Microsoft Faces New Antitrust Trial

Appeals court upholds monopoly finding, but sends case to new judge to consider penalties.

Frank Thorsberg, PCWorld.com

WASHINGTON, D.C.-- A federal appeals court has shoved the antitrust case against Microsoft into reverse, ruling a new trial judge must take over the case in which U.S. District Court Judge Penfield Jackson had ordered the breakup of the nation's biggest software company.

The appellate court set aside Jackson's remedy of breaking up Microsoft into two separate companies (for operating systems and applications). But the seven-judge panel upheld the finding that the software giant illegally tried to maintain a monopoly with its Windows operating systems.

"We vacate the Final Judgment on remedies, because the trial judge engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality," says the ruling by the U.S. Court of Appeals for the District of Columbia.

There is no immediate comment from Microsoft or federal prosecutors.

Comments disparaging Microsoft and its attorney, made by the federal district judge, apparently convinced the appeals court that Jackson could not remain unbiased if the case returned to his Washington, D.C. courtroom.

Observers Unsurprised, Undeterred

The ouster wasn't a big surprise.

"We can't be surprised by this decision in reaction to Judge Jackson's conduct, which was widely criticized at the time and now has also been criticized by the Court of Appeals," comments Ken Wasch, president of the Software & Information Industry Association.

"But let's keep our eye on the ball. Two of the three causes of action in this case were upheld and it's being remanded to a new judge for review of the remedies," Wasch says. "We believe this holds great promise."

The Computer & Communications Industry Association also applauds the court's action in one of the most important antitrust cases in U.S. history.

"Today's ruling by the Appeals Court is a powerful statement because it underlines the reality that even the 'new economy' cannot be based on lawless anticompetitive behavior," says CCIA President Ed Black. "A monopoly company may not practice predation, nor institute other exclusionary barriers to competition."

Microsoft's Still a Monopoly

Under U.S. antitrust law, it is not illegal for a company to be a monopoly, but it is against the law for a monopolist to engage in anticompetitive behavior.

The U.S. Department of Justice and a group of state attorneys general filed the federal lawsuit three years ago. They argued that Microsoft has illegally used the power it has garnered because Windows is used in the vast majority of computers globally. They contend Microsoft used that power to illegally make inroads into other markets and squelch competitors.

The appeals court says that Microsoft's appeal fails to challenge the factual findings from the district court. It also fails to argue that Jackson's findings in the case did not support his conclusions, the appeals decision says.

That failure "infects many of the company's monopoly power claims" in its appeal, the ruling found, covering examples point by point, paying particular attention to the issue of middleware, the court says.