AOL sues Microsoft for Netscape damages

Associated Press

WASHINGTON — AOL Time Warner sued Microsoft in federal court Tuesday seeking damages for harm done to AOL’s Netscape Internet browser, which had ruled computer desktops until Microsoft began giving its competing browser away.

Many of Microsoft’s business practices, including ones in which the company encouraged computer manufacturers and Internet providers to distribute its Web browser instead of Netscape, were found to be anti-competitive by a federal appeals court last year. AOL, which bought Netscape in 1999, wants Microsoft to cease its contested business practices and pay damages.

AOL executive John Buckley noted that court ruling and said, "This action is an attempt to get justice in this matter."

Jim Desler, a Microsoft spokesman, said the company had no immediate comment.

AOL filed the lawsuit in the U.S. District Court for the District of Columbia. Under federal law, AOL would be entitled to triple any actual damages found by the court.

The company also asked for an immediate injunction against "ongoing and further damage" involving the Netscape Navigator browser, Buckley said.

One possible option, if a judge ruled in favor of AOL, would be to force Microsoft to sell a stripped-down version of its Windows operating system so computer manufacturers could choose which Internet browser to offer. That has also been requested by nine state attorneys general suing Microsoft in federal court.

The federal government and nine other states settled their landmark antitrust suit with Microsoft last year, and that settlement is under consideration by a federal judge. AOL has been a longtime critic of Microsoft and has talked frequently with prosecutors throughout the case.

U.S. District Judge Thomas Penfield Jackson, who heard the federal government’s case against Microsoft in the Netscape matter, found that Microsoft tried to keep consumers from being able to choose Netscape. The appeals court affirmed many of Jackson’s decisions.

Microsoft’s business practices "help keep usage of Navigator below the critical level necessary for Navigator or any other rival to pose a real threat to Microsoft’s monopoly," the appeals court wrote last year.

University of Baltimore law professor Bob Lande said of AOL and its lawsuit: "This is a company that obviously can afford it, and wouldn’t take the step lightly."

"I think they’ve got an excellent chance of success, given that the government has established the facts and established that Microsoft has broken the law," he said.

A judge would still have the challenge of choosing a remedy that would restore competition to the Internet browser market. Netscape has less than 20 percent of the Internet browser market, compared with more than 70 percent in 1995.

"You can’t literally put the market back in the competitive position it was in, so you’d have to think of a forward-looking remedy to help restore competition in the market as best as possible," Lande said.

Shares of AOL were down $1.18, or 3.9 percent, to $28.80 in trading on the New York Stock Exchange, but gained back 14 cents in extended trading. Shares of Microsoft were down $1.64, or 2.4 percent, to $64.46 on the Nasdaq Stock Exchange, before gaining 2 cents in extended trading.