Microsoft Not Out of the Legal Woods Yet. So What?

With Microsoft critics describing Judge Colleen Kollar-Kotelly's ruling in the company's antitrust case as a resounding victory for the software giant, many people are wondering how Microsoft could have escaped relatively unscathed after being found guilty of such egregious antitrust violations. But its federal antitrust case isn't the only major legal battle Microsoft faces, and the company still has to answer to a wide range of charges, some of which are predicated on its wider guilty verdict on the US antitrust trial. Here are some of the legal challenges Microsoft still faces:

Appeal of Kollar-Kotelly's Ruling
The 13 non-settling states and the District of Columbia could appeal Kollar-Kotelly's ruling to the US Supreme Court, claiming that the ruling is ineffectual and not in the public interest. And many of Microsoft's rivals are begging the nonsettling states to do just that. Sun Microsystems has issued a statement requesting that the states appeal, while AOL Time Warner general counsel Paul Cappuccio derided Kollar-Kotelly's ruling as "making a weak settlement stronger." Critics of the settlement say it is riddled with the sorts of loopholes that let Gates and company run roughshod over the Internet in the years after an ineffectual 1995 consent decree would have supposedly prevented such behavior.

Microsoft Competitors Sue the Software Giant
Many of Microsoft's competitors are taking matters into their own hands. During the original Microsoft trial, Judge Thomas Penfield Jackson ruled that Sun, Netscape (now part of AOL Time Warner), and Be Inc. were harmed by Microsoft's anti-competitive behavior, and that ruling was upheld on appeal. These companies are now all suing Microsoft for monetary damages. Netscape's case, especially, is interesting because the DOJ used the company as the center of its case against Microsoft in the original trial. Like the other companies suing Microsoft, Netscape seeks monetary damages, but it is also trying to convince the courts to require Microsoft to change its behavior further, in a way "designed to promote competition and deter further anticompetitive behavior." For its part, Sun is attempting to prevent Microsoft from becoming the "gatekeeper of the Internet." The company is seeking billions of dollars in damages.

European Antitrust Case
The European Union (EU) is currently investigating Microsoft for antitrust violations centered around its server and media player software, and the EU's executive body, the European Commission (EC) said last week that it would issue a ruling by the end of the year. Now that the US case is largely completed, the EU will delve ahead, though the European case against Microsoft faces a different set of requirements, due to differences in European antitrust law. "We have our own rules to uphold," an EU spokesperson said this weekend. The European case against Microsoft began when Sun complained to regulators there that Microsoft's server software made it difficult to integrate third-party services, such as those made by Sun. The EU found that Microsoft engaged in discriminatory licensing of its technology, refusing to supply competitors such as Sun with the technical information they needed. This case could be Microsoft's biggest concern, as the EU could theoretically fine the software giant up to 10 percent of its global sales.

Private Lawsuits
After Judge Thomas Penfield Jackson found Microsoft guilty of sweeping antitrust violations two years ago, hundreds of individuals filed private lawsuits against the company, most of which revolved around the notion that Microsoft overcharged consumers for Windows, one of the Findings of Fact that were upheld on appeal. Most of these lawsuits were consolidated or, in states without specific consumer protection laws, thrown out on a technicality. That's because of a federal law that protects companies from such lawsuits when consumers purchase a product--in this case, Windows--through a third party--in this case, PC makers--and not directly from the manufacturer (Microsoft). At this time, however, over 60 private lawsuits remain, and some of them could cost Microsoft billions of dollars. In California, where there are strict consumer protection laws, a judge has accepted 382 of the 421 facts in the Findings of Fact from the original Microsoft trial, a stinging defeat to Microsoft. And in Maryland, a judge is now considering doing the same. In these two states alone, Microsoft faces billions of dollars in damages. The California case goes to trial in February 2003.

Taiwan Antitrust Investigation
Though it now appears that Microsoft will settle this case, the software giant faces yet another antitrust investigation in Taiwan. But over the weekend, a consumer group in that country demanded that Microsoft cut its prices by 75 percent before any settlement talks commence. The Consumers Protection Foundation says it doubts that Taiwan's Fair Trade Commission (FTC) can protect Microsoft's Taiwan customers from the company's predatory behavior and pricing, and wants the country to ignore Kollar-Kotelly's ruling as it develops its own case against Microsoft. As exciting as this all sounds, we can expect Taiwan to settle with Microsoft.

Microsoft is a big company with over $40 billion in liquid assets, a maniacally driven executive team, and hordes of software developers who are constantly pumping out code and improving the company's products. It also commands roughly 95 percent of the two most important software markets on earth, those of PC-based operating systems and office productivity suites, in an age when competition in both markets is at an all-time high. It's unlikely that any legal challenge can derail the Microsoft juggernaut at this point, especially when the most daunting legal challenge it ever faced was essentially erased with the swipe of a judicial pen. Almost five years after the US government launched its epic antitrust suit against the biggest software company in the world, the competitive landscape has changed dramatically. But one thing remains the same: Microsoft still dominates this industry, and it will do so for the foreseeable future.

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