High court says `no' to Microsoft

Justices deny request to hear appeal of antitrust decision

Few surprised by rejection

Status of settlement unclear

deadline near for picking mediator

October 10, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

The U.S. Supreme Court rejected yesterday Microsoft Corp.'s request to hear an appeal of its antitrust case, but it was unclear whether that action will hasten a settlement between the world's largest software company and government attorneys or set the stage for more courtroom battles well into next year.

Microsoft, the Justice Department and attorneys general from 18 states and the District of Columbia have been ordered to agree on a mediator to facilitate settlement talks if they don't reach an agreement themselves by Friday, according to an order by U.S. District Judge Colleen Kollar-Kotelly, who is hearing the case. The judge gave the parties until Nov. 2 to settle; if they don't, trial proceedings will commence in March.

Few - including Microsoft itself - expected the Supreme Court to intercede after the Justice Department announced a month ago that it wouldn't seek a breakup of the company or force it to separate its Web browser from its widely used software. The high court issued its decision without explanation.

"We understood coming in that very few petitions to the Supreme Court are granted," Microsoft spokesman Jim Desler said at the company's headquarters in Redmond, Wash.

"It was a desperation move on Microsoft's part, a Hail Mary pass, a 1-in-100 shot," said Robert H. Lande, a law professor at the University of Baltimore. "But why not take it? They had nothing to lose."

Some observers said the political environment in Washington has improved for Microsoft in recent months, in part as a result of the Sept. 11 terrorist attacks. Tough action against the company, a bellwether of the technology sector, might be seen as inappropriate given the damaged economy, some said.

Speculation has also centered on what to expect from Charles A. James, the assistant attorney general who has been assigned to lead the Justice Department case against Microsoft. Based on past comments from President Bush and Attorney General John Ashcroft, the current administration is viewed as less determined to punish Microsoft than the Clinton administration, which for six years pursued allegations that Microsoft acted illegally to create a monopoly for itself.

"We're pleased with the court's decision," a Justice Department spokeswoman said in a brief statement yesterday. "We'll continue our progress in the District Court."

"Given the change in administrations and the opinion of the D.C. Circuit, there should be room for settlement discussions to go forward," said Michelle D. Miller, an antitrust attorney with Hale and Dorr, a Boston law firm. "But Microsoft's done well in the past by declining to settle. There's no question that Microsoft plays hardball, but I would be surprised if they're as aggressive as they have been in the past."

State attorneys general who have also filed suit against Microsoft, including J. Joseph Curran in Maryland, said they were pleased by the Supreme Court's decision and will continue to work toward a resolution.

"We are not surprised the Supreme Court did not take up the matter, because the decision by the D.C. Court of Appeals was unanimous and very well-reasoned," Iowa Attorney General Tom Miller, who has led the states' effort, said in a statement.

Ellen Cooper, who heads the antitrust unit of the Maryland attorney general's office, dismissed the theory that concerns about the war on terrorism and economic recovery would increase political pressure to settle quickly and be rid of the controversial lawsuit.

"What the president has said is that we want things to get back to normal," she said. "If normal doesn't include a competitive economy, then what is normal?"

Kollar-Kotelly has told the parties she expected them to negotiate around the clock or expect to go to trial. She received the case after fellow District Judge Thomas Penfield Jackson was removed from the case. He was criticized by the U.S. Court of Appeals for his prejudicial comments to the media, including his comparison of the short-statured Microsoft Chairman Bill Gates to Napolean.

A settlement could range from Microsoft's having to share the secret code that underlies its software to a "slap on the wrist," said the University of Baltimore's Lande, who believes the court might prefer a settlement to remedies it would have to oversee.

"If you were the judge and had the prospect of regulating the PC industry until you retire or could try to get any kind of settlement, you might be tempted to take anything," he said.

"The new judge isn't planning on putting up with a lot of delay," said Carl Howe, who follows the company for Forrester Research, an industry analyst in Cambridge, Mass.

Microsoft's stock closed yesterday at $54.56 a share, down $3.48 or 6 percent. It has fallen from $76 a share last summer, but has still fared better than many competitors in the computer field.

"They obviously have the best balance sheet in the business," said Robert Becker, an analyst for Argus Research in New York. "We continue to highly recommend Microsoft as a core holding to investors."

The global focus on terrorism, however, is expected to hamper the company's ability to market its two most widely anticipated products in years. Those are its XP operating system for personal computers, scheduled for a nationwide rollout Oct. 25, and its XBox game-playing system.

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