BOSTON (04/03/2000) - U.S. District Court Judge Thomas Penfield Jackson will release his "conclusions of law," or the verdict, in the government's antitrust case against Microsoft Corp. today, and while that might seem like an ending of sorts, it will most likely be the beginning of a long appeals process.
The conclusions of law will establish whether Jackson believes that Microsoft violated federal antitrust laws. Given his scathing "findings of fact" released last November, in which he ruled the software maker is a monopoly, the conclusions of law are widely expected to go against Microsoft. If that is the case, the next step will be to determine the remedies.
Arriving at remedies that appease the plaintiffs -- the U.S. Department of Justice (DOJ), 19 state attorneys general and the District of Columbia -- already has proved problematic, based on published reports and comments made over the weekend by Microsoft Chairman Bill Gates and Chief Counsel Bill Neukom. The two Bills commented Saturday at a press conference after mediation talks broke down, with Gates pointing a finger at the inability of the DOJ and the states to work together as a key factor in the settlement negotiations ending without a resolution.
Gates said that if the plaintiffs had proposed a "sane" settlement offer, things might have gone differently during the four months of what now are known to have been intense negotiations. Richard Posner, chief judge of the 7th Circuit Court of Appeals, who was appointed by Judge Jackson as mediator in an attempt to settle the case and end the litigation, announced on Saturday in a written statement that the talks had "proved fruitless" because disagreements between the two sides "are too deep-seated to be bridged."
Microsoft quickly went on the defensive. [See "Mediation Ends, Case Back in Judge's Hands," April 2. ]"We really covered what should have been all the legitimate concerns and certainly went beyond the issues in the case," Gates said of Microsoft's approach to mediation. "There were divisions and extreme views on the other side that brought us to the point where a mediation wasn't going to be successful."
Published reports suggested that the problem was with the state attorneys general, who reportedly were holding out for a harsher remedy -- possibly the breakup of Microsoft. Although the DOJ had reportedly been strongly pushing for that remedy, the department was said to have backed off that position recently in an attempt to settle the case. Microsoft officials, including Gates, have been publicly adamant that a company breakup is not an acceptable option, and that they would fight any attempt to impose that remedy.
However, when he was asked by a reporter if the state attorneys general were the problem in the mediation talks, Gates said "I think that's going a tiny bit too far."
U.S. Assistant Attorney General Joel Klein was also quoted in weekend news reports saying that remedies in the case have to deal with fixing the effect Microsoft's Windows operating system monopoly has had on the marketplace. The government contends that Microsoft leveraged that monopoly to make inroads into the Internet browser market. The "tying" of Microsoft's Internet Explorer to the Windows 98 OS is a key focus of the case.
Posner's announcement that mediation had ended set the stage for today's release of the conclusions of law and for the likely upcoming remedy phase of the legal process. The judge had told both sides that time was running out and set a deadline of March 28 to release his conclusions of law, but when that date arrived, he agreed to delay the verdict to allow more time for a possible settlement. [See "Judge in Microsoft Case Gives More Time," The Industry Standard, March 28.]The New York Times today quoted an e-mail Gates reportedly sent to Microsoft employees on Saturday telling them that the judge's verdict could be out as soon as today and "we don't expect the ruling to be favorable to Microsoft."
Although the situation doesn't look good for Microsoft right now, Gates and Neukom both said at the press conference on Saturday that they believe they will prevail. Neukom pledged to fight it out in appeals court -- a process that would undoubtedly take years.
"We absolutely believe that the judicial system will ultimately rule in our favor," the New York Times today quoted Gates as saying in an interview on Sunday.
While that might well be the case in the end, the lack of a settlement means that Judge Jackson's findings of fact, which established that Microsoft is a monopoly, will stand. Legal experts have said that with that finding established other plaintiffs are likely to have an easier time of suing Microsoft because plaintiffs in other cases will not have to prove that the company is a monopoly. That point will be taken as fact.
After Jackson released the findings of fact, dozens of civil lawsuits were filed against Microsoft, and no matter what happens with the federal case, the company still must contend with the ensuing civil-suit litigation. Documents, including depositions, from the federal case can be used in the other lawsuits.
If the ruling today by Judge Jackson is particularly harsh in finding that Microsoft violated the Sherman Antitrust Act, legal experts believe that plaintiffs in the other lawsuits will have stronger cases.
The effect of mediation ending and the verdict's imminent release already has begun to take its toll on the stock market. Microsoft is a key stock on the technology-heavy Nasdaq, and its share prices were markedly down in morning trading. The company share price closed at $106.25 on Friday, but was trading at $92 late this morning, down 14.25 percent, with the Nasdaq overall down in trading so far today.
Judge Jackson's conclusions of law are due out at 5 p.m. EDT, an hour after the U.S. markets close. The verdict will be posted Government Printing Office Web site at http://usvms.gpo.gov/.
Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or http://www.microsoft.com/. The DOJ, in Washington, D.C., can be found at http://www.usdoj.gov/. The U.S. District Court for the District of Columbia can be reached at http://www.dcd.uscourts.gov/.