Appeals Court Continues to Give Microsoft Good News - 16 May 2001

Microsoft's antitrust appeal got off to a rosy start in late February as a panel of appeals court judges grilled Department of Justice (DOJ) and Microsoft lawyers about the company's market dominance, Judge Thomas Penfield Jackson's handling of the original case, and Microsoft Internet Explorer (IE) integration in Windows. One appellate justice even attacked the basic premise of the case against Microsoft, which might be a revealing indicator of how the court will eventually rule. Microsoft is trying to overturn its massive defeat at the hands of Jackson, who ruled last year that the company should be broken into two competing corporations. After 2 short days in court, Microsoft's prospects brightened considerably.

In the first day of hearings, Chief Justice Harry Edwards said that he doubted whether the Web-browser market, which was at the heart of the DOJ's case, was important enough to warrant breaking up Microsoft. "Web browsers," he said, "lack the capacity to serve as middleware platforms." And although Netscape's browser might have eventually grown to serve in this capacity, he said he saw nothing in the court record that proved Netscape Navigator was ever a Windows competitor. He quoted former Netscape CEO James Barksdale, who had said that Netscape was "not in the middleware business."

The court then grilled DOJ lawyers about the differences between procompetitive and anticompetitive behavior. "If Microsoft used its monopoly power to put a grocery chain out of business," Chief Justice Edwards asked, "would that violate federal antitrust law?" Assistant Solicitor General Jeffrey P. Minear said that Microsoft's illegal business practices stymied companies such as Sun Microsystems and Netscape. Sun, he said, wasn't able to gain widespread support for its platform-independent Java programming language. However, Minear's comment didn't satisfy the panel of judges.

"You are still very vague \[about\] what \[competitive\] methods are permissible," one justice responded, and Edwards refused to listen to arguments that Microsoft tried to "crush" both Netscape Navigator and Sun Java. Of course Microsoft would want to compete aggressively, he said, as any company would. Edwards said that replacing one monopoly—Microsoft—with another wouldn't solve any problems. The government's solution, he said, virtually ensures such an outcome. "This case ultimately is about whether the Microsoft Windows Internet Explorer monopoly should be replaced by \[a\] Netscape-Sun-AOL \[monopoly\]," Chief Justice Edwards said.

Microsoft didn't get off without a few embarrassing moments, however. When Microsoft attorney Richard Urowsky tried to argue that the company doesn't possess monopoly power, the court quickly shot him down. Urowsky also lost points with the judges for continuing the argument that removing IE from Windows is impossible. "I'm not buying that \[argument\] for a minute," Chief Justice Edwards scoffed. "It's not technically complicated at all."

During the second day of hearings, Justice David Sentelle noted that the order to break up Microsoft would be rescinded if the appellate justices refuted any of the facts that Jackson presented in the original case. "If there isn't a proper finding of fact, then we would have to at least send this back for some trial judge to weigh the facts," Justice Sentelle proposed. If the appeals court reverses the findings of fact, which is rare at the appellate level but increasingly possible in this case, the guilty verdict and subsequent breakup ruling against Microsoft must also be revisited.

An examination of Jackson's behavior provided an interesting sideshow. Microsoft had long complained about the judge's bias against the company, and the appeals court specifically set aside time for this topic, despite the fact that no one—Microsoft included—had formally requested such a thing.

The court's attitude toward Jackson was clear from the outset: The panel of judges pointed out that the appearance of bias—rather than actual bias—is the concern. If Jackson appears to be biased against the company, the court could nullify his ruling against Microsoft. Although the appeals court judges gave no indication that they would pursue this option, the justices were clearly upset about Jackson's comments to the media and his courtroom theatrics. (Jackson was highly critical of Microsoft throughout the process.)

In another interesting exchange, the appeals court justices explored Jackson's reasons for ordering the Microsoft breakup. The appeals court judges said it was "crystal clear" that Jackson pinned the order on Microsoft's decision to integrate IE with Windows. If this decision was the sole reason for breaking up the company, Justice Sentelle said, the ruling is unduly harsh.

The appeals court judges appear to accept that Microsoft tied IE to Windows solely to harm a competitor (i.e., Netscape) and not to benefit consumers. But Chief Justice Edwards noted that the idea of a market for a browserless OS is "absurd," and regardless of why Microsoft integrated IE with Windows, consumers now expect Web-browser functionality in OSs. As Microsoft pointed out during the trial, Linux, BeOS, and Apple Computer's Macintosh OSs include Web-browsing functionality, although their browsers aren't typically as integrated as Microsoft's is.

The justices gave no indication about when a decision would be made. However, one thing is clear after only 2 days of hearings: The appeals court has strong doubts about the case and the way the original court handled it, leading many to believe that the court will, at least, reverse the breakup order. As Justice Stephen Williams noted, "I don't see how this \[breakup plan\] is effective."

TAGS: Windows 8
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