Last week the team’s dire prediction was about the only thing Judge Jackson vindicated as he ruled against Microsoft on three of the four antitrust charges and outlined the “violence that Microsoft has done to the competitive process.” In addition, a posse of state attorneys general remains on the warpath. There are 19 states that “will want some form of civil penalties” (translation: cash), says Iowa state A.G. Tom Miller. Separately, Microsoft has to hire lawyers in 32 states to defend against the more than 120 private antitrust lawsuits piggybacking on the judge’s decision.
Microsoft remains characteristically confident about its legal prospects. But the big question is whether the company will dodge future legal disasters. (Remember the seemingly doctored videotape?) By failing to reach a settlement, Microsoft has made a huge bet that higher courts will vindicate it in the end. Microsoft is staking its legal future on a three-pronged assault. Its team of a dozen lawyers plans to appeal the decision on procedural, factual and legal grounds. “When we read these conclusions,” says William Neukom, Microsoft’s top lawyer, “we saw very powerful opportunities on appeal for the decision to be reversed.” A look ahead:
The Procedure. Microsoft takes issue with the way the judge conducted the trial. Company lawyers say the compressed schedule–10 weeks between the time the DOJ’s complaint was filed and the original court date–put Microsoft at an unfair disadvantage. Microsoft attorneys also complain that the judge has allowed an enormous amount of hearsay–secondhand knowledge–into the record. For instance, one Apple executive testified that he had heard from someone who had heard from someone else that Microsoft wanted Apple to kill a product that competed with Microsoft’s. But some antitrust observers think it will be hard for Microsoft to prevail on this point because without a jury, judges are more willing to allow such testimony into the record.
The Facts. Microsoft has many complaints about the judge’s view of “the facts,” his version of what actually happened. A higher court could overrule Jackson if it deems his facts “clearly erroneous,” and Microsoft thinks there are many such mistakes. In one reference in last week’s opinion, for example, the judge noted that a company contract prevented Apple from distributing non-Microsoft Web browsers. The actual contract, however, says Apple may do just that. But Microsoft’s attempt to overturn the judge’s facts “is an argument that they will almost surely lose,” says Eleanor Fox, professor at New York University Law School, because higher courts generally defer to a judge’s findings.
The Law. Some observers believe Microsoft has a good chance of reversing the judge’s decision that the company illegally foisted its browser on consumers by bolting it to Windows. Microsoft relies heavily on an earlier, related court decision that it waves like a “Get Out of Jail Free” card. In June 1998, the appeals court overruled Judge Jackson’s order for Microsoft to separate its browser from Windows and warned that courts shouldn’t get involved in the design of high-tech products. Last week Jackson said if the appellate court intended to set legal precedent, it “ignores reality.” Some observers believe the court of appeals “won’t brush aside Microsoft’s arguments in the same way Judge Jackson did,” says William Kovacic, a professor at George Washington University Law School. But other legal experts think that Microsoft misconstrued the appellate court’s decision and relies too heavily on an earlier opinion that’s irrelevant. Rivals, of course, are quick to agree. “I’m not sure it’s a basket that’s going to hold all those eggs,” says Sun Microsystems’ counsel Michael Morris.
Microsoft will stick closely to its three-point game plan, but the case took another potentially unfavorable turn for the company even after the crushing decision. Last week the judge suggested that the government could try to leapfrog the appellate court and take the case directly to the Supreme Court. Though a longshot, that would eliminate the company’s advantage of arguing in front of a court that ruled in its favor before. “I’m not sure Microsoft factored that into their decision” to appeal, says Robert Litan, a former DOJ official now at the Brookings Institution.
Barring a settlement, there are other risks in the appeal process. Even if the higher court overturns part of the judge’s decision, many observers think Microsoft will still be found liable for several antitrust violations. Neukom, Microsoft’s gentlemanly chief counsel, “disagree[s] flatly” with that conventional wisdom. It will take at least a few more judges to tell whether the company’s assessment is a brilliant insight–or another miscalculation.
