CapITol Insider: Did judge sabotage Microsoft breakup remedy?

The truth behind the Microsoft case. The government and Microsoft tried twice to reach an out-of-court settlement in the antitrust case; if they had agreed, Microsoft would have been required to restrict its business practices, not break up.

The government asked for a breakup at the end of the original trial because, like a good prosecutor, it went for the harshest possible remedy. Judge Thomas Penfield Jackson adopted the government's breakup plan, but by not holding hearings on it, he injected this remedy with a fatal, but deliberate flaw. To the surprise of no one connected with this case, the Appeals Court last month rejected the breakup plan citing, in part, the absence of hearings on it.

Why did Jackson sabotage his own remedy? Jackson knew that the case was certain to be sent back by the Appeals Court for reconsideration on some issues. He first wanted to find out what the Appeals Court thought of the case to get a better of sense of what remedy was possible before holding hearings on specific remedy options. This is the private view of people who worked on the government team.

Although a breakup is -- technically -- still on the table, it's never been critical to the government's case. "Whether it's characterized as structural or conduct [remedy] is less important than what will effectively stop any recurrence of illegal conduct and also help restore competition -- those objectives are central," said Attorney General Richard Blumenthal of Connecticut, one of the 19 states originally involved in the lawsuit.

The million dollar question: If Jackson knew his flawed remedy would mean that the case was certain to return to him, why did he set himself up for disqualification? Jackson's out-of-court comments attacking the ethics of Microsoft's executives prompted the Appeals Court to disqualify him from any future actions on this case because of the appearance of bias. Did Jackson either misjudge or fail to think about the potential legal reaction of Microsoft and the Appeals Court by publicly attacking the company? Did he want to be kicked off the case? Was he sick of it? Only Jackson knows what his motives were.

The bottom line: Even though Jackson was disqualified, it's important to note that the Appeals Court rebuked Jackson behavior, not his decision. The court agreed with Jackson that Microsoft is a monopoly that used anticompetitive means to maintain that monopoly. That was the core finding of Jackson's decision, and the Appeals Court upheld it.

Carnivore to Cybervore. The ink wasn't even dry on President Bush's nomination of Robert Mueller to take the helm of the FBI from Louis Freeh when all the Washington pundits began applauding Mueller's cybercrime prosecutorial skills.

Pending his confirmation, Mueller would come to the FBI after several years as the U.S. attorney for Northern California (which includes Silicon Valley). In fact, Mueller is credited with establishing the Justice Department's Computer Hacking and Intellectual Property unit in San Jose. He is also a former Marine, known for having an aggressive, no-nonsense management style.

Freeh, on the other hand, who plans to retire after eight years as FBI chief, leaves behind a series of public relations black eyes for Mueller to deal with, including the flap over the Carnivore e-mail surveillance system, the handling of the Wen Ho Lee spy scandal and the recent high tech-enabled spy case of former agent Robert Hanssen -- not to mention a controversial push for greater wiretap authority for FBI agents.

"We're impressed," said one DOJ cybersleuth about Bush's selection of Mueller. "He has a reputation for being a hands-on, dedicated crimefighter and somebody with a personal interest in [cybercrime]," the source said, requesting anonymity.

Doing his homework. When Timothy Muris took over as chairman of the Federal Trade Commission last month, he heaped praise on outgoing Chairman Robert Pitofsky, but also warned that the two "have not always agreed." But Muris didn't explain on what issues they disagreed on, such as privacy.

We have since learned that Muris is working hard at figuring out the privacy issue. He has been quietly meeting with privacy experts for briefings and also intends to meet with industry groups. But Muris has also been poker-faced on the issue; he's concentrating on taking in information and isn't revealing where he might fall.

Pitofsky supported privacy regulations. Muris is a former Reagan administration official and law professor.

Don't get in my genes. President Bush's position on privacy is getting a little clearer. First, he backed medical privacy rules that were opposed by many health care providers, and last month he came out against the use of genetic data in insurance and employment screenings.

Genetic data can be used to determine whether a person is predisposed to cancer, heart disease or other illnesses. Although this issue doesn't have a direct IT impact, privacy advocates say it's the second strong indication that Bush may back privacy rules affecting a broad number of areas.

It could have happened to anyone. Although the U.S. Commerce Department quickly fixed an embarrassing security lapse on its European "safe harbor" privacy Web site last week, the issue is almost certain have an afterlife with congressional critics of government privacy efforts. (Companies that sign up for safe harbor agree to voluntarily follow certain privacy rules of the European Union.)

The glitch potentially exposed data that's sensitive to private companies but is reported by public firms: revenue and employee head count. Commerce officials say no data was compromised.

But an official at one company that's on the safe harbor list said the incident isn't worth harping about. "You would hope that a site would be secure. But it could have happened to anybody," said Jean Cantrell, Dun & Bradstreet's director of government affairs. "I'm not so hard as maybe I should be. But I'm a little pragmatic about things like that."

Research Decline? The government is cutting back on the assistance it provides to private firms that are researching technologies that in the past have often led to significant enhancements in the daily performance of both government agencies and private companies. In response to the phasing out of dedicated funding for private sector development partnerships, the Department of Energy's laboratories have reduced the number of Cooperative Research and Development Agreements (CRADAs) they enter into with private companies, as well as the amount of technical assistance the agency provides small businesses.

That's the conclusion of a recently concluded study by the General Accounting Office, the investigative arm of Congress. But while dedicated funding and CRADAs are down, there are more agreements that are fully funded by the DOE's private-sector business partners.

CRADAs are Congressionally sanctioned agreements designed to boost U.S. technology competitiveness in the global economy by facilitating the transfer of technology research from the government to the private sector. For example, in 1997, the Energy Department entered into a CRADA with a consortium of microelectronics manufacturers to develop extreme ultraviolet lithography equipment for making next-generation computer chips with enhanced speed and memory. Consortium members are providing $250 million to develop this technology, which is also important for developing advanced computational capabilities that DOE needs for its nuclear stockpile stewardship program.

But funding for technology partnerships has dropped from $390 million in 1995 to $81 million so far in the first six months of fiscal 2001, according to the GAO.

In fact, the total number of CRADAs at DOE laboratories and production facilities has declined by more than 60%, from a high of 639 in 1995 to 244 in the first six months of this year, according to the GAO. During this period, department funding for CRADAs dropped even more -- from $222 million to $19 million. Similarly, technical assistance for small businesses dropped from about 1,700 actions that assisted small businesses in 1995 to 136 in the first six months of this year.

Copyright © 2001 IDG Communications, Inc.

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