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EDITIONS
Friday, 1 November, 2002, 23:39 GMT
Microsoft wins battle but war continues
A smiling Bill Gates
Bill Gates has much to smile about with the settlement

The only question left in this chapter of Microsoft's long-running anti-trust battle is how Bill Gates will celebrate.

Pizza? Champagne? A nice game of MechAssault on his Xbox where he can pretend his opponents are so many Microsoft competitors falling helplessly before the tech juggernaut?

It matters little how, for Mr Gates has much to celebrate and a lot of money to celebrate with.

A judge in Washington has approved a settlement the software giant struck with the US Government, casting aside the concerns of nine states that were pushing for stiffer penalties.

But while this chapter is closed, this battle won, Microsoft's anti-trust war continues.

Bill Gates' competitors will take over the battle from the government, and legal experts say these lawsuits have a chance for success.

States' rebuffed

Judge Colleen Kollar-Kotelly showed a year ago that she preferred a settlement, basically telling both sides to work non-stop until they had come to agreement.

In the wake of the 11 September attacks, she felt that the both sides needed to negotiate with a new sense of urgency, with Americans and the US economy reeling.

The settlement agreement aims to:
ensure Microsoft does not enter into exclusive deals that could hurt competitors
demand that computer makers develop uniform contract terms
enable customers and computer makers to remove icons for some Microsoft features
demand that Microsoft releases some technical data to help software developers to write programs that work well with Windows
benefit consumers, according to the US Justice Department
Negotiate they did, coming back with a settlement.

Microsoft would release technical information about Windows so that other companies would be able to write software that would be able to compete evenly with Microsoft's own products.

Microsoft also agreed to give PC makers greater freedom in pre-installing software from other companies on their machines.

When the settlement was announced, nine states refused to sign off on the deal and pushed for more aggressive penalties.

They wanted the company to make a modular form of Windows that could have different key elements such as the Internet Explorer web browser and Microsoft's own media player removed.

But the Judge Kollar-Kotelly largely rejected the non-settling states' concerns, saying they were "not supported by any economic analysis."

The one notable modification to the settlement is that she wants Microsoft to release technical information to its rivals more quickly than stipulated by the settlement.

Patience pays off

The states had always pushed for more aggressive penalties.
Former Microsoft vice president legal affairs Bill Neukom
Microsoft's legal eagle Bill Neukom knew time was on his side

The push harshly to penalise Microsoft by the states may have given them a much weaker settlement than they could have had just a few years ago.

Judge Thomas Penfield-Jackson, who presided over an earlier case, also gave both sides time to negotiate. He even appointed a well-respected mediator to help the sides bridge their differences.

Those talks fell apart, with those close to the negotiations blaming the intransigence of the states.

Draft settlements leaked after the talks showed a settlement with much harsher terms than the one Judge Kollar-Kotelly approved.

Microsoft's patience has paid off. Just two years ago, Microsoft was threatened with break up, the antitrust equivalent of the death penalty.

But its legal team always thought that time was on their side. They expected a more business friendly Justice Department with the election of Republican George W Bush.

And they had found the court of appeals to be sympathetic to their cause.

Competitors take up the case

Appeals are a possibility in the complex case, but more worrying for Microsoft will be the private anti-trust suits brought by its competitors Sun Microsystems and the Netscape Division of AOL Time Warner.

The most dangerous legal legacy of the anti-trust case will be Judge Thomas Penfield Jackson's scathing findings of fact that laid out how the company had engaged in illegal anti-competitive behaviour.
The AOL Time Warner logo
AOL Time Warner is one of several companies pressing a private anti-trust suit

Although the appeal court overturned Judge Jackson's break-up order and rebuked him harshly for his comments to the press, much of his findings of fact were allowed to stand.

Private anti-trust cases are now working their way through the courts relying heavily on Judge Jackson's findings.

Early indications are that other judges might let those findings of fact stand as a basis for private lawsuits.

It would eliminate much of the legal legwork for plaintiffs in private anti-trust cases against Microsoft.

Sun is seeking $1bn in damages, not a small sum, even for the world's largest software maker.


The settlement

Appeal court ruling

Appeal hearing

Analysis
See also:

18 Oct 02 | Business
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