Microsoft Tailors Its Tune to Appeals Court

Attorneys assess Microsoft's all-out assault on federal judge, adversaries, and competitors in latest legal brief.

Clare Haney and Margret Johnston, IDG News Service

Microsoft's all-out attack and self-justifying mode may sit well with the U.S. Court of Appeals, which is catching the newest chapter of the government's antitrust suit against the software giant.

In its initial appeals brief filed Monday, Microsoft criticized Federal Judge Thomas Penfield Jackson, blasting both his findings and suggested remedies. Attorneys for the software giant allege the entire proceeding was rife with errors. (See "Microsoft Claims Antitrust Law Abused.")

Legal experts Monday suggest its arguments may suit the appeals court, which was eager to hear the next phase of the case. The Justice Department had unsuccessfully sought to send it directly to the U.S. Supreme Court.

Critical of Judge

A Microsoft allegation is that Judge Jackson profoundly misunderstood U.S. antitrust laws. The judge ruled in June that Microsoft had abused its monopoly power in the operating systems market to quash competitors in the Internet browser market. He recommended the company be broken up into two pieces. The divestiture is on hold until the appeals process is complete.

But that argument didn't wash with legal experts.

"Microsoft saying there are no dead bodies therefore it didn't do anything is the wrong standard for a monopolization case," says Richard Gilbert, professor of economics at the University of California at Berkeley. From 1993 to 1995, Gilbert served as the deputy assistant attorney general for economics in the Justice Department's antitrust division.

He concedes Microsoft's point about Judge Jackson's behavior in talking to reporters both during and after the trial. The judge's comments during the trial didn't appear in print until the trial was over.

"The judge did kind of take the publicity trail more than judges usually do," Gilbert says.

Microsoft may gain the appellate court's sympathy over the judge's decision against hearings on the proposed remedies, Gilbert adds. Instead, both sides submitted briefs.

Focus on Facts, Not Emotions

The issues that worked against the software giant in federal district court won't have the same impact in the appellate court, says Mark Ostrau, partner in charge of the antitrust practice at the law firm Fenwick & West, which has a number of high-tech clients.

For example, during the trial Microsoft appeared to lose ground with the judge over the often inflammatory tone used in internal company e-mail submitted as evidence. Jackson also appeared unimpressed by the demeanor of Bill Gates, Microsoft's chair and chief software architect, who testified by videotape.

At the appellate level "all the emotion is wrung out," Ostrau says. "It's about the cold facts of the law...in a rarefied atmosphere devoid of that psychology."

Case Introduces Antitrust to High Tech

Also working in Microsoft's favor is a lack of precedent-setting legal cases. Although U.S. antitrust law is long standing, its application in the high-tech industry is limited. The law must stretch to fit the technology industry, observes Ostrau, the Fenwick & West attorney.

"There's nothing (in case law) that says if you act like Microsoft, you are guilty," Ostrau says.

Microsoft's error may be in tackling all aspects of the case, another attorney observes. The vendor might do well to limit its focus to the strongest arguments against the Justice Department's case.

"They don't seem to have winnowed anything, which is pretty unusual for appellate council, who usually start narrowing issues the higher up they get," says Don Falk, an antitrust attorney with the law firm Mayer, Brown & Platt. "That's just basic appellate practice."

Falk authored briefs submitted to the district court in the Microsoft case on behalf of a Justice Department supporter, the Software & Information Industry Association (SIIA). He is also helping write a joint brief being prepared by the SIIA, the Computer and Communications Industry Council, ProComp, and America Online. That brief and the Justice Department's papers are due January 12.

"[Jackson's] judgment is well supported by the evidence offered during a 78-day trial, including thousands of pages of Microsoft's own documents," says Gina Talamona, a spokesperson for the Justice Department. "We are confident in our case and look forward to presenting it to the Court of Appeals."

Attitude Adjustment?

Falk harks back to those inflammatory e-mail messages from the District Court as unfinished business not covered in Microsoft's brief.

"They still don't come to grips with the words that came out of their own executives' mouths about what their product position and markets were," Falk says.

While Falk sees the brief as similar to others Microsoft has filed, Fenwick & West's Ostrau finds its emphasis to be very different.

Microsoft previously downplayed the competitive threat of Netscape Navigator and Sun Microsystems' Java technology, Ostrau says.

"But here in the brief, rather than distancing themselves from that argument they are embracing it, saying, look, 'We are not monopolists...all of these things compete with us,'" he says. "They are positioning this as if everything [Microsoft] did was simply in the competitive spirit."

Microsoft's arguments are a "total flip" from its previous positioning, Ostrau says. For example, the company's brief notes the browser competes with Netscape and Sun products, he notes.

Will pointing to hardy competitors help insulate Microsoft from the judge's breakup ruling?

"I was taught never to say never," quips Berkeley's Gilbert, noting plenty more courtroom arguments are ahead. "Anything is possible in the law."