perhaps lengthy appeal.

Many of the remedies - including any breakup - would be delayed during the appeal.

Only Jackson and his immediate staff know what he is likely to do, but indications mounted over the past week that he is leaning toward a division of the company. That was the main remedy sought by the Justice Department and 17 states, including Maryland.

They also suggested a series of tight restrictions on Microsoft's corporate behavior before a breakup would take place, in order to encourage its competitors, and they sought similarly close restraints on how Microsoft's two new companies could deal with each other once they had come into being.

The department and the states laid out the details of their suggested remedy order Friday, and Microsoft was given until yesterday to offer its comments on it.

While the suggested remedy order by the governments could be accepted by the judge exactly as it was written, Microsoft sought to prevent that outcome by asking yesterday for scores of changes - major and minor - in the details.

As one example of an important change, Microsoft asked for a full year - instead of the proposed four months - to draw up the detailed plans to split the company into two. Four months, the company said, would not be nearly enough time.

"Dividing the company in half," it argued, "would be an enormously difficult task."

In another change, Microsoft suggested that the breakup should be called "a divestiture" - the strongest remedy there is in antitrust law -- rather than the more modest-sounding "reorganization," as the governments' proposal called it. This appeared to be designed to remind the judge of how harsh a breakup would be, and thus perhaps to deter him from that remedy.

Although most legal observers have been expecting Jackson to disclose his remedy plan as early as today or tomorrow, the Microsoft filing may have made that difficult because the judge would seem to need some time to absorb all of what the company asked. It suggested changes in virtually every significant part of the proposed order.

The company stressed that, even if the judge did accept every change it had proposed, that would not be enough to justify a breakup of the firm and would not keep Microsoft from trying to defeat the entire plan by its appeal.

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