However, as Microsoft rolled out its top brass to laud the ruling--which also vacated Judge Thomas Penfield Jackson's remedy of a company break-up back to US District Court for review--many legal experts viewed it as a serious blow to the company's case.
That's because the core of Department of Justice's case, that Microsoft is a monopoly and has used anti-competitive means to shut out competition, was upheld by the Appeals Court for the District of Columbia Circuit, in Washington. As a result, if the case makes it back to District Court, there is nothing to prevent the new judge from ordering the same remedy, or for that matter, an even stronger remedy than Jackson's.
Underlining that point is the fact that once the case makes it back to the District Court, new evidence of alleged anti-competitive behaviour will be able to be introduced--evidence that seems to be mounting.
All this, experts say, is enhancing the likelihood of an out of court settlement. However, because this ruling favors the core of the District Court's original ruling, any settlement will probably place far more stringent conditions on Microsoft than previously proposed.
"Today's decision represents a very significant victory for the Antitrust Division on the core claim in the Microsoft case: That Microsoft engaged in anti-competitive conduct to preserve its monopoly position in computer operating systems," said Charles James, assistant to US Attorney General John Ashcroft for the antitrust division in Washington, following the announcement of the ruling. "The unanimous court has concluded now that Microsoft has monopoly power and has acted unlawfully to preserve it."
Most legal experts contacted last week agreed and said that despite Microsoft's claims that the ruling "narrowed the scope of the case," the threat of a possible breakup of the company is far from over. "This ruling is really bad for Microsoft in the sense that they lost on the legal merits of the monopolization claim--by far the most important part of the case," said Dana Hayter, a lawyer with Fenwick & West, and a former attorney in the Justice Department's Antitrust Division.
"This is a double blow. Not only did Judge Thomas Penfield Jackson, the conservative District Court judge who handled the case, brand them a monopolist, but even the more conservative Appeals Court has now unanimously mostly affirmed that view," he said.
Donald Falk, an antitrust expert at legal firm Mayer Brown & Platt, agreed that the most significant finding was that Microsoft had an entrenched monopoly and repeatedly violated antitrust laws in trying to maintain that monopoly. "The core of the government's case was affirmed. Microsoft has been roundly and unanimously condemned for the most central aspects of its conduct," he said.
While the Appeals Court had vacated, or kicked back, the remedy order, it in no way prohibits another District Court judge or the Supreme Court from re-imposing such a measure.
"The possibility exists that the courts may believe a structural remedy is the only way to effectively deal with his behaviour," Hayter said. "I don't think Microsoft is likely to take that chance and it will move to settle."
But if the case is not settled and not appealed, the DOJ will be able to introduce new evidence at the full evidentiary and remedy hearings about the current market structure, as well as any alleged anti-competitive behavior Microsoft may have engaged in since Jackson's ruling last summer.
"When this record comes to light and gets in front of a District judge, we could find ourselves where we were last June: with another breakup order," Hayter said.
Legal experts and critics say Microsoft continues to use the type of monopolistic business tactics that caused the original antitrust case, most notably integrating additional functions like music playback and instant messaging into the core operating system.
Iowa Attorney General Tom Miller maintains Microsoft's upcoming HailStorm Web services, to be built on top of its .Net software and requiring its Passport service for log-in and storage of personal information, clearly violates antitrust law.
The inclusion of Smart Tag technology in Internet Explorer 6, the Web browser bundled with Windows XP, has also been heavily criticised as a means of controlling the way consumers use the Internet. However, Microsoft has dropped this feature "for the time being" because of partner and tester feedback and not due to concerns about legal issues, spokesman Jim Cullinan told eWEEK.
In addition to vacating the remedy to the lower court, the Appeals Court in its 125 page decision, also kicked back Jackson's ruling that said Microsoft illegally tied, or bundled products together.
But Iowa Attorney General Tom Miller was upbeat about that part of the ruling. "[We'll be] very comfortable before the District Court in reviewing both our tying claims and the remedy necessary to address the findings of wrongdoing by Microsoft in maintaining its monopoly," he said. "We will have the opportunity to present again our claim that Microsoft illegally linked together its products to further protect its monopoly. With a unanimous liability decision as the basis for a strong remedy, today's decision will offer us a powerful foundation for addressing that issue again before the District Court."
