Government, Microsoft defend settlement against skeptical tech rivals

By D. Ian Hopper

Associated Press

WASHINGTON – The Justice Department set out to prove Wednesday that its antitrust settlement with Microsoft is a bird in the hand and better than what it reasonably could have expected if it had gone back to court to seek tougher penalties.

Philip Beck, speaking for the government, told U.S. District Judge Colleen Kollar-Kotelly that a federal appeals court radically narrowed the scope of Microsoft’s wrongdoing, making it difficult for the government to seek stronger penalties against the software giant.

Getting more “would have been an uphill battle that likely would have been resolved against us,” said Beck. He argued that the settlement still goes further than what the appeals court decided was Microsoft’s legal liability.

The settlement would prevent Microsoft from retaliating against partners for using non-Microsoft products; require the company to disclose some of its software blueprints so software developers can make compatible products; and make it easier for consumers to remove extra Windows features.

Microsoft lawyer John Warden referred to criticisms of the settlement as “whines” and that the they seek “a grab bag of personal advantages for Microsoft competitors.”

They “would redesign Microsoft’s products, confiscate Microsoft’s intellectual property … and extend this case into markets that it has nothing to do with.”

Warden said the settlement would reduce costs and strains on Microsoft in ending the four-year case. “Litigation is not good for the soul,” he said.

Kollar-Kotelly, who is empowered to approve or reject the deal, asked the government to clarify several portions of the settlement that she indicated were vague. But she said she likely would not make a ruling any time soon.

“I have a lot of work ahead of me before I make this decision,” she said.

The judge questioned whether Microsoft had adequately disclosed all of its lobbying contacts with the government, as required by federal law. Microsoft claims the law requires details of meetings with the executive branch, but not those with members of Congress.

Former Sen. John Tunney, D-Calif., a sponsor, said recently that the law was intended to cover meetings with lawmakers.

Kollar-Kotelly said the history of the law indicates it was more inclusive than Microsoft contends.

Warden said the letter of the law bolsters Microsoft’s point of view, and that Tunney’s assertion is “pretty low-level legislative history.”

“That kind of stuff is not compelling,” Warden said, adding that Microsoft did not talk to congressional members or staff about any specific terms of the settlement.

The government’s lawyer, Beck, said in response to the judge’s questions that the government has not researched whether Microsoft should have mentioned the congressional lobbying.

“We have had a lot to do,” Beck said. He said no one at Justice could recall whether previous defendants disclosed congressional lobbying practices.

Opponents contend the deal would help neither consumers nor the industry at large.

At least two groups argue that a provision that would allow computer manufacturers to remove icons leading to “middleware” products, like the Internet Explorer Web browser or Microsoft’s instant messaging program, are not enough to help other software developers compete.

The underlying programs would still exist in Windows, and critics say developers would feel forced to either write software that’s compatible with those Microsoft programs or bear the cost of including competing middleware made by companies such as AOL or RealNetworks.

The original judge in the case, Thomas Penfield Jackson, ordered the breakup of the software company into two companies after concluding Microsoft violated antitrust laws by illegally stifling its competitors.

But a federal appeals court reversed that penalty last summer and appointed Kollar-Kotelly to determine a new penalty in one of the most significant monopoly cases in U.S. history. The Justice Department and Microsoft announced their proposed settlement in early November.

SBC, one of the four remaining regional Bell telephone companies, said Microsoft’s track record of adding features in Windows – like movie and music players and instant messaging software – threatens SBC’s business plans.

Microsoft can use its overwhelming market share in operating systems to dominate other areas, it says.

“We seek no protection from competition,” attorney Donald Flexner said. “We seek protection from Microsoft putting its power between us and the business we want to be in.”

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