Supreme Decision Marks a Microsoft Victory

Microsoft won an initial victory Tuesday when the U.S. Supreme Court decided not to hear an expedited appeal of a court-ordered breakup of the software giant. The justices ruled that the case should first go to a lower appellate court.

The decision is seen as a win for Microsoft because the appellate court, the U.S. Court of Appeals for the District of Columbia, has ruled in favor of Microsoft at times during the course of the government's ongoing antitrust case. Microsoft is hoping for a similar outcome in its appeal of a federal judge's ruling this spring that it engaged in anticompetitive conduct. Moreover, the appeals process is expected to delay the final ruling of the case, and perhaps the implementation of remedies, for as long as two years.

"The possibility of a breakup sank closer to zero," said William Kovacic, an antitrust professor at George Washington University law school who is following the case. "It increases the likelihood that the ultimate result on appeal is a substantial reduction in the scope of the government's victory."

The Court of Appeals will now set the timetable. The court has already indicated that the Microsoft appeal will be heard "en banc," meaning by the whole court, not the customary three-judge panel. At least four members of the court are said by observers to be "antitrust skeptics" - assessments which are based both on their rulings in previous Microsoft appeals and on legal papers they wrote while teaching law school.

Microsoft spokesman Jim Cullinan said Tuesday that the company "has been confident of our case on appeal, regardless of whether it was heard by the Supreme Court or the Court of Appeals. We look forward to presenting our arguments to the Court of Appeals."

The company had asked the nation's highest court to send the case first to the Court of Appeals. It had argued that an appeal would involve many legal and factual issues and would benefit from a lower court review.

By an 8-1 vote, the Supreme Court agreed. Of the nine justices, the only dissent came from Justice Stephen Breyer, who argued that the high court had probable jurisdiction in the matter. "The case significantly affects an important sector of the economy - a sector characterized by rapid technological change," Breyer wrote. "Speed in reaching a final decision may help create legal certainty. That certainty, in turn, may further the economic development of that sector so important to our Nation's prosperity."

Meanwhile, Chief Justice William Rehnquist declined to recuse himself from the Microsoft case. The company has hired a law firm in Boston, for which Rehnquist's son is working on a private antitrust case for Microsoft.

Stephen Houck, the antitrust attorney who represented 19 states at trial, and who is now an attorney with Reboul, MacMurray in New York, said the delay benefits Microsoft. "It benefits Microsoft because the court has determined that Microsoft has engaged in illegal conduct, and it is now free to continue to do so until the Court of Appeals acts," Houck said. "It doesn't say anything about the ultimate merits of the case."

On Tuesday the federal government issued a statement that did not indicate whether or not it would seek to impose some of the court-ordered remedies while the parties await the outcome of the case. "We look forward to presenting our case to the Court of Appeals as expeditiously as possible," said Gina Talamona, a U.S. Department of Justice spokeswoman.

Outside experts said they were not surprised by the Supreme Court's reluctance to directly take on Microsoft's appeal of U.S. District Court Judge Thomas Penfield Jackson's ruling that it engaged in anticompetitive conduct. In June, Jackson ordered the company split in two, but he put off enforcement while the company appealed.

The federal government argued that a seldom-used law, the Expedition Act, should have been invoked in the case because a long appeals process "could irreparably harm competition in a vital and rapidly evolving sector of the national economy." The AT&T Corp. (T) breakup marked the only time the Supreme Court has taken a direct appeal since laws were changed to give justices that discretion.

"Nobody expected the Supreme Court to take the direct appeal because they want to hear from the Court of Appeals," said Marc Schildkraut, an attorney with Howrey, Simon, Arnold & White in Washington. "The court is fairly conservative. They want to hear from the Court of Appeals and get more wisdom on the matter."

The federal government and 19 states filed the case against Microsoft in May 1998. Jackson ruled that Microsoft illegally sought to maintain a monopoly over the personal computer operating system software market and tried to tie its Web browser to the Windows system. Windows runs on an estimated 90 percent of the world's personal computers.

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