Microsoft asks judge to delay his orders

Software maker wants time to appeal before any changes

June 09, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON - Microsoft Corp., saying it fears "grievous and irreparable harm" from the court order to break up the company and force changes in its business behavior, asked a federal judge yesterday to put "all provisions" of that decree on hold.

In a brief motion, the software giant told U.S. District Judge Thomas Penfield Jackson that the order could cause "radical changes in the software industry" and that he should not permit that to happen before the company had a chance to appeal the order.

Though the judge is expected to reject the plea, the filing began a chain of maneuvers expected to unfold over the next few weeks, perhaps shifting the antitrust case from Jackson directly to the Supreme Court. That is where the Justice Department and a group of states, including Maryland, want the case to go next.

At a news conference, Joel I. Klein, the assistant attorney general in charge of antitrust, argued strongly for early Supreme Court review. "There is an overriding national interest in a quick resolution by the highest court in the land," he said.

Klein also said the Justice Department would oppose Microsoft's move to delay all of Jackson's order during the appeal.

"There is a real dynamic going on in the market today, affecting a wide range of developments and products," Klein said, and "during the time of appeal, it's very important that further harm to the market ... not take place" as the result of Microsoft's conduct while the appeal proceeds.

On Wall Street, reaction to the historic but long-awaited judgment was muted. Microsoft's shares fell $1.6875, or 2.5 percent, to $68.8125 in regular session trading yesterday, marking an unusually stable day for the Redmond, Wash.-based company's stock price.

"I would not panic. The damage to the stock has been done," said Art Russell, a software industry analyst for the St. Louis-based brokerage Edward Jones, noting that Microsoft is in his firm's "model portfolio" and rated "buy."

"With this ruling we have reached the point of maximum bad news. All the cards are on the table," Russell said.

Under Jackson's order to remedy Microsoft's antitrust violations, the company would be split into two new companies. The judge has postponed that part of his remedy during appeals.

But the judge has ordered the rest of his remedy plan be put into effect in 90 days. These steps include tight restrictions on how Microsoft deals with competitors or partners in the computer industry. One provision that particularly rankles Microsoft requires it to share with rivals its secret software protocols and codes for computer uses running on its Windows operating system.

Those remaining provisions in Jackson's plan are what Microsoft sought yesterday to delay during the appeal. The company promised to pursue its appeal "promptly," arguing that no one would be harmed if all parts of the remedy were put on hold.

Microsoft's chairman and co-founder, Bill Gates, accused Jackson yesterday of prejudging the case against the company.

"The judge apparently formed those opinions even before this case began," Gates asserted, because Jackson had been overruled by an appeals court in a prior case involving Microsoft.

Both sides said yesterday that they have not ruled out the possibility of a negotiated settlement, but neither showed willingness to bend on breaking up the company.

Klein said a settlement is the "preferred course." Negotiations for a settlement fell through April 1.

"It's in the interest of the industry, it's in the interest of the company and it's in the national interest to have Microsoft address, in a meaningful way, the competitive issues that animated the case and that the court found, and for people to go about their business, rather than to have a protracted legal proceeding," Klein said. He declined to elaborate on whether the Justice Department would accept a settlement that does not include a breakup.

The company was far clearer about its position on that issue.

"Microsoft is willing to consider any proposal that would protect two core principles - our freedom to innovate and the integrity of our products," said Jim Cullinan, a company spokesman. "We will not consider breaking up the company because it would not protect these principles and would cause significant harm to Microsoft, our employees, the high-tech industry and consumers."

The company's postponement request was the first step in this likely sequence of events:

If, as expected, Jackson refuses to delay the remedy order, the company would file next week a notice that it is appealing the case and a request to the appeals court to delay all of Jackson's order during the appeal.

The Justice Department would then ask Jackson to send the case to the Supreme Court, certifying it as a case of general public importance. Jackson said in an interview Wednesday with the Washington Post that he was "favorably inclined" to do that.

Microsoft would then be required, within about six weeks, to file its appeal papers in the Supreme Court.

After that, the Supreme Court would decide whether to hear the appeal or send the case back for a first look by the appeals court.

Wire services contributed to this article.

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