Microsoft Appeals Breakup Ruling
Feb. 27, 2001 -- The U.S. government's case against Microsoft suffered a major blow in two days of oral arguments before a federal appeals court ending today, analysts said.
The seven judges of the U.S. Circuit Court for the District of Columbia will now consider whether to uphold a lower court judge's order to break the software company in two, to send it back for reconsideration, or to vacate it — eliminate it entirely.
The justices took a dim view of the government's "tying" claim that Internet Explorer and Microsoft Windows were illegally linked together, experts said, and tore into the idea that Explorer monopolizes the browser market. District court judge Thomas Penfield Jackson may never have proved there is a separate browser market to monopolize, the judges said.
"They were brutal on the government lawyers … I think there's a 50 percent chance that the entire thing will be vacated," said Bob Lande, a law professor at the University of Baltimore.
Unusually, the judges also spent this afternoon criticizing Jackson's out-of-court statements during the trial, where he badmouthed Microsoft to journalist Ken Auletta and others. Auletta later published some of Jackson's statements in a book, World War 3.0.
"The system would be a sham if all judges went around doing this," Judge Harry Edwards told government lawyer John Roberts.
But the judges took a harsh view of Microsoft's position that the whole case should be thrown out based on Jackson's statements. Their questions to Microsoft lawyer Richard Urowsky focused on when Jackson would have come up with his anti-Microsoft opinions, and whether it could be proved that he was actually biased against the company.
There is no evidence "other than your own speculation that he had these views before the trial started," Judge David Tatel told Urowsky.
Sending it Back
The judges are more likely to send the case back to a lower court for reexamination than to throw it out entirely, but Jackson won't be the judge to look at it experts said.
"Judge Jackson will never see this case again," said Hillard Sterling, an antitrust lawyer with Gordon & Glickson in Chicago.
Jackson's comments probably won't imperil the case on their own, analysts said. But he'll probably get his own rebuke, whether as part of the circuit court's decision or separately, they said.
"Given the magnitude of this case, it's hard to imagine overturning the entire complex judgment just because a trial judge was shooting his mouth off," ABCNEWS legal analyst Jeffrey Toobin said. "But I wouldn't be surprised if an opinion from the court said, 'We don't think it was a good idea for him to be talking this way.'"
The issue of the remedies — especially the order to break Microsoft into two companies — is sure to be sent back if any of the case survives, said Nicholas Economides, professor of economics at New York University. Jackson decided to break up the company after one day of hearings, and the circuit court would prefer more evidence and consideration, he said.
"They were poking holes left and right on the remedies," he said.
Chief judge Harry Edwards suggested that if even one of the pillars of the government's complex case is knocked down, the breakup may have to be sent back for reconsideration.
"If we are to uphold the judge on fewer than all the arms that he found, does it necessarily follow that we have to send the remedy back?" he asked.
Questioning the Breakup
Discussing the potential breakup of the company proposed by Jackson, Microsoft lawyer Steven Holley said the breakup was punishment for Microsoft, an option not permitted under antitrust law.
"It is difficult to conclude that the breakup is anything other than punitive. The breakup was intended to punish Microsoft because it refused to concede that it had broken the law," he said.
Government lawyer David Frederick said splitting the company in two would increase competition in the software industry.
"Our point is we're trying to restore competitive conditions," he said.
Finding Facts
Earlier, the justices criticized Jackson's "findings of fact," specifically suggesting the judge may not have properly defined a market for Internet browsers.
"If there isn't a proper finding [of what the browser market is], … we would have to at least send this back for some trial judge to weigh the facts and the evidence," Judge David Sintelle said.
Jackson and government lawyers were confusing the browser market with the operating system market, the appeals court judges said, and that's not permissible. Microsoft lawyer Richard Urowsky also drilled that point, saying browsers were just a free part of an operating system, and so Microsoft can't be thought to have dominated a market which doesn't exist.
"These judges are very skeptical about whether Microsoft successfully monopolized any market," Sterling said.
Government lawyer Frederick said the point of his argument was that Microsoft stopped Netscape from turning its browser into a full-scale platform that might be able to compete with Windows — and that Microsoft's actions of integrating Explorer into Windows may have stopped a further browser market from developing.
"[In 1995] Netscape had approximately 80 percent market share. They were selling this product, they were licensing it as a product, there was a market for this product," he said.
Long Fight
No matter what, this promises to be an even longer fight.
If the decision is vacated, the federal government and 19 states can appeal it to the U.S. Supreme Court. Although analysts have said that Charles James, antitrust chief for the Bush administration, may want to settle rather than pursue this Clinton-era case, the state attorneys general can appeal on their own.
"I asked three separate state people [today] and all three of them said that if [the federal Department of] Justice bows out, we're going all the way to the Supreme Court," Lande said.
If it's remanded, it will go back to the district court level. And on the slim chance the appeals court upholds all of Jackson's findings, Microsoft can appeal to the Supreme Court.