Microsoft Casts Rivals in Antitrust Case as Opportunists
Microsoft case: For states, trial is to determine overall future of high tech
By Kevin Galvin
Seattle Times Washington bureau
WASHINGTON — At every opportunity in its landmark antitrust case, Microsoft casts competitors seeking tough remedies against the company as opportunists who would use the legal system to hobble the giant of the software industry.
Court testimony over the past two weeks about TV set-top boxes and handheld computers have no place in a trial about desktop operating systems, Microsoft attorneys insist, and rivals who claim that instant messaging or Web services deserve special legal protection are merely angling for an unfair edge in emerging markets.
But for the states pressing to extend the remedies for the company's antitrust violations, and for Microsoft competitors large and small, the case is about much more than the market for personal-computer systems. They want to litigate the future of high tech.
"That's what this debate is all about," said Andrew Gavil, a Howard University law professor who has been following the case. "How do we remedy past monopolization in an industry where the challenges are constantly changing because of the technology?"
California, eight other states and the District of Columbia want U.S. District Judge Colleen Kollar-Kotelly to go beyond a settlement the Justice Department and nine other states struck in November to end their claims against Microsoft.
Generally, the litigating states, whose officials have sought counsel from companies such as Novell and America Online, are seeking increased ability and flexibility for computer manufacturers and software developers to customize Windows and produce programs that could reduce Microsoft's control over the software industry. Among other things, they want the judge to force Microsoft to produce a stripped-down version of Windows.
In a sense, the challenge for Kollar-Kotelly is to determine if the states' proposed remedies amount to an unacceptable prior restraint or a sensible check on a repeat offender.
Nature of the market
A federal appeals court affirmed last year that Microsoft abused its monopoly position in the market for Intel-compatible personal-computer operating systems.
In settling with Microsoft, the Justice Department indicated that it did not believe the government would prevail if it had pressed for stiffer remedies. Microsoft has said that by agreeing to uniform licensing agreements for Windows, for example, it went beyond the scope of the case in order to reach a settlement.
Narrowly viewed, the appeals-court ruling would seem to constrain the judge to remedies that deal specifically with the PC market.
But the plaintiffs want to bridge the gap between the law and reality. The action in the high-tech arena is moving off of the desktop and onto Web servers and into wireless handheld devices. Microsoft's rivals say that unless boundaries are drawn, the software maker will be able to use its dominance of the PC platform to repeat its anticompetitive acts in new realms.
"If you don't try to anticipate where the future platform challenges are going to come from and facilitate their emergence, then the remedy can't be effective," Gavil said. "It will always be two steps behind Microsoft."
Witnesses talk competition
Industry witnesses on the stand last week testified that Microsoft's desktop monopoly gives the company an unfair advantage in emerging areas and discourages development of new products.
For example, they said, desktops could be configured to favor Windows Media Player over other software that allows computer users to handle online music. Or developers writing code for network servers might be disinclined to build products that can't work efficiently with Windows.
Such arguments draw sharp challenges from Microsoft attorneys, who suggest that the states are pressing ahead in the case at the behest of competitors whose business strategies are augmented by their legal strategies
"If this remedy proceeding results in a remedy that significantly harms Microsoft as a competitor — obviously that would benefit your company, Liberate, in the marketplace. Is that correct?" Microsoft lawyer Dan Webb asked an executive with the company, which develops interactive-television software. Reluctantly, the witness, Liberate Chief Executive Mitchell Kertzman, agreed that it would.
Narrow vs. broad
One of the central ironies of the case is that the plaintiffs argued for a narrow definition of the market — the PC operating-system market — when they sought to establish that Microsoft was a monopolist; now they want the market defined broadly into new technologies.
Attorney Gene Schaerr, whose Association for Competitive Technology has sided with Microsoft throughout the case, says they can't have it both ways under antitrust law. If the market at issue has moved beyond desktop operating systems, then there should be no remedy because Microsoft hasn't been found liable of acting improperly anywhere else.
"The theory of a civil case, especially when brought by the government, is to try to correct whatever problems there are in competition in a particular market," Sharer said. "If the market itself has somehow corrected the problems that a particular company created at a particular period in time, then in theory no remedy would be needed."
To Gavil and others, that amounts to declaring that antitrust law is irrelevant in the fast-changing high-tech industry.
"That can't be the answer," he said. "It can't be that someone who has engaged in conduct that a court of appeals has found violated the Sherman Act can come back and say there isn't anything you can do to resuscitate the competition, so it's time for us to move on to the next prey.''
At the outset of the remedies proceeding, Kollar-Kotelly seemed inclined to determine the scope solely on the basis of previous court rulings. But by the third week in the trial, she conceded that she needed more information about new products to determine whether they were relevant and whether the remedies should take them into account.
The appeals court gave her some guidance, but left it up to her to evaluate the specifics of the case, which represents a new frontier in antitrust law.
"The law is not very instructive because the court has not faced this sort of situation before," Gavil said. "She is, to some extent, writing on a clean slate."
Kevin Galvin can be reached at 206-236-1217, kgalvin@seattletimes.com.
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