DOJ, States File Brief On Microsoft Appeal

Not only did the government rebut Microsoft's claims not to have violated federal antitrust laws, the DOJ and states' attorneys contradicted Microsoft's call for U.S. District Court Judge Thomas Penfield Jackson to be taken off the case, should it be remanded back to his court.

The government brief told members of the U.S. Court of Appeals for the District of Columbia that Microsoft has shown no concrete grounds for disqualifying Judge Jackson from the case. However, several observers note that out-of-court comments Jackson made to the press could backfire on him on appeal.

William Kovacic, a close observer of the trial and antitrust law professor at George Washington University law school, says Jackson should know better than to talk out of school because he's been warned before. Jackson spoke of jury nullification in the drug trial of former D.C. Mayor Marion Barry and was chastised by the appeals court. Yet, "he stuck his hand right back onto the hot stove after being burned once before," Kovacic says.

The filing states, "The government proved at trial that Microsoft had engaged in a broad pattern of anti-competitive conduct to eradicate a developing threat to its monopoly power in its core business - personal computer operating systems - and that Microsoft's conduct had harmed consumers," the government's filing says.

Indeed, "the evidence demonstrated that Microsoft engaged not just in aggressive, unlawful competition, but also in predatory conduct to thwart the development of emerging technologies that would allow applications such as word processors, spreadsheets, games and other useful programs, to be written so they would run on operating systems other than Microsoft's Windows without costly adaptation," the filing says. "The evidence showed that Microsoft acted out of concern that those technologies would erode the 'applications barrier to entry' that protected the Windows monopoly."

Microsoft's appeals brief also argues that Jackson had made several procedural errors that make the case ripe for reversal. However, "Microsoft's objections to the trial procedures are also groundless and Microsoft can identify no concrete prejudice to its right to a fair adjudication," the DOJ brief says.

"Microsoft cannot establish any prejudice from the out-of-court statements of Judge Jackson," the government writes in its filing. "Those statements provide no ground for inferring bias or partiality, nor establish a basis for setting aside the judgment or removing him from subsequent proceedings."

"In effect, Microsoft sought by anti-competitive means to insulate its operating system monopoly from the kinds of technological and entrepreneurial changes that have characterized other parts of the industry," the DOJ says in its brief. "The evidence further established that, in the course of taking unlawful steps to maintain its Windows monopoly, Microsoft engaged in attempted monopolization of the browser market in violation of Sections 1 and 2 of the Sherman Act."

"The huge majority of companies in the IT industry are most concerned about the new rules for competition, implied by the DOJ position and the judge's ruling. In the end, it will be the small IT businesses that are the backbone of the industry, that will suffer under this new regulatory regime," adds Jonathan Zuck, president of the Association for Competitive Technology, a Washington-based industry group that opposes the case.

"The DOJ's position is belied by the facts. Anyone who watches the technology marketplace knows that competition and innovation are widespread and that only a handful of Microsoft's competitors stand to benefit from this level of intervention into the IT industry," Zuck says.

Meanwhile, Ken Wasch, president of the Washington-based Software & Information Industry Association, says his group fully supported the government's position in the case and is filing its own friend-of-the-court brief later in the day.

In addition, the DOJ argued that Jackson did not commit reversible error in the scheduling or conduct of the proceedings and did not rely on inadmissible hearsay, as Microsoft claimed in its appeal. DOJ also defended Jackson's decision not to hold separate evidentiary hearings on the remedy.

"In response to the public interest in resolving this case expeditiously and in recognition of the rapid pace of technological change in software markets, the district court conducted a fair and efficient trial," the DOJ filing says.

In addition, the government attorneys wrote: "Microsoft declines to acknowledge the district court's core findings of fact and instead recites, as its statement of the case, a sanitized description of its actions based largely on its own proposed - but rejected - findings."

The government's filing also criticizes Microsoft's failure to "negotiate in utmost good faith" toward a settlement, attacking the company's argument that Jackson didn't give it enough time to present its case on the remedy. Noting the judge's wording, the DOJ filing says: "the court findings of fact gave clear warning to Microsoft that the result would likely be adverse, yet the court delayed entry of its conclusions of law for five months so that mediation on a remedy could occur."

In short, "the district court's judgment rests on the application of settled law to established facts," the DOJ filing states. "Microsoft has monopoly power. The court's finding that Intel-compatible PC operating systems constitute the relevant market is comprehensively supported by evidence showing the absence of commercially realistic substitutes for those operating systems."