To print this page, select "Print" from the File menu of your browser salon.com > Technology April 3, 2000 URL: http://www.salon.com/tech/col/rose/2000/04/03/microsoft_law Software outlaw roams the streets! So Microsoft broke the law. But while the judges argue among themselves, the company remains free to stalk new markets. - - - - - - - - - - - - By Scott Rosenberg It's a matter of legal record now: Microsoft is not only a powerful, rich company whose software is everywhere; it is a powerful, rich company that has broken the law. Or at least it has broken the law -- doing "violence" to the competitive process -- according to the U.S. District Court where its antitrust case has been heard over the past year and a half. That judgment will stand while the court decides what should be done with, or to, Microsoft -- and while Microsoft inevitably takes its case up the judicial ladder, in hopes of reversing the ruling. Those are the two directions this battle will take now that settlement talks have failed (and, gee, who was really surprised at that?) and judgment has been entered. On one hand, the plaintiffs in the trial will, along with Microsoft's enemies, try to agree on a set of "remedies" that might or might not include breaking Microsoft up into little pieces. On the other hand, Microsoft's legal army will abandon its field of shame in Judge Thomas Penfield Jackson's courtroom for what it fervently hopes -- and has good reason to believe -- will be more hospitable terrain in the U.S. Court of Appeals. Unlike the judge's "findings of fact" released last November, which painted a gripping narrative of Microsoft's predatory behavior in the browser wars, the "findings of law" released today is a relatively dry affair. The document details the specific legal grounds under which Microsoft has violated the Sherman Antitrust Act. Jackson concludes that "Microsoft maintained its monopoly power by anti-competitive means and attempted to monopolize the Web browser market, both in violation of Section 2 [of the Sherman Act]. Microsoft also violated Section 1 of the Sherman Act by unlawfully tying its Web browser to its operating system." The judge rejected another claim that Microsoft's contracts with other companies constituted "unlawful exclusive dealing" under the antitrust act's Section 1. Overall, he found that Microsoft -- rather than "innovating," as it has steadfastly maintained -- actively worked to reduce the choices available to consumers: "Microsoft's anti-competitive actions trammeled the competitive process through which the computer software industry generally stimulates innovation and conduces to the optimum benefit of consumers." None of this comes as any surprise; it was plain that Jackson would come down on Microsoft from the tenor of his "findings of fact." But one part of the new ruling does provide some dramatic sparks. If you remember, before Jackson began presiding over this trial he also ruled on a narrower case, one that had charged Microsoft with violating the terms of a 1995 consent decree. That agreement had averted a major antitrust case in its time. But in 1997 the Department of Justice argued that Microsoft's behavior in the browser market violated its terms. Jackson agreed -- but his colleagues on the U.S. Court of Appeals did not, and overturned his ruling in 1998. That preliminary appellate decision has hung forebodingly over every step of the subsequent full-bore antitrust trial. Now, in today's findings, Jackson fires a preemptive round at his appellate colleagues, citing a couple of Supreme Court decisions as precedents for his decision on the "tying" issue -- thereby, as it were, attempting to trump the appellate court by going over its head. This gets a little complicated -- well, of course! -- but basically, the appeals court had granted software companies like Microsoft immense latitude in product design and set very high barriers to antitrust complaints based on the integration of products ("tying"). Jackson fires back: "The majority opinion in Microsoft II [the appeal in the consent decree case] evinces both an extraordinary degree of respect for changes (including 'integration') instigated by designers of technological products, such as software, in the name of product 'improvement,' and a corresponding lack of confidence in the ability of the courts to distinguish between improvements in fact and improvements in name only, made for anti-competitive purposes. Read literally, the D.C. Circuit's opinion appears to immunize any product design (or, at least, software product design) from antitrust scrutiny, irrespective of its effect upon competition, if the software developer can postulate any 'plausible claim' of advantage to its arrangement of code." Citing two Supreme Court rulings, Jackson maintains that the boundaries of specific software markets -- like browsers and operating systems -- should be defined not by what the software-maker defendant says, but by how the software-buying public acts and thinks. While Jackson nods in the direction of the appellate decision's "admonition" regarding "the perils associated with a rigid application of the traditional 'separate products' test to computer software design," he concludes with his own appeal to the highest court in the land: "To the extent that the Supreme Court has spoken authoritatively on these issues, however, this Court is bound to follow its guidance and is not at liberty to extrapolate a new rule governing the tying of software products. Nevertheless, the Court is confident that its conclusion, limited by the unique circumstances of this case, is consistent with the Supreme Court's teaching to date." In other words, Jackson to appellate judges: My precedents are stronger than yours! This legal conversation is critical because, ultimately, the remedies Jackson's court proposes are meaningless until and unless his judgments are upheld in higher courts. But legal conversations take time. Even on the fast (for antitrust cases) track that this case has taken, it's likely to be two more years before we know the outcome. In the previous two years, of course, Microsoft's Internet Explorer browser took the lead from Netscape's Navigator/Communicator and Netscape was sold to America Online. The browser war was widely declared over and won. So the big question hanging over the continuing antitrust case is, what further markets will Microsoft move into while the law grinds away? Jackson's ruling makes explicit something astute observers have long understood: That Microsoft's victory in the browser war was a negative achievement -- it prematurely shut down certain avenues of computing's evolution before they had a chance to emerge. Microsoft wanted to make sure that the Web browser did not become a useful applications platform that might challenge aspects of its operating system monopoly. Maybe the Web browser, for a variety of technical reasons, wouldn't have proven a very good platform anyway; but Microsoft made sure we wouldn't have the chance to see for ourselves. By weaving the browser into its own operating system, it wasn't "innovating," but rather choking off the potential innovations of others. All that said, anyone trying to view the Microsoft trial with some kind of balance must remain torn between two valid perspectives: On the one hand, Microsoft has behaved like a predatory monopolist and probably deserves to have the full weight of antitrust law land with a kick on its arrogant posterior. On the other hand, the technology market does move so fast that every couple of years there is, as Bill Gates is constantly reminding us and his own troops, a new challenge to Microsoft's dominance. Yesterday, Netscape; tomorrow, Linux? Some commentators have placed great weight on the possibility that Microsoft, in the wake of the "findings of law" ruling, may now find itself dealing with a vast number of distracting private lawsuits based on its new, confirmed legal status as monopolist. But the ultimate significance of this week's failed settlement talks and harsh judicial ruling may well lie in Microsoft's ability to fight more rounds of its market-dominance game before its legal rope runs out. In the past, the company has trounced its opponents, one after another -- from the pre-DOS operating system CP/M to IBM and Apple to its competitors in the office suite market to Netscape. With each victory, Microsoft has, to adopt its own favored verbs, "embraced" new markets and "extended" its sway -- from command-line operating systems to graphical operating systems to office productivity software to Web browsers, its hegemony keeps widening. Now the next wave of competitors looms: Handheld devices are a platform Microsoft does not yet control; the server marketplace is hotly contested; electronic commerce remains a wide-open field. As long as the antitrust case is wending its way through the courts, and whatever happens at the end of that road -- whether the appeals judges exonerate the company or the government succeeds in busting it up -- Microsoft will have years more to fight these battles. How many more markets will be "embraced and extended" into Microsoft fiefdoms by the time the courts have finished their work? And how can any ultimate remedy -- even a breakup of Microsoft -- make up for the innovations lost and the choices foreclosed? salon.com | April 3, 2000   - - - - - - - - - - - - About the writer Scott Rosenberg is Salon's managing editor. For more columns by Rosenberg, visit his column archive.