Update: Appeals court judges question case against Microsoft

WASHINGTON -- Both sides in the Microsoft Corp. antitrust case today faced a steady stream of blistering questions from a panel of seven U.S. Court of Appeals judges. But the attorney representing the U.S. Department of Justice (DOJ) clearly received the worse of it, with several judges bluntly questioning the foundation of the government's case.

On the first of two days of oral arguments in front of the appeals court for the Washington circuit, Jeffrey Minear, an attorney from the Office of the Solicitor General who's handling the DOJ's defense of a breakup order against Microsoft, began his comments with a sweeping attack on the software vendor. But Minear was quickly forced to argue with some of the judges over whether Microsoft used anticompetitive measures against Web browser rival Netscape Communications Corp.

In direct and caustic questioning, Chief Judge Harry Edwards said he doubted the validity of the government's theory that Microsoft exhibited monopolistic behavior by attacking Netscape from a business standpoint. And he asserted that Netscape would simply have become another monopoly if it won out in the browser market against Microsoft.

Netscape's browser represented a middleware threat that could have made the Windows operating system "relatively insignificant" if software developers began writing applications directly to the browser, Edwards said.

"That was the threat that Microsoft contemplated -- that middleware would virtually wipe out anything of great import [that Windows offers to users]," he said.

Edwards added that Netscape, in combination with Sun Microsystems Inc., would have replaced Windows with a monopoly technology of their own making. "That's what this case is ultimately about: whether or not the Microsoft monopoly -- [or] the alleged Microsoft monopoly -- should be replaced by the Netscape/Sun-combination middleware monopoly," he said.

Minear said he disagreed and claimed that the antitrust case against Microsoft is "all about allowing the competitive process to determine who will be the winner in the market." That prompted an exchange in which Edwards contended that the winning company "will be a monopoly" either way and Minear replied that the court should let the market determine that in a fair and open process.

Another disturbing sign for the government was an attack by Edwards on the findings of fact that U.S. District Court Judge Thomas Penfield Jackson used as the basis for his order last spring that Microsoft should be split into two separate companies -- a move that, if upheld during the appeals process, would separate Microsoft's operating systems from its applications.

Legal experts say that appeals courts typically give substantial weight to a judge's findings and only consider the merits of the law being applied to a case. But Edwards, on at least two occasions, expressed doubt about some of Jackson's findings and suggested that they weren't really facts at all. "I don't think my obligation is to defer to them," he said.

Supporters of the government's case, including former appeals court judge and Whitewater special prosecutor Kenneth Starr, cautioned against reading too much into the skeptical questions posed to Minear. "I think what we saw today [was a case of the judges] testing what the correct theory of law is in" this new antitrust area, Starr said outside the court.

Despite the skeptical questioning, William Kovacic, a visiting professor of antitrust law at George Washington University in Washington, said it would be "relatively breathtaking and difficult for the [appeals court] panel to simply brush aside what Judge Jackson has found."

But Kovacic said the government's case against Microsoft faces trouble from the appeals court even if it's unlikely to be totally upended. The court will likely render a decision that's "not broad-based enough to support a breakup" of the company, he predicted.

Microsoft attorney Richard Urowsky also faced his share of tough questions, but none seemed as pointed as the ones posed to Minear. And Urowsky may have scored a significant point with his contention that Netscape was never shut out of distributing its Web browser by Microsoft's bundling of Windows and Internet Explorer.

Urowsky illustrated that argument by claiming that 60 million people downloaded Netscape Navigator in 1998. Commenting on Urowsky's claim, Appeals Court Judge Stephen Williams said, "I took seriously the proposition that [the need to download Netscape's browser] was a big barrier. But 60 million [people] downloaded it."

But Microsoft did face skepticism over another contention that the restrictions it put on PC makers to prevent them from changing the Windows boot-up sequence and making other alterations to the operating system were protected by federal copyright law. "I don't think you can get reversal on this part of the case," Judge David Tatel told Urowsky.

Today's oral-arguments session revolved around two key issues: whether Microsoft illegally tied its browser to Windows and whether the company illegally maintained its desktop computing monopoly. The appeals court already ruled in favor of Microsoft on the browser issue in 1998, overturning an injunction issued by Jackson that prohibited the company from forcing PC makers to add Internet Explorer.

John Roberts, another DOJ attorney, said at today's hearing that there's nothing wrong with including the browser with Windows. But the government objects to Microsoft forcing PC vendors to include Internet Explorer on their machines, he added. "What we don't see the benefit of is forcing [users] to take those two products together," Roberts said.

But some of the Appeals Court judges questioned the legal foundations of the government's position, and Judge Raymond Randolph compared including a browser with Windows to equipping a car with air conditioning. The car would still work if the air conditioning was removed, but the benefits of having built-in cooling can't be denied, Randolph said.

Tomorrow, the appeals court plans to consider Jackson's proposed remedy as well as his conduct during the trial and public comments he has made since it ended last June. Jackson wrote in his breakup order that the goal of the ruling was to restore competition in the software industry. Without a breakup of the company, he said, Microsoft "may yet do to other markets what it has already done in the PC operating system and browser markets."

Microsoft has steadfastly denied that it engaged in anticompetitive behavior, and the company charged as part of its appeal that Jackson "demonstrate[d] an animus toward Microsoft so strong that it inevitably infected his rulings" (see story).

But the DOJ and a group of state governments that are involved in the case urged the appeals court in their written filings to uphold Jackson's breakup order, arguing that Microsoft would still have the "incentive and ability" to engage in anticompetitive conduct if it isn't split in two (see story).

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