IP: A Test for Antitrust Laws

[David Farber <dave () farber net>]

> 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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