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IP: A Test for Antitrust Laws
From: David Farber <dave () farber net>
Date: Sun, 24 Mar 2002 22:41:29 -0500
A Test for Antitrust Laws March 25, 2002 By AMY HARMON The second week of arguments begins today over what penalties Microsoft (news/quote) should face for repeatedly violating antitrust law, and the federal judge presiding over the trial in Washington has postponed ruling on the case's most contested question: how broad is the scope of this remedy proceeding? The Justice Department and nine states have settled with Microsoft, but nine other states - California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia - and the District of Columbia are pursuing stronger measures that they say are needed to prevent Microsoft from repeating its illegal conduct in new markets. This week, an executive of Novell is expected to cast aspersions on Microsoft's tactics in deflecting the threat to its Windows operating system posed by computer networks, according to court filings. A witness from Palm may accuse Microsoft of withholding information to derail competition from Palm's hand-held devices, whose ability to synchronize information with most desktop or laptop PC's depends on Windows. Microsoft's lawyers say testimony about such technologies has no place in the final phase of a case that for four years has centered largely on Web browsers like Netscape Navigator and Internet Explorer. They are pressing Judge Colleen Kollar-Kotelly to ban mention of server operating systems, hand-held devices, television set-top boxes and Web services, arguing that the states are trying to "muddy the record" and turn the remedy hearing into a new liability trial. Their opponents, however, insist these are the future battlegrounds where decisions in this case will count. But the judge, who has received written briefs from both sides on the matter, has steadfastly refused to make a broad decision. Instead, she reminds the states about twice a day that she does not want to "go down the road of new anticompetitive conduct," but she does agree to consider the testimony in the context of an appropriate remedy. Legal experts agree that Judge Kollar-Kotelly has broad discretion, should she choose to exercise it, in how to carry out the instructions from the appeals court to restore competition in the market for personal computer operating systems, prevent Microsoft from benefiting from its misconduct and ensure that it does not happen again. Among other things, the states want Microsoft to produce a version of Windows built with block-like modules of software code that would allow PC makers to swap features into and out of the program without harming the stability of the basic operating system. They also want to force Microsoft to disclose more information, sooner and on an equal basis, to developers who want to write programs that work with Windows as well as Microsoft's own programs do. But the judge has precious little legal precedent to guide her. Most antitrust cases are settled before this point, many remedies require a breakup - the one option the appeals court strongly discouraged - and the rapid evolution of technology may make restoring the conditions that existed before Microsoft's violations impossible or irrelevant. "The law of remedies in this context is kind of a black box," said Alan Meese, a visiting professor of law at the University of Virginia, who specializes in antitrust. "Every case is different, every marketplace is different, so it's hard to point to a precedent." Such freedom, however, does not necessarily make things easier. "Microsoft was found guilty of violating the Sherman Antitrust Act," said David B. Yoffie, a professor at Harvard Business School. "The question is whether there is a remedy for that that's applicable in a high-tech industry where constant evolution is not only required, but is necessary for ongoing consumer welfare. I'm not sure that there is." Judge Kollar-Kotelly has good reason to be cautious. For one thing, the United States Court of Appeals for the District of Columbia Circuit removed her predecessor on the case, Judge Thomas Penfield Jackson, for misconduct, threw out his order to break up Microsoft and overturned large parts of his ruling, which held Microsoft liable for several additional antitrust violations. Judge Jackson received the case after the appeals court removed Judge Stanley Sporkin, who said the federal government's 1994 consent decree with Microsoft was not aggressive enough and declined to approve it. In an opinion that may bear on the current case, the appeals court criticized Judge Sporkin for failing to defer to the Justice Department's "prosecutorial discretion." Further complicating matters, Judge Kollar-Kotelly must decide in a separate proceeding whether the Justice Department's new consent decree is in the public interest. Given that the appeals court said Judge Sporkin had overstepped his authority, she may well be inclined to approve it. But some legal experts say it may be a hard psychological juggling act for the judge to still keep an open mind to the additional remedies the dissenting states are seeking in the current trial. In the current case, the appeals court found that Microsoft had illegally maintained its Windows operating system monopoly by engaging in a number of tactics designed to crush the rival Netscape Navigator browser, which could have become a threat to Windows. The court also found that the company had illegally sabotaged Java, a programming language developed by Sun Microsystems (news/quote), which posed another potential threat to Windows. Microsoft argues that any remedy must be tailored to fit those particular misdeeds, and points to its settlement with the Justice Department as a model. But the nine states that did not join in the proposed settlement argue that it will not prevent Microsoft from using similar tactics to fend off new competitors to its operating system - and that many of the strongest contenders for the present and future look much different from those of the past. "As a whole, Microsoft has engaged in a catalog of anticompetitive acts eerily familiar to the actions Microsoft took to stamp out the nascent threats of Navigator and Java," lawyers for the dissenting states argue in a court filing. "This court has to fashion a remedy that allows the next generation of platform threats to Windows the opportunity to develop and compete with Microsoft on the merits." Last week, David Richards, vice president for consumer systems at RealNetworks (news/quote), testified for the states. Like the Netscape browser, the states argue, Real's audio and video software can run on multiple operating systems. And as they could with the browser, people can write programs to run on the RealPlayer platform. Given a chance, the software could grow into an operating system, the states say. Microsoft dismisses that notion as fanciful, and argued that Mr. Richards's testimony - which described Microsoft's efforts to undermine the RealPlayer by withholding information - had no place in the remedy trial. And Microsoft finds the upcoming testimony even more offensive. "Last week, there were issues that at least dealt with what the case was about," said Jim Densler, a Microsoft spokesman. "This week, we'll see a shift in witnesses that will discuss products that have nothing to do with this case whatsoever." http://www.nytimes.com/2002/03/25/technology/ebusiness/25SOFT.html?ex=1018027327&ei=1&en=79781380d90fa544
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- IP: A Test for Antitrust Laws David Farber (Mar 24)