June 30 2001

MSFT  $71.72 B.G.  $50.3B 01.06.30. Thanks to BillG Networth.

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Thursday, after more than three months of wait, the seven judge U.S. Court of Appeals panel in Washington, D.C., finally handed down a decision about Microsoft's appeal of the verdict in its antitrust case. The trial had been in the judges' hands since March when attorneys from both sides of the lawsuit presented oral arguments to the court [see Mar. 12, 2001]. In their unanimous 125-page ruling the seven judges dismissed half of Judge Thomas Penfield Jackson's original verdict about Microsoft's behavior and gave the judge a verbal face slap for his behavior during the last few months of the trial.
The panel first threw out Microsoft's conviction on the charge of tying Internet Explorer to Windows in an attempt to monopolize the Web browser market. That essentially means that while Microsoft may not have had the best of intentions, it never planned to completely take over Web browsers and destroy all competitors. However, the judges left Jackson's original verdict about monopoly maintance intact, indicating that they not only agree Microsoft has a monopoly in desktop operating systems but that the company also bundled the browser to illegally protect that monopoly by crushing potential operating system competitors, namely Netscape.
With more than half of the original verdict gone, the panel had no choice but to overturn the original penalty (splitting Microsoft into two competing companies) because the punishment no longer fit the crime. The penalty was also scrapped because of several mistakes Judge Jackson made as the trial was winding down, primarily those infamous interviews he gave to reporters from several magazines a few months before the final verdict was released [see Jan. 15, 2001]. The Court of Appeals ruling noted that while they found no evidence of an actual bias on the part of Judge Jackson, he "called into question the integrity of the judicial process" by conducting interviews before trial was complete and refusing to give Microsoft a "fair" hearing about the proposed penalties (although one could argue that both sides had a good two years to discuss punishment before the penalty phase actually arrived). Jackson only said what everyone else was already thinking anyway, but he should have kept it to himself because of his unique position as presiding judge.
Microsoft immediately took the ruling and ran around with it like some sort of perverse trophy, claiming the decision was a complete victory that justifies every business decision it has made since time began. The government and lobbying groups opposed to Microsoft then did the same thing, pointing to the untouched parts of Jackson's ruling as a victory for their side that will result in Microsoft being dismantled. But in reality the decision is a small victory for both camps: the government won its argument about Microsoft having a monopoly and having to play by different rules than companies which do not, while Microsoft gets off the hook for another year, can legally bundle any software it wants with Windows, and gets to tell the public that its business practices are perfectly legal. Bill Gates already made comments that the ruling means Microsoft won't have to change its behavior in any way - a statement that may serve as understatement of the decade if Satansoft keeps bundling new products with Windows at the rate it has over the last 18 months.
With the verdict in Microsoft and the government now have several choices for what to do next. The route most often discussed is a settlement agreement that would immediately wrap the case up and let both sides move forward without having to do this again. Microsoft is obviously willing to settle this thing if the price is right, and, with everyone involved in the original lawsuit gone with the previous presidential administration, the Department of Justice is also very likely to be interested in a settlement. However, the individual states involved in the lawsuit are ready to fight this to the death, so finding a settlement that everyone can agree to will be rather difficult. Microsoft will probably settle everything with the feds and then keep battling with the state attorneys general, who recently hinted they may file another suit against Microsoft irregardless of how the current case ends up.
If no settement is reached, unlikely as that may be, Microsoft has two more options: appeal the appellate court decision to the Surpreme Court, or let it go back to the district court level. If Microsoft appeals the verdict then the Supreme Court can choose to take a look at it, but that body of judges already turned down a chance to tackle the Microsoft case once before and isn't likely to accept it the second time either. And Microsoft has very little reason to appeal the decision anyway, since the Court of Appeals judges was more inclined to be friendly towards the company's case than any other judicial body will be; the Surpreme Court is a little more evenly balanced and would just make things worse for The Behemoth. If no appeal is filed then the case will automatically return to a lower level court where a new judge will be randomly assigned to preside over a second presentation of the evidence in the case concerning browser tying and eventually pick a new penalty for Microsoft's behavior. The new judge could be picked in less than a week, but the case would not progress until September when the judges return from their Labor Day break and begin scheduling courtroom appearances. Whatever happens, we assure you this is far from being over.
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