DOJ Takes Last Jab at Microsoft

WASHINGTON (05/26/2000) - Although the U.S. Department of Justice (DOJ), 19 U.S. states and the District of Columbia have Microsoft Corp. bloodied, on the ropes and staring straight at an impending court-ordered breakup, the government today couldn't resist jabbing at the software giant one last time in the 2-year-old antitrust battle.

The government's plan, which reiterated its April 28 proposal to split Microsoft into two companies, would allow Microsoft cofounder Bill Gates to own stock in either of the new firms, but not both. The government also harshly accused Microsoft of dissembling and obfuscating in a crass attempt to prolong the trial's outcome.

The government's filing today clarifies several questions that U.S. District Judge Thomas Penfield Jackson raised in a courtroom hearing Wednesday. Jackson stunned a packed courtroom then by putting the lid on a case that many had expected to go on for at least a few more weeks, if not months.

Jackson had asked government lawyers to file a "clean copy" of their proposal to remedy Microsoft's multiple violations of federal and state antitrust laws by breaking the company in two, which would leave one company with the Windows operating systems, subject to conduct restrictions; and the other with everything else, including the Office software applications suite and the Internet Explorer Web browser.

The government's "clean copy" now includes a new provision that would allow Microsoft cofounder Paul Allen and Chief Executive Officer Steve Ballmer, but not Gates, to own stock in both new companies. The original proposal stated that Microsoft shareholders who owned more than 3 percent of the company's stock -- namely, Gates, Ballmer and Allen -- should be prohibited from being granted shares in both new companies. Allen, who owns 4 percent of Microsoft's stock, had written to the court complaining about the provision.

The government also blasted Microsoft's request for more time to defend itself against the breakup proposal. At Wednesday's hearing, Microsoft's attorneys protested that they needed more time to mount a defense. One attorney, Steven Holley, told Jackson that chamber conferences held on April 4 and 5 had led Microsoft to believe that it would be granted more time. Holley offered a 35-page "offer of proof" telling Jackson that the company wanted 16 witnesses, including Gates and Ballmer, to testify against a breakup.

"Microsoft has not.. engaged responsibly on those issues," the government stated. "To the contrary, its eleventh-hour submission of the Offer of Proof appears to be just a cynical ploy calculated to raise diversionary issues on appeal."

The government said Microsoft has "known for months" that the government was considering proposing a breakup of the company and that Microsoft has had "ample opportunity" since the government's April 28 proposal to "set forth its substantive and procedural concerns."

Microsoft responded to the government's proposal with a May 10 filing arguing that a breakup would be a drastic and unwarranted remedy disproportionate to the laws that Jackson ruled the company violated. Microsoft set forth a sliding scale of remedy proceedings but didn't specify how much time, and which additional legal tools, it wanted to mount a renewed defense.

Microsoft spokesman Jim Cullinan said today's filing "remains excessive and unwarranted. The proposal would hurt consumers, the high-tech industry and our economy."

In today's filing, the government blasted Microsoft for its ambiguity, accusing the software giant of being deliberately vague in requests contained in both the May 10 filing and an uncalled-for follow-up brief filed May 22.

"The fact that Microsoft had prepared but kept secreted in its briefcases a 35-page Offer of Proof concerning testimony from 16 different witnesses... demonstrates that Microsoft was not genuinely surprised about what was expected of it," the government stated. It added that Microsoft was "perfectly capable of being forthright with the court but chose not to do so."

At Jackson's suggestion, the government also expanded its legal definition of "Microsoft" today to include "directors, officers, managers, agents, and employees," among others. The DOJ also put a new limit on the proposed two new companies' ability to share technology, in response to Jackson's concerns about a possible loophole in the government's proposal. Under the original proposal, the two companies could share code as long as the same technology was made available to other companies. Today, the government proposed barring the two companies from sharing technology offered as separate products.

Microsoft has until May 31 to respond to today's filing. A final judgment by Jackson could come as early as June 1. In the wake of Wednesday's hearing, Jackson is widely expected to order a breakup of Microsoft.

At Wednesday's hearing, the government's lead trial counsel David Boies signaled that the government will ask to have Jackson's final judgment sent straight to the U.S. Supreme Court for review. Legal observers expect the high court to kick the case back to the U.S. Court of Appeals for the District of Columbia Circuit.

In 1998, the appeals court ruled against Jackson in a previous battle between the DOJ and Microsoft. The company is confident about its chances on appeal in the current case, especially an appeal involving a breakup ordered after little in the way of evidentiary hearings. Whether the Supreme Court will eventually hear the case remains an open question.

"We expect at the end of the legal day that Microsoft's actions will be found to be good for competition and consumers, and our position will be vindicated," Microsoft Cullinan said.

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