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Monday, August 9, 1999 Published at 09:16 GMT 10:16 UK


Business: The Company File

Making plans for Microsoft

Investigations into Microsoft have been going on for 10 years

By independent computer industry analyst Graham Lea

The US court action against Microsoft for alleged anti-competitive business practices, or antitrust, is entering the final phases.

On Tuesday, both sides will file their proposed findings of fact with the federal District Court in Washington.

A month later, there is an opportunity for a further filing of comments on the findings by the opposing sides.

Closing arguments will then be heard by Judge Thomas Penfield Jackson on 21 September, although this may take several days.

Judge can award costs

The judge will produce his own ruling on the facts, probably before the end of the year. There is no jury in the case, and no possibility of Microsoft being fined, although Judge Jackson could award legal costs against Microsoft.


[ image: The Department of Justice is looking the likely winner]
The Department of Justice is looking the likely winner
If he favours the Department of Justice case, which seems to be likely, there will probably be a hearing on possible remedies.

Those most often discussed include breaking Microsoft into "baby softs" or separate companies, to stop applications developers profiting from advanced knowledge about operating systems development.

Substance was given to this possibility when it became known last month that several US investment banks had been approached by the Department of Justice about the consequences of breaking up Microsoft.

It would be unwise to assume that this was anything other than a general inquiry.

Another remedy that appears attractive is to require the Windows operating system to be put in the public domain, as an "essential facility". However, the size of the code - tens of millions of lines - suggests that this might not be very practical.


[ image: Scott McNealy: No more acquisitions]
Scott McNealy: No more acquisitions
Another option came from Scott McNealy, the chief executive of Sun Microsystems, who suggested that Microsoft should not be allowed to make acquisitions, and that it should grow organically.

In other legal actions, Microsoft largely won against Bristol Technology with the jury deciding that it was not guilty of deceptive business practices, and perhaps perversely, awarding only $1 in damages against it for violating the Connecticut Unfair Trade Practices Act.

In the Sun versus Microsoft case, Microsoft is accused of breaking the terms of its Java licence agreement by corrupting "pure" Java. Sun appears to be winning, although the case is not yet concluded.

The other main case was brought by Caldera, and concerns actions that Microsoft took against DR-DOS. Caldera has won all the points so far, and has succeeded in having the scope broadened to include the alleged damage done by Windows 95, as well as the inclusion of international damages claims.

It is not expected that any of these other cases will directly affect the outcome of the Washington case.

Microsoft has now been investigated for more than 10 years, first by the Federal Trade Commission, and then, when the FTC commissioners could not agree whether to proceed, by the Department of Justice.

Judge overruled

Microsoft agreed to a consent decree in July 1994. There was much criticism at the time that Microsoft had not been sufficiently reined-in, since essentially it had only to make a minor change in its licensing practices for software.

Judge Stanley Sporkin refused to sign the consent decree on the grounds that it did not address the problems sufficiently, but he was overruled by the Court of Appeal.

In October 1996, the Department of Justice asked the District Court to order Microsoft to obey the consent decree, and to find it guilty of contempt of court.

Microsoft essentially won this case on appeal after Judge Jackson had granted an interim injunction forbidding Microsoft to tie Internet Explorer to Windows 95.

The Justice Department then issued a new complaint concerning a wide range of Microsoft's business practices, and the case went to trial last October, with the primary evidence being completed at the end of March.

The court recessed until June, when rebuttal witnesses from each side were heard.

Confidential talks failed

In the interim, there have been some confidential discussions between the sides, as suggested by the judge, in the hope of finding a way of settling the case, but without success.

Wall Street has paid little attention to the cases over the years, but public opinion has recently been turning against Microsoft, judging from a number of polls. The company says its own studies suggest otherwise.

The departure of a number of senior Microsoft executives may be a sign of battle fatigue, or of a desire to avoid being in the limelight if there is an adverse result. Microsoft's comfort is that its dominance of the desktop software market continues unabated.

Graham Lea is a leading computer industry analyst specialising in Microsoft who is following the case for BBC News Online. His views do not represent those of the BBC.



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