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Microsoft Foes Continue The Fight
by Drew Clark
Any thought that Microsoft had put its legal problems behind it was quickly disabused last week during the Senate Judiciary Committee hearings on the proposed settlement of the government's antitrust case against the software company.
The chairmen and ranking Democrats of the committee and its Antitrust Subcommittee heaped scorn on last month's proposed settlement, which would impose new restraints on the company's business practices but is widely regarded as a light penalty for a company whose conduct has been found guilty of violating antitrust laws by a federal district court.
Assistant Attorney General Charles James defended the Justice Department's settlement as containing "some of the most stringent enforcement provisions ever contained in any modern consent decree." The deal has been accepted by nine of the 18 state attorneys general that joined with the federal government suing Microsoft.
But Sens. Patrick Leahy, D-Vt., Orrin Hatch, R-Utah, Herb Kohl, D-Wis., and Mike DeWine, R-Ohio, each criticized portions of the deal. Companies and trade groups that oppose Microsoft's dominant position in the software market were gleeful, and their lobbying troops were out in force. Even as Microsoft is looking to settle each of its major legal disputes, the rivals eagerly anticipate a long and multi-pronged battle against the company next year.
"This is the first place there has been objective scrutiny of the settlement," said Mark Bohannon, general counsel of the Software and Information Industry Association, one of the trade groups leading the charge against Microsoft. "The details aren't standing up so far."
"We object to the settlement less for what is in it than for what is not in it," said Mitchell Kertzman, CEO of Liberate Technologies, which competes with Microsoft in making software for interactive television. "Microsoft has a record of interpreting consent decrees to its advantage. Therefore, it should be tightened up."
Going Too Far?
None of the states still suing Microsoft -- California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia, along with the District of Columbia -- agreed to testify at the hearing, citing their ongoing litigation. The previous Friday, they had proposed a set of harsh remedies that they said would do much more than the proposed settlement to neuter Microsoft's record of anti-competitive conduct.
Their proposed remedies call for restrictions that would: strip computer programs from the company's Windows operating system; permit computer makers to create unique versions of Windows; and require a "special master" to supervise Microsoft's conduct. The deal also would require Microsoft to: bundle Sun Microsystems' Java with Windows; publicly release the source code for its Internet Explorer Web browser; and translate its Office software suite to work on rival operating systems.
Microsoft and its defenders have harshly criticized such proposals. On the afternoon of the Senate hearings, Microsoft responded to them in a court filing that declared, "The non-settling states seek to punish Microsoft and to advance the commercial interests of powerful corporate constituents -- Microsoft competitors such as Sun Microsystems, Oracle, Apple and Palm. Neither objective is appropriate under the antitrust laws."
Two one-time critics of Microsoft partially agreed with that assessment. Although they did not testify in person, Jay Himes, chief of the antitrust bureau at the New York State Attorney General's office -- which favors the agreement -- defended language in the settlement that "may help break down barriers that protect Microsoft's Windows monopoly."
"The proposed final judgment compares favorably to -- and in some respects may well exceed -- the remedy that might have emerged from a judicial hearing," said Himes, whose state was the lead plaintiff in the action by the 18 attorneys general.
Comparing the settlement agreement with the suing states' remedy, Stanford University law professor Lawrence Lessig added that while he preferred the latter, in several respects the remedy "goes beyond" what is necessary by requiring an open-source Internet Explorer and by requiring that Office be translated to rival operating-system platforms. Lessig had been appointed a "special master" in the Microsoft case when District Judge Thomas Penfield Jackson presided over the case, but Microsoft successfully objected to his appointment.
The Fight For Momentum
Since the settlement proposal, Microsoft has sought to expedite legal action and its opponents to exploit every avenue of the political process, rather than the converse. Having negotiated a settlement with both the Justice Department and the largest group of private class-action plaintiffs against it, Microsoft hopes to build on its momentum to resolve its burdens as soon as possible.
"It takes two people to work together and only one to pick a fight," Microsoft general counsel Brad Smith, who recently was selected to take the top legal job at the company, said about industry and the attorney generals' criticism of the settlement. "We are committed to working with the industry in a more constructive way than we ever had before. We are looking for a better path, and we are prepared to go more than halfway."
Legal observers are split on the likely court result. Under normal circumstances, most agree that it would be hard for District Judge Colleen Kollar-Kotelly, who now oversees the case, to overturn a settlement backed by the two major parties, Microsoft and the Justice Department. Because of the nine states' remedies trial set to begin in March, much will depend on whether Kollar-Kotelly certifies the settlement as being "in the public interest." Such a proceeding, called for under the Tunney Act, is likely to begin in February and could conclude that month.
Kollar-Kotelly's legal discretion is limited by an unprecedented, anonymous seven-judge ruling by the D.C. Circuit Court of Appeals. But most observers agree that District Judge J. Frederick Motz, who is presiding over class-action lawsuits against Microsoft, has no such constraints. He must decide whether to approve a $1 billion donation in software and hardware to schools in exchange for dismissing almost all lawsuits against the company -- including those by California plaintiffs who have stronger claims in state court.
"There is no question that Motz has the authority to reject the settlement on the basis of not being fair and reasonable with respect to California and other states," said John Shope, a class-action attorney with Foley Hoag Eliot in Boston. In that case, "the real battleground will be among the differing plaintiffs."
Sensing a perceived weakness in the class-action case, Microsoft critics hope to influence Kollar-Kotelly. State attorneys general "are hoping that Motz won't approve" his settlement, said Stephen Benz, a Washington attorney working with the California class-action plaintiffs. "That will give Kollar-Kotelly more comfort in not approving" the Justice Department settlement.
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