Posted on: Saturday, August 18, 2001

Court denies Microsoft bid to delay

By D. Ian Hopper
Associated Press

WASHINGTON — A federal appeals court yesterday denied a bid by Microsoft to delay its four-year antitrust case, but analysts said the ruling probably would not deter the software giant from continuing to slug it out in court.

The U.S. Court of Appeals for the District of Columbia rejected Microsoft's request to halt the case until the Supreme Court decides whether to hear its appeal. The ruling clears the way for a new judge to decide what penalty Microsoft should face for antitrust violations.

The penalty proceedings, in turn, could turn the legal spotlight for the first time onto Microsoft's upcoming operating system, Windows XP, due for release in October, said Howard University law professor Andy Gavil.

"This is the first option the government's going to have to take a position on Windows XP publicly," Gavil said of the proceedings, which will start once a new judge is chosen. "The immediate battleground will be, can they achieve some changes to Windows XP."

District Judge Thomas Penfield Jackson, who found Microsoft guilty of antitrust violations last year and ordered the company split in two, initially had demanded ``conduct remedies'' that would have affected Windows XP. But Jackson rescinded those orders before he was removed from the case by the appeals court earlier this year. The appeals court upheld his finding of antitrust violations but overturned his breakup order.

Gavil said the Justice Department may want to revive those conduct remedies immediately, before the long penalty process starts. Such a move, he said, could cause last-minute changes to Windows XP, or even spark a quick settlement.

Gavil said Microsoft officials "have to know at this point that they can't really ship Windows XP as they designed it."

Windows XP will add many new features to the operating system — such as a streaming media player, Internet security firewall and DVD player — that are currently standalone products made by competitors.

Other antitrust experts predicted that Microsoft won't change its strategy of using every legal route to delay penalties.

"I think they would rather be under no constraints over the next few years rather than do something that would be enough to get everyone signed off on a settlement," said Don Falk, an antitrust attorney who has worked for a Microsoft rival.

Lawyers for Microsoft and government prosecutors have met in recent weeks, but their talks have not included significant negotiations.

In asking the appeals court to halt the case pending Supreme Court review, Microsoft argued that Jackson was biased because he harshly criticized Microsoft in newspaper and book interviews before he issued his verdict. Because of the timing of the interviews, Microsoft said, the verdict should be thrown out.

But the appeals court disagreed. The judges also rejected another Microsoft argument that allowing the case to continue would erode the public's faith in the judicial system.

Friday's ruling does not affect whether the Supreme Court will take up the case when the justices return from recess in October.

The penalty, which is likely to come after a hearing process, could require simple changes in Microsoft's practices or a breakup of the Redmond, Wash., company.

The Justice Department and the attorneys general of Iowa and Connecticut, two of the 18 states suing Microsoft for anticompetitive practices, applauded the ruling.

"We are pleased with the court's decision and look forward to proceedings in the District Court," said Justice Department spokeswoman Gina Talamona.

Microsoft spokesman Jim Desler said the company was disappointed, and was still hoping the case could be settled out of court.

"While we believed the process was best served through a stay, we were prepared to move ahead with getting the remaining issues in the case resolved while we await word on Supreme Court review," he said.

"We are focused on launching a product that is critically important to the PC industry," Desler said.

Dana Hayter, a former Justice antitrust attorney, said the new Bush administration antitrust chief, Charles A. James, has pursued the case vigorously and he predicted that Microsoft will keep fighting through the courts.

"If the past is prologue, they'll take everything until the last appeal is exhausted," he said. "It would take a change in strategy and mindset at Microsoft."