AOL Faces Burden Of Proof

Suit alleges Netscape Navigator suffred from Microsoft's conduct

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AOL Time Warner's lawsuit against Microsoft, filed last week in U.S. District Court here by its Netscape Web browser division, stands to be an uphill battle, industry observers say.

The seven-count suit by Netscape, which AOL acquired in 1999, claims that its Navigator browser suffered harm from unfair activities by Microsoft to promote its Internet Explorer browser. Many in the high-tech industry and legal circles expected the suit after the U.S. Court of Appeals upheld monopoly rulings against Microsoft last June.

However, observers said it won't be easy for AOL to extract cash or injunctive relief from Microsoft.

"The law requires Netscape to prove that it sustained actual damages because of Microsoft's conduct. But that burden isn't as easy as it sounds since Netscape must show tangible losses of business or sales," said Hillard Sterling, an antitrust attorney at Chicago law firm Gordon and Glickson.

"Netscape was giving away its product for free, making it hard to show losses of real dollars,"Sterling said.

Sterling and other legal and business experts said AOL's goal is to get injunctive relief that prevents the future bundling of Internet Explorer with Windows XP or Windows.Net code.

One Microsoft solution provider said AOL is using the Netscape acquisition to protect its own dominance in the online services market.

"While it is true that Netscape was no longer strong enough to stand on its own, AOL seemingly had little to gain from the acquisition. It seems entirely possible that Netscape was perceived as a smart investment in the case that a monopoly ruling was handed down against Microsoft," said Ian Chronister, an adviser at Chronister Consultants, Mobile, Ala.

"It will be interesting to see if damages are determined to be greater than the sum AOL paid for Netscape," Chronister said. "AOL is seeking to limit what [it views as further anticompetitive behavior, which likely means [it is targeting MSN [Microsoft Network and Microsoft's presence in the media and entertainment industry. In essence, AOL could be trying to protect its own monopoly."

In related news on the antitrust case, Microsoft last week filed a motion with the U.S. District Court here to compel AOL to comply with subpoenas in the discovery phase of the remedy proceedings that involve the nonsettling states and Microsoft.

Microsoft insisted that the motion is not related to AOL's suit but stems from AOL's refusal to comply with the subpoenas, according to a Microsoft spokesman.

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