Ruling on Microsoft Gives States Optimism

WASHINGTON —  After days of judicial rebuke and questions about their witnesses’ credibility, the states suing Microsoft Corp. for antitrust violations rejoiced last week when the presiding judge opened the door to broader sanctions against the software giant.

U.S. District Judge Colleen Kollar-Kotelly told courtroom lawyers Tuesday, “I need more factual information” about new technologies such as TV set-top boxes and hand-held devices to determine whether antitrust penalties against Microsoft should also cover these items.

Though Kollar-Kotelly reserved the right to later exclude any evidence, legal experts said the comment has helped boost the states’ case against Microsoft, given the judge’s earlier efforts to keep the trial centered on Microsoft’s business tactics in the markets for Internet Web browsers and computer operating systems.

As the third week of the trial begins today in U.S. District Court in Washington, legal and industry experts said the states have regained near-parity with their opponent in what many consider the biggest antitrust case since the breakup of Standard Oil a century ago.

“The judge’s request for information proves that she is at least listening to the states,” said Rob Enderle, a senior technology analyst for Giga Information Group in Santa Clara, Calif.

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Decisions by Judge to Have Broad Influence

With at least six more weeks of testimony--including key input from economists and a possible appearance by Microsoft Chairman Bill Gates--experts said either side could gain the upper hand in a dispute that many believe will set important legal precedents and affect the course of Information Age technology.

Enderle said much of the case and the future of the technology industry hinges on Kollar-Kotelly’s ability to fairly consider the trial evidence and then order adjustments to Microsoft’s behavior to stimulate competition in the computer software market.

Any broader move “is going to have a big impact on the technology sector,” he said. “The judge has to be careful of the potential collateral damage.”

Little less than a year and a half after a federal court declared Microsoft an illegal monopoly in June 2000, the Justice Department and nine states reached a settlement with Microsoft.

Among other things, the accord calls for Microsoft to disclose the technical details of the Windows computer code.

But California, eight other holdout states and the District of Columbia pressed on with a separate lawsuit seeking tougher punishment of Microsoft. They said they want to ensure the software giant wouldn’t repeat its anti-competitive conduct in new markets.

“They’re saying you can’t just stop at the [Web] browser and [programming language] Java and come up with an effective remedy. They’re telling the judge, ‘You have to hear some of this other evidence,’ ” said Andy Gavil, an antitrust expert and professor at Howard University Law School.

The current proceedings have contrasted sharply with the fireworks that marked the first, no-holds-barred antitrust trial that began four years ago in the courtroom of U.S. District Judge Thomas Penfield Jackson.

Back then, Jackson gave the green light for marathon broadcasts of the videotaped deposition of Gates, allowed both sides to introduce almost any evidence and publicly compared Microsoft executives to unremorseful gang members and likened Gates to Napoleon.

Kollar-Kotelly has been more circumspect in hopes of avoiding the kind of higher court rebuke Jackson suffered when the U.S. Court of Appeals in Washington threw out his breakup order and chastised him for his disparaging comments about Microsoft officials.

As a result, experts said, the current litigation may turn on how much evidence Kollar-Kotelly lets in and how much attention she pays to trial documents that already take up more space than a dozen big-city phone books.

What’s more, her willingness to allow testimony about a broad range of new technologies may mean that she is willing to consider more draconian remedy proposals, such as forcing Microsoft to license its source code to outside software developers, said University of Baltimore antitrust professor Robert H. Lande.

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Banning of Evidence Appears to Be Justified

The jurist appears determined to slog through the thousands of pages of documentary evidence that have been submitted so far. She recently complained about the late hours she’s been keeping and wondered aloud whether she could keep it up.

“I’ve been here until 10 or 11 every night reading testimony and trying to decide if it fits your theory,” she told a lawyer for the states during the first week of the trial.

Although Kollar-Kotelly has excluded portions of the states’ evidence, the banished evidence has been limited, and experts said the judge appears to be on strong legal ground for excluding it.

“She can [almost] never make a mistake by listening to evidence and then excluding” things that aren’t germane, said Ernest Gellhorn, an antitrust expert and law professor at George Mason University in Fairfax, Va. “By doing that, she avoids doing something that Judge Jackson did in the previous proceedings that brought him the wrath of the appeals court, and that is terminating the antitrust process prematurely.”

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Prior Ruling May Pose a Problem

The government’s former star, trial lawyer David Boies, said he agreed with Kollar-Kotelly’s ban on some evidence during the trial on grounds that it was hearsay.

But Boies, who briefly sat in on the Microsoft proceedings last month before heading off to another case, said the judge’s early efforts to discourage discussion of Microsoft’s conduct on emerging technologies such as hand-held computers could prove more problematic.

“I’m a little concerned about what’s happening to my case,” he said jokingly.

Microsoft has submitted a request that Kollar-Kotelly reject any evidence regarding products and markets not related to PC operating systems such as hand-held devices, TV set-top boxes and Web services.

The software giant also has asked that the judge exclude any evidence of alleged abuses before the first antitrust case or after the final judgment was handed down in June 2000. Kollar-Kotelly said she would rule on Microsoft’s motion later in the trial.

The states want the judge to order Microsoft to offer a modular version of Windows so consumers and PC makers would have the option of replacing Microsoft browsers, media players and other products with those from competitors such as AOL Time Warner Inc. and RealNetworks Inc.

With Kollar-Kotelly choosing to listen to such evidence, the states think their chance of securing a stronger remedy has improved.

The decision, said Tom Greene, a senior lawyer in the California attorney general’s office, “will allow us to provide the judge all of our evidence.... The strategy that Microsoft was pursuing was to preclude us from bringing in that evidence. This now means we can at least tell our story.”