Oral arguments close antitrust trial

WASHINGTON

At closing arguments in the Microsoft Corp. antitrust trial today, a federal judge zeroed in on the potential impact of a 1998 U.S. Court of Appeals ruling on tying products together.

The oral arguments in U.S. District Court aren't expected to dramatically alter the course of the trial, which began in October 1998. The case is entering its final phase, and will determine whether Microsoft violated antitrust laws.

Settlement talks are also continuing. But today's arguments were noteworthy because, as he had done during the 76 days of testimony, presiding Judge Thomas Penfield Jackson interrupted the proceedings several times with questions that provided insight into legal issues he considers relevant.

Jackson repeatedly pressed attorneys for both sides on how they think he should apply an appeals court ruling that rejected the government's claim that Microsoft illegally tied its Internet Explorer Web browser to the Windows 95 operating system. The panel ruled for Microsoft on technical grounds, but also stated that the union of Windows 95 and Explorer was a "genuine integration" and not illegal tying, because it was done for efficiency and had positive consequences.

The issue of "technological tying" is so key to the current case against Microsoft that Jackson had asked for the input of Harvard University law school professor Lawrence Lessig. The cornerstone of the case is the company's incorporation of Web browsing into its dominant Windows 98 operating system.

Lessig, who filed a friend-of-the-court brief last month, urged Jackson to eschew the appellate ruling and delve into the issue of when software constitutes one product or two. However, Lessig also said that if Jackson determines the 1998 ruling applies to this case, then Microsoft wins hands down.

In his closing argument today, David Boies, lead counsel for the U.S. Department of Justice, said he believed Lessig was mistaken in making that last point. Boies said the government disagreed that the appellate ruling "immunized" Microsoft's tying of the browser to Windows 98 if there is found to be some good that came out of that tying.

"How about the greater distribution of browsers?" Jackson asked Boies.

Boies argued that the same distribution benefits could have been achieved without changing the product design, either through contractual arrangements or by shipping the two products together.

"The question is, what is the Court of Appeals saying?" Jackson again interrupted.

Boies said the government has taken the position that the appellate ruling should be limited to the earlier case and doesn't apply to the case before Jackson. Boies further said he believed the panel limited the scope of benefits achieved by the legal tying of products to those that are made at the design stage, and not products that are combined for the purpose of limiting competition. "We believe these products were commingled for an anticompetitive purpose," Boies said.

The Court of Appeals ruling isn't the only issue of contention between Microsoft and government lawyers on how antitrust laws should be applied to the findings of fact that Jackson issued in November. In those findings, Jackson said the evidence at trial showed that Microsoft had a monopoly over PC desktop operating system software and had used that power to harm consumers, stifle innovation and thwart competition. The case is now in the next stage of determining whether the findings of fact will translate into laws that were broken by the company.

Jackson also pressed Microsoft's lead counsel, John Warden at New York firm Sullivan & Cromwell, on the company's claim that copyright laws allowed it to legally make a series of requirements on computer makers who licensed Windows. Such stipulations included requiring computer makers to take Internet Explorer and not remove the Microsoft icon. "The holder of a valid copyright is entitled to protect it," Warden said.

Jackson responded: "I have two problems with your defense. What evidence did you give me with respect to what is protected by copyright?" Warden said Microsoft had submitted the copyright certificates to Windows 95 and 98.

"I don't really understand your copyright defense," the judge said. "Nobody disputes that you have a copyright."

"We don't argue that the copyright laws trump the antitrust laws — but the antitrust laws don't trump the copyright laws," Warden said.

Said Jackson: "I'm not so sure of that. What you're saying is, 'If you license my operating system, you've also got to license my browser.' "

But Jackson also pressed Warden on how he reads the decision by the Court of Appeals, in particular whether it's binding if the judge finds any design benefits.

"The answer to your question is yes," said Warden. "If there's a plausible benefit."

Jackson is expected to rule this spring on the issues of law. But the parties are still involved in ongoing settlement talks with a court-appointed mediator in Chicago. Microsoft officials said today that the talks now include Microsoft Chairman Bill Gates and Chief Executive Steve Ballmer.

Neither side would publicly comment on the status of the talks. But recently Microsoft officials made public statements that they were willing to make some adjustments in the company's conduct, although they viewed a breakup of the company as too extreme.

But the tough talk continued outside the courtroom. William Neukom, Microsoft's chief counsel, told reporters that "the government in this trial seems to want to rewrite antitrust laws to slow innovation, raise prices and harm consumers." He said the company was committed to settlement talks to "find a way to resolve this matter while preserving the high tech industry's right to innovate."

The oral argument comes as the antitrust case winds down. The Justice Department and 19 states filed sweeping antitrust charges against Microsoft in May 1998, alleging the company engaged in a variety of tactics to pressure computer makers, Internet service providers and online content providers to distribute the company's browser in order to maintain the dominance of its operating system.

Complete Computerworld coverage of Microsoft's legal battles.
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