Thread---Microsoft Corp.
The Wall Street Journal -- June 14, 1999
Law:
A Strategy Shift Helps
Microsoft Score in Court
----
By John R. Wilke
Staff Reporter of The Wall Street Journal
WASHINGTON -- As Microsoft Corp.'s antitrust trial enters its final weeks, it looks like the software
company is aiming at a more modest goal than outright victory: Get in position for a possible settlement,
or limit penalties if -- as seems increasingly likely -- the judge rules against Microsoft.
Microsoft's lawyers are also proving more effective in the courtroom. In the first phase of the trial,
which ended in February, they looked like the gang that couldn't shoot straight. They endured a series of
courtroom setbacks as David Boies, the government's lead trial counsel, grabbed the spotlight and
pressed ill-prepared Microsoft witnesses into repeated concessions.
But Microsoft's lawyers returned from the break with guns blazing, thanks largely to Michael Lacovara,
a young partner in the Wall Street firm of Sullivan & Cromwell. In three days of polished and relentless
cross-examination, the 35-year-old litigator worked to raise doubts about how well the government's
economic witness, Franklin Fisher, knew the industry. Then he steered Mr. Fisher into statements about
the future of technology that appeared designed to make the judge reluctant to interfere in such a
dynamic industry.
Microsoft's emerging strategy is built upon the argument that the traditional software industry is rapidly
being overshadowed by the Internet, where powerful rivals, especially America Online Inc., offer a
counterweight to Microsoft's alleged monopoly on the desktop.
Mr. Lacovara was armed with new evidence gleaned from confidential merger files of AOL, Goldman,
Sachs & Co., Netscape Communications Corp. -- bought by AOL for $10 billion in the midst of the trial
-- and AOL partner Sun Microsystems Inc., a fierce Microsoft rival. He used it to raise questions about
earlier testimony by Netscape's chief executive and portray the alliance as a potent new force planning
to take on Microsoft.
Confronted with these documents, Mr. Fisher, a professor at the Massachusetts Institute of
Technology, conceded Microsoft's monopoly power may be restrained in the future by the Internet and
the AOL alliance. But that has nothing to do with Microsoft's illegal acts up to now, he said, or its
continuing dominance of desktop software.
The future, however, will be very much on the mind of Judge Thomas Penfield Jackson if he rules that
Microsoft is a monopoly and begins to weigh how it might be restrained. Indeed, after Mr. Lacovara
introduced the documents, the judge said that "the existence of these documents does call into question
the accuracy of [Mr. Fisher's] forecast for the future."
Microsoft's choice of witnesses for the rebuttal phase of the trial also signals a new focus. Today, it will
call as a hostile witness David Colburn, a flamboyant AOL executive who testified earlier in the trial, to
talk about the scope of AOL's competition with Microsoft and its Internet plans. Mr. Colburn will be
followed by Gordon Eubanks, a Silicon Valley veteran and former chief of Symantec Inc., testifying on
"the rapid pace of change in the software business."
These witnesses know almost nothing about specific claims of predatory practices made by the
government during the trial. So they won't help much against the government's charge that Microsoft
misused its monopoly power.
Microsoft also plans to make its case on Capitol Hill this week. The company has become a major
contributor to the Republican Party, and its billionaire chairman, Bill Gates, will testify before the Joint
Economic Committee. He is expected to face only friendly questioning -- schoolchildren will be able to
ask questions via satellite hookup -- and, later, to meet privately with congressional leaders to argue
against federal meddling in fast-moving, high-tech markets, such as Microsoft's.
Despite its strong start with Mr. Lacovara, Microsoft may have lost ground with damaging disclosures
by an IBM executive about allegedly heavyhanded Microsoft tactics. Microsoft's cross-examination of
the IBM executive failed to shake him, though the legal team fared better against a third government
witness.
Mr. Lacovara rejects the notion that Microsoft has changed its strategy or is gunning for anything less
than a victory in the case. "If we ever have to deal with remedies, we will do that," he says. "But our
rebuttal case shows that the government hasn't even come close to what they need to show that
Microsoft violated the antitrust laws."
The point of emphasizing AOL's rising power, Mr. Lacovara says, "is to show that Microsoft does not
have and could not exercise monopoly power in any plausible market" because the industry is evolving
so fast and in new directions. "The government has been bending over backward to ignore the meaning
of the AOL deal from the day it was announced, and it won't wash."
The son of a prominent Washington lawyer, and a graduate of Cambridge and Harvard Law, Mr.
Lacovara made partner at 33. His father, former Justice Department prosecutor Philip Lacovara, was
in the courtroom last week and saw his son argue a case for the first time, crossing swords with the
veteran Mr. Boies. "I'm really proud," he said. "He's a better litigator than I am."
That's saying something, because the elder Mr. Lacovara argued the Nixon Watergate tapes at the age
of 30, and prevailed. Now, some of his son's tactics recall the theatrics Microsoft angrily accused Mr.
Boies of using earlier in the case. After one document he used against the witness was exposed by Mr.
Boies as misleading, Dr. Fisher, the silver-haired economist on the stand, threw Mr. Lacovara an icy
reproach. "You're very fond of games," he said.
"I have children, too, Dr. Fisher," the lawyer responded.
"That's not quite what I meant, Mr. Lacovara," Mr. Fisher shot back. Journal Link: For an expanded
look at the Microsoft antitrust trial and an online discussion
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