To: rudedog who wrote (138334 ) 6/28/2001 11:58:16 AM From: Road Walker Read Replies (1) | Respond to of 186894 Appeals court vacates MSFT ruling Case sent back to district court By William L. Watts, CBS.MarketWatch.com Last Update: 11:49 AM ET June 28, 2001 WASHINGTON (CBS.MW) - In a major legal victory for Microsoft, a U.S. appeals court vacated a ruling that would have split the company into two separate firms was vacated Thursday and sent back to a lower court, according to reports. The U.S. Court of Appeals for the D.C. Circuit also ordered U.S. District Court Judge Thomas Penfield Jackson removed from the case. Microsoft shares were up $3.82, or more than 5 percent, at $74.96 before being halted. Shares have yet to reopen. Jackson last summer ordered Microsoft (MSFT: news, msgs, alerts) split into two non-affiliated companies - a Windows firm and an applications software firm -- to remedy the violations of U.S. antitrust laws he found after a lengthy trial. He also set significant restrictions on Microsoft's conduct, but stayed the entire order pending the final outcome of the appeals process. The appeals court ruling leaves open questions about the ultimate fate of the case, which was initiated three years ago this month by the Clinton Justice Department and 20 state attorneys general. Speculation has mounted that the Bush administration would await the appeals ruling, then seek a negotiated settlement with the software giant that would avoid a break-up. Microsoft, in written briefs, argued that Jackson's ruling was "infected with error" and disputed almost every aspect of the judge's findings and the government's case. The government stood by Jackson's findings that Microsoft illegally used the power of its Windows monopoly to sideline competitors, such as Netscape. Microsoft has maintained that Windows is not a monopoly, much less one that was used to prey on competitors. Monopolies, per se, are not illegal. Antitrust laws prohibit companies from using a monopoly in one area to stifle competition in another. Basically, Jackson found that Microsoft bullied its partners by implicitly threatening to withhold or restrict access to Windows unless they favored Microsoft products, such as the Microsoft Explorer browser. In a key finding, Jackson ruled that Microsoft illegally welded its Explorer browser to Windows in order to thwart Netscape. Microsoft, citing a ruling in an earlier antitrust case that saw the appeals court overturn Jackson, had argued during the trial and in its appeal that it hadn't violated antitrust law by bundling the browser with the operating system. Jackson ruled that the earlier appeals ruing didn't apply to the case and instead cited a Supreme Court precedent. The appeals court heard two days of oral arguments on the appeal in February - an extraordinary amount of time in an appellate case. The judges also accepted expanded written arguments from both sides. Living up to their fearsome reputations, the appeals judges raked lawyers for both sides over the coals during the arguments. Government lawyers, however, were put in a particularly tight spot the final day of arguments, with almost the entire judicial panel forcing the lawyers to defend statements made by Jackson to the press and in public. Jackson, in interviews with various news organizations, likened Microsoft Chairman Bill Gates to Napoleon and said the company's dismissive attitude toward the case reminded him of the remorseless mindset held by members of a criminal drug gang whose trial he had once presided over. Chief Judge Harry Edwards, an authority on judicial ethics, was particularly withering. "We don't run off our mouths in a pejorative way ... The system would be a shambles if all judges did that," Edwards said. William L. Watts is a reporter for CBS.MarketWatch.com.