MS/DOJ - Microsoft case goes to court of appeals

Lawyers for Microsoft and the US Department of Justice (DoJ) squared off in a Washington courtroom again yesterday when two days of oral arguments before the US Court of Appeals for the District of Columbia got under way in the nearly three-year-old landmark antitrust case.

The oral arguments are expected to be lively and comprehensive as the seven justices, who already have received extensive briefs from attorneys and supporters of both sides, use the unusually long debate to probe the soundness of the arguments and weigh them against US antitrust law.

Microsoft, facing the threat of a court-ordered break up, appealed the case last year almost immediately after it concluded with the divestiture remedy proposed in June by US District Court Judge Thomas Penfield Jackson. It will attempt to persuade the judges to agree that its decision to begin offering its Internet Explorer (IE) browser together with its Windows operating system in 1998 was neither anticompetitive nor harmful to consumers, as the district court ruled.

Richard Urowsky, who has twice argued successfully on Microsoft's behalf before the appellate court, will argue that, in fact, the opposite was the case: that when IE was integrated with Windows, the result was better functionality for users and increased competition in the browser market because the dominant product at the time, Netscape Communications' Navigator, was forced to improve its product and lower its price.

Urowsky is also expected to argue that splitting the company into two entities -- one to run the operating-systems business and the other to take over applications and other business lines -- is too great a risk to take. In addition, the company will say that it can't be compared with other targets of government antitrust action, such as AT&T. He is also expected to argue that the divestiture order was made too hastily and didn't provide Microsoft with an adequate opportunity to submit arguments.

On the opposing side, DoJ attorneys Jeffrey Minear, senior litigation counsel, and David Frederick, assistant to the solicitor general, will argue that the appellate court should uphold Jackson's verdict and his proposed break up of the company, a remedy the DoJ sought.

Minear and Frederick will argue that Jackson correctly determined that Microsoft violated US antitrust law and that it "placed an oppressive thumb" on the scales of competition in order to guarantee its continued dominance in the operating system market and that its "tying" of IE to Windows was illegal and of no benefit to consumers.

As indicated in one of briefs filed in support of the government, the DoJ lawyers are expected to argue that Microsoft "simply did not care about the requirements of federal antitrust law" and believed it could outspend and outlast the government in court.

In the days leading up to oral arguments, supporters of the DoJ, including Kenneth Starr, best known for his role as the government's special prosecutor in the Monica Lewinsky sex scandal, set the stage for the courtroom drama. Starr, who was hired by the Project to Promote Competition in the Digital Age (ProComp) to write a brief supporting the DoJ, was formerly a justice on the appellate court, which he described as "very bright, energetic and able".

Much is at stake, Starr said, and the lawyers will have to talk quickly and must expect to be interrupted by questions. Although certain questions might give the appearance that the court is favouring one side, Starr warned not to over interpret any predominant themes because judges who are silent might not agree with those themes.

"I think the judges will be very attentive and focused on the facts," Starr said on Friday. "There's going to be a very deferential view towards the fact finding in which the judge engaged. The record is the record and it's very strong. It will be very influential with this court."

Also on Friday, Jonathan Zuck, executive director of the Association for Competitive Technology, which supports Microsoft's side in the case, said Microsoft is "a company that competes hard and succeeds in the marketplace" while continuing to innovate. It faces competition every day, most notably from the Linux operating system, which continues to advance, he said.

The appellate court should focus on whether there has been a definable, specific consumer injury, such as an artificial price -- a crucial determination in an antitrust case -- and it won't find one, according to Zuck.

The court will dedicate a portion of the oral arguments on Tuesday to Jackson's conduct since he finished his work on the case. Among the questions it will explore are the "extrajudicial statements" made by Jackson, including an interview with The New Yorker magazine in which he compared Microsoft chairman and chief software architect Bill Gates to Napoleon.

The court said it will spend 75 minutes on monopoly maintenance and 45 minutes on whether Microsoft bundled IE with Windows. The DoJ attorneys will be joined by representatives of 19 US state attorneys general and the District of Columbia, which are plaintiffs in the case.

The appeals court is expected to rule sometime in the second quarter. Gates has expressed confidence that the appellate court will overturn the district court ruling.

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