By Siobhan Kennedy and Rachel Chalmers
What are the legal implications of the findings of fact in the Microsoft antitrust trial? Bill Kovacic, an antitrust professor at George Washington University describes them as an extraordinary pro-government document. He says: The judge basically chose the document that the government proposed in its findings of facts and paid very little attention to anything Microsoft said. Silicon Valley attorney and Microsoft antitrust maven Rich Gray agrees that Judge Thomas Penfield Jackson’s findings were a smashing victory for the government. How vulnerable are these findings to appeal? Not at all, said Gray. I think the judge was very thorough, very careful. The vast majority of his findings, when tested on appeal, will be found to have strong grounding in the evidence.
Financial commentators have claimed that Judge Jackson provided no evidence of consumer harm (see separate story). Gray disagrees: Find me a lawyer that’s saying that that isn’t already working for Microsoft! That is a total Microsoft spin control argument. The Sherman antitrust act is not a consumer protection statute, it is a competition protection statute. If competition is harmed, it necessarily follows that consumers are harmed. Gray explains that Microsoft has been found to engage in the illegal maintenance of a monopoly. In particular, Judge Jackson found that Microsoft targeted other companies and other technologies that were potential threats to its monopoly products, and that it engaged in anti-competitive conduct against those companies and technologies. That is an antitrust violation, period, says Gray.
Given the nature of Friday’s findings, Kovacic says it is inevitable that Judge Jackson will rule against Microsoft. What’s not clear is the extent to which he will rule. Certainly, Kovacic says the Judge will likely accept most of what the government has argued for, but that says nothing of the remedy, which won’t be decided for months to come yet. The next stage in the legal procedure is called the conclusions of law. This is where the judge tells the opposing parties to read his summary and come up with what they think he should conclude in his final judgment.
To do that, both sides must draw on evidence from previous case histories. Based on earlier court decisions, they have to argue that the facts the judge found in this case have this particular legal significance. The judge has given both sides till the end of January to come up with their conclusions of law, whereupon Kovacic says there will be a recess before the judge will most likely hold a court session to discuss the contents of the findings. These oral arguments could take around a month, he says, which means Jackson won’t deliver his final verdict until about mid-February.
Kovacic says it may not go that far. While the two parties are drawing up their conclusions of law, they will also be engaged in lengthy talks, aimed at settling the case before it gets to the judge’s final ruling. If they reach some sort of settlement then the procedure will be stopped in its tracks and the conclusions of law won’t be necessary any longer, he says. While Kovacic thinks that settlement talks will begin as soon as possible, he thinks it unlikely that the two sides will reach any agreement prior to the judge’s final ruling. The 19 states have made it clear that any settlement with Microsoft should involve mandatory licensing of the Windows source code or a break up of the company, he said. The DOJ hasn’t been as forthright but it won’t contradict what the States say, which means that Microsoft will have to agree to one or both of those elements if a settlement is going to take place.
If Gray were advising Microsoft, what would he advise it to do? Settle, says Gray, without question. He believes that if Microsoft approaches the government offering to spin off its applications business into a separate company, and combines that offer with a promise to make browser functionality a module that can be removed or replaced, the company could minimize damage to its business and to shareholder value. That offer would be difficult for the government to walk away from, he says. If, on the other hand, Microsoft declines to settle, Gray predicts the company will be embroiled in legal battles for another decade.
Besides the Sun Java and Caldera DR-DOS lawsuits, both of which seem likely to benefit from Judge Jackson’s findings, Gray reports that Microsoft has two antitrust class actions pending against it, both filed in February 1999 by GravityNet Inc. They’re facing a bunch of lawsuits that they’re in a position to lose, he explains. One downside of taking the Judge Jackson lawsuit all the way without settlement, he says, is that it creates the potential for a final judgement that can be used against Microsoft in the other lawsuits. There’s a do-able deal here that can allow Microsoft and shareholders to basically walk away without too severe damage, he urges. That’s what they should be conveying. They had a very bad day. There’s no sugar- coating it. They should do what they can to put this behind them.
Yet Kovacic believes the chances of a settlement are very slim. If [breakup or publication of source code] are non-negotiable elements, then I can’t see Microsoft agreeing either way. It’s like asking them if they want to be killed by the gas chamber or by the death sentence. For a settlement to be agreed upon, Kovacic says Microsoft would have to be willing to re-evaluate the necessary elements in such as way that the DOJ still came out looking as if it had won a decisive victory. For its part, the DOJ might have to back off slightly on the rigidity of the terms of the settlement and be prepared to give more leeway to Microsoft. If Klein [the DOJ’s lead attorney] decides to settle there will be a lot of pressure on him to explain why the DOJ appeared to give in when it had such a clear litigation victory. He can’t be seen to be selling the side short.
Given that to be the case, Kovacic says the judge’s ruling will be followed by his remedy – what he thinks should happen to Microsoft in the light of his findings – and then Microsoft will take the case to appeal. But that could take months, Kovacic said. Before the judge issues his remedy he could decide to take more testimony. Kovacic estimates the procedure will last till at least the middle of next June or early July. If Microsoft then takes the case to the appeal courts it could then drag on for at least two more years. The first year will be spent in the US Court of Appeals for the District of Columbia and then the most likely outcome will be a final judgement by the US Supreme Court, which could further extend the case’s conclusion until summer 2002.
