The behavioral remedies imposed on Microsoft Corp. Friday in its four-year antitrust battle with the U.S. government go soft on the company, legal experts said. Microsoft and the government argued that they will bring a tough but fair resolution to the case.
District Court Judge Colleen Kollar-Kotelly issued her opinion in a 300-plus page document, released nearly one year after Microsoft agreed to proposed settlement terms with the U.S. Department of Justice (DOJ) and nine plaintiff states. She largely approved the terms of that deal, adding only a few measures intended to ensure that Microsoft adheres to the restrictions.
Several legal experts familiar with the case said that at first glance the judge's opinion appears to pack little punch. One antitrust attorney compared Microsoft to a fox that has been given a free reign in the hen house.
"The clear message is that monopolists get a free ride, at least in this administration," said Donald Falk, a partner with the law firm Mayer, Brown, Rowe & Maw, in Palo Alto, California, who specializes in antitrust law.
"I thought there was some chance that (the judge) might have entered a decree that actually tried to undo some of the harm that was done," Falk said. "What the opinion said basically was, 'You robbed a bank, you can keep the money, and you can do it again, but don't use exactly the same method.'"Another legal expert said the judge's wordy opinion does little to ensure that Microsoft will be prevented from using its monopoly on the market for desktop operating systems to illegally harm competitors in new markets.
"There's no change in the substance of the settlement proposal, there's only a change that says basically the fox-in-the-hen house method of enforcement (remains) but now allows a judge to come in with a gun periodically," said Mark Ostrau, antitrust chair at technology law firm Fenwick & West LLP, also in Palo Alto.
"Otherwise, the fox is still in the hen house grabbing eggs," he said.
Microsoft, meanwhile, applauded the court's opinion without immediately commenting on any specific terms. "We're pleased that the court has conditionally approved the settlement, which is a tough but fair compromise," said Microsoft legal spokesman Jim Desler. "It imposes significant requirements on the company. We recognize it will be closely scrutinized by the government and our competitors, and we will devote all the time, energy and resources needed to ensure that we meet our responsibilities."
In a press conference Friday afternoon, Bill Gates, the company's chairman and chief software architect, indicated that the company is unlikely to appeal the decision.
"At this point we're not seeing anything that would be cause for appeal but we need to make a full assessment," Gates told reporters.
Friday's ruling laid out in detail the sanctions that Microsoft must follow for the next five years. It says that the company must share important software code that will allow competing software makers to design their software to work well with Windows. It also prohibits Microsoft from retaliating against hardware makers that take advantage of their freedom to offer other vendors' software with Windows PCs. It also outlines a structure for a watchdog committee that will ensure that Microsoft adheres to the settlement terms.
While Microsoft and the government plaintiffs still could potentially appeal the decision, it is unlikely that any of the parties who signed on to the proposed settlement would do so, according to Falk. Whether or not nine states who had been pushing for stricter sanctions will continue to do so is unclear.
"It has as much to do with various political and resource considerations as anything else," Falk said.
State attorneys general representing the suing states were scheduled to respond to the opinion late Friday at a press conference, and it was not immediately clear if they would appeal the decision.
It also remains to be seen how dramatic the effect of the ruling will be on the IT industry. Several of Microsoft's most ardent competitors, including Sun Microsystems Inc., Oracle Corp. and AOL Time Warner Inc.'s AOL division, have pressed the federal government to impose tough sanctions on Microsoft, which they say would provide them with better means to compete.
Michael Madison, a law professor at the University of Pittsburgh who specializes in intellectual property law, said that while the opinion may have been lighter on Microsoft than expected, the case may still have affected the company's behavior in a way that has benefited the industry.
"Obviously there's a great deal of activity in the operating system marketplace that wasn't going on two or three years ago with Linux and Apple," Madison said. "You have to look at it in the context of the market. Microsoft might have some oversight via the judge, but Microsoft also has some additional competition to deal with."
Software vendors may still be challenged when it comes to tuning their software to work well with Windows, despite sanctions in the consent decree that require Microsoft to share or license portions of its source code such as APIs (application programming interfaces) and communications protocols, said Rob Enderle, a research director with Giga Information Group Inc.
The court has required Microsoft to "make more limited disclosures of APIs, communications protocols, and related technical information in order to facilitate interoperability," according to a 22-page executive summary. Microsoft does not, however, have to hand over important code that could compromise the security of technologies such as digital rights management and virus protection, the court said.
"This ruling doesn't cripple Microsoft as much as (competitors) would like, but the ruling should provide them with more access to Microsoft's source and make it easier to build a compatible product," Enderle said.
With the behavioral restrictions established, it will gradually become clear how effective the court's ruling will be, he said.
"Software and hardware vendors have to rely on two key sections of this agreement: one is the selection and the powers of the compliance committee. The other is the compatibility process that exists for competitors to come in and get access to Microsoft's source code," he said. "Neither has been tested yet. Over the next two years, those sections will be tested heavily."
(Paul Roberts in Boston contributed to this report)