Long legal process kicks off with Microsoft plea for stay

WASHINGTON - Microsoft Corp. sought a stay Thursday of a federal judge's order breaking the company in two, launching another phase of a time-consuming legal process fraught with obstacles as well as options for the software giant and the government.

''Microsoft acts as if they've got a slam-dunk, and it's far from a slam-dunk'' that it will win on appeal, said Steven Salop, a Georgetown University law and economics professor. ''The government produced substantial evidence of anticompetitive conduct.''

But New York antitrust lawyer Joseph Angland said the rulings by U.S. District Judge Thomas Penfield Jackson ''will give Microsoft some good targets to shoot at on appeal,'' particularly his order Wednesday that Microsoft be split into two companies.

Still an option is an agreement to settle the case, and Justice Department antitrust chief Joel Klein said Thursday the government ''is prepared to engage in meaningful settlement negotiations.'' But he also said it was imperative ''that a settlement meaningfully address the harm that's occurred to this market.''

In addition to splitting Microsoft into two companies - one for operating systems and the other for other software and Internet properties - Jackson also imposed restrictions on Microsoft's business practices, due to take effect in 90 days.

Microsoft filed court papers asking Jackson to delay the effect of his decision while the software company pursues an appeal.

''Such radical changes affecting a major American corporation ... should not be implemented before Microsoft has had an opportunity to secure appellate review,'' the company's lawyers said.

Microsoft Chairman Bill Gates said on ABC's ''Good Morning America'' that he believed the appellate round of the case ''will be very different than this first round has been.'' He also said the company might have gotten its point of view across better if he had testified in person.

Jackson, in an interview published in Thursday's Washington Post, said he had little choice but to accept the government's breakup proposal because he wanted to avoid issuing an order requiring complex regulations to control the company's conduct.

''Given my personal preferences I'd much prefer to have market forces accomplish as much of the remedy as could be done,'' Jackson said, adding, ''I've always thought the best remedy was the one the parties could have negotiated between themselves.''

The judge also said he was inclined to favor certifying an appeal directly to the Supreme Court, which would decide whether to hear it or have a federal appeals court rule on it first. The government hopes to bypass the appeals court, which ruled in favor of Microsoft in an earlier dispute.

Norman Hawker, a law professor at Western Michigan University, said he believes the government made ''an extraordinarily strong case'' that he expects to be upheld on appeal.

But he said Microsoft could win if appellate courts viewed federal antitrust law narrowly. ''Microsoft has a chance of winning everything,'' Hawker said. ''I don't think it's a great chance.''

He said the company may argue technical issues, contending Jackson imposed unfair limits on pretrial fact-finding and the number of trial witnesses, and failed to hold a hearing on possible remedies. ''Their best avenue of attack would be to say that Judge Jackson rushed to judgment,'' Hawker said.

Angland called the breakup order ''a strange remedy'' and added he believes Microsoft has a ''legitimate shot at getting the divestiture remedy reversed.''

''Microsoft will argue that the remedy has very little relationship to the conduct that was found inappropriate,'' said Angland. Little of the anticompetitive conduct identified by Jackson stemmed from the fact that operating systems and other software were part of the same company, he said.

Judy Sloan, a professor at Southwestern University Law School in Los Angeles, said the strongest part of the government's case was ''the human testimony coming from people like the heads of Netscape and Sun Microsystems saying, 'This is what they did to us.'''

She said the Supreme Court was likely to decline expedited review, allowing the appeals court to hear the case first. Given that the court previously ruled in Microsoft's favor, she added, ''Surely that's tantalizing to Microsoft as to what might happen again.''

However, Salop said Jackson's ruling included findings that might satisfy the appeals court on the issue of whether Microsoft unlawfully tied its Internet browser to its operating system.

On appeal, he said, Microsoft will ''make the argument that all the conduct they engaged in was beneficial'' and therefore not unlawful.

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On the Net:

Microsoft: http://www.microsoft.com/presspass/trial/default.asp

Justice Department: http://www.usdoj.gov/atr