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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Maverick who wrote (7718)	5/20/1998 1:32:00 PM
From: C. Niebucc	Respond to of 74651

Preliminary Injunction Ruling Is Crucial in Microsoft Case By MARGARET A. JACOBS Staff Reporter of THE WALL STREET JOURNAL The next big turning point in U.S. vs. Microsoft Corp. will be a ruling on the U.S. Justice Department's ambitious request for a preliminary injunction against the software giant. "If the judge issues a weak preliminary injunction, then Microsoft will have won," says antitrust lawyer Garret Rasmussen of Washington, D.C. "If the injunction isn't aggressive enough, then the company will have several more years before a full trial can be heard -- and that's a lifetime in the computer industry." Assessing the Impact For Microsoft, the most painful preliminary injunction would be one that required it to carry rival Netscape Communications Corp.'s Internet software in addition to its own. But if a preliminary injunction merely barred Microsoft from forcing personal-computer makers to distribute its Internet software as a condition of licensing its operating system, the impact could be minimal. That is because PC makers would still buy Microsoft's operating system with the Internet software as long it cost no more than a version with the software. The Justice Department contends in a lawsuit filed in federal court in Washington on Monday that Microsoft is crushing competition in the Internet browser market. While the allegations are sweeping, many legal authorities don't expect the case to turn into the kind of decade-long antitrust battle that the government fought with AT&T Corp. and International Business Machines Corp. in the 1970s and early 1980s. The remedies the government is seeking this time around are far more limited and specific. Before deciding whether to issue the injunction, U.S. District Judge Thomas Penfield Jackson must balance several factors. First, he must determine how likely it is that the government will win at a full trial. Assuming the odds of winning are pretty good, he must then weigh the harm to consumers if an injunction weren't issued against the harm to Microsoft if one were. "The preliminary injunction could become the trial on the merits, because the judge has to go so far into the merits," says Mr. Rasmussen. Judge Jackson has ruled for the government in the past. But it is hard to predict what he might do now that he is being asked to decide more complicated and far-reaching issues. Clear Message Antitrust lawyers predict that he is likely to grant only some of the government's requests. Last week, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit agreed with Microsoft that its launch of Windows 98 shouldn't be affected by its 1995 antitrust settlement with the Justice Department. The ruling sent a clear message that the court doesn't want judges overseeing complicated orders that intrude upon product development. Any order that does so would "put judges and juries in the unwelcome position of designing computers," wrote the court. Some antitrust lawyers say Judge Jackson is likely to enjoin Microsoft from enforcing contract terms with computer makers and Internet providers that the government alleges are illegal. "This is the easiest thing for the government to persuade the court of-if the provisions exist, at least the government has the plausible argument" that they adversely affect consumers, says antitrust lawyer Joe Sims of Washington. It will be harder to convince Judge Jackson to give computer manufacturers more control over the screen that users see when they first turn on the computer, lawyers say. That starts to veer toward product design, which the Courts of Appeals has frowned upon. 'Border-Line Insanity' The hardest thing to do will be to convince Judge Jackson to require Microsoft to include Netscape's Internet browser in its Windows 98 software or sell its own Internet browser separately. "That's border-line insanity," says William Baxter, the Justice Department's antitrust chief from 1980 to 1984 and now professor emeritus as Stanford Law School. "Microsoft should be able to design and sell whatever it wants. If the PC manufacturer then wants to alter it, well that's the manufacturers' decision." But such remedies aren't unprecedented. For example, in the mid-1980s, American Airlines' dominant computer-reservation system was required to list the flights of competitors after the government challenged the system's market power. Nobody expects the judge to move with lightning speed. Tuesday, he set a scheduling meeting for Friday at 11 a.m. EDT with lawyers for both sides. Microsoft will have about a month to respond to the allegations laid out in the government's 53-page complaint. In addition, the company is expected to ask the judge for more time to gather information about the government's case and to conduct its own fact-finding, known as discovery. The judge is considered likely to grant that request. Microsoft is likely to take depositions of many of the people mentioned in the complaint as well request documents and other evidence in the government's case. Since the government has had the advantage of subpoena power to do much of its investigation before filing the complaint, it isn't likely to launch a lot of new discovery requests. A Mini-Trial While the judge has the option to decide the preliminary injunction strictly on court papers, he is expected to hold something resembling a mini-trial, probably in the summer or early fall. At the hearing, the government is likely to call many of the people it mentions in its complaint, possibly including Microsoft Chairman Bill Gates. Microsoft is likely to cross-examine them extensively and call its own witnesses. While Judge Jackson has a reputation for efficiency, he isn't expected to put the lawyers on a tight schedule, as judges sometimes do. Last year, for example, U.S. District Court Judge Thomas Hogan restricted the Federal Trade Commission and lawyers for Staples, Inc. to 25 hours of testimony each before granting the government's request for a preliminary injunction to prevent Staples from acquiring Office Depot Inc. The Microsoft hearing is expected to last longer than that -- possibly two to three weeks -- because the need for speed isn't as great as with a potential merger. No matter what the outcome of the hearing, there is likely to be an appeal to the D.C. Circuit, lawyers say. That appeal could take a few weeks to a year to be argued and decided. While Microsoft is unlikely to have the same three-judge panel that heard its case previously, the judges on the circuit tend to be conservative on antitrust issues. It is unclear whether they will approve a preliminary injunction that addresses anything more than the contract provisions, lawyers say. If the appeals court approves only a limited injunction, some lawyers see little reason for Microsoft to seek a settlement. The company would then have two to three years before a trial to make further inroads in the browser market. "Even if the government wins [after a full trial], what is it going to have achieved? It is likely to be a different world," says Mr. Sims interactive.wsj.com