How MS is winning the court war by losing all the battles

Still guilty in detail, but what's to be done? And when?

Yesterday's appeals court ruling on the antitrust case was a pretty substantial victory for Microsoft, but oddly enough it consists mainly of a big stack of defeats for the company. The appeals court has agreed with the majority of the content of the district court's findings of fact and conclusions of law, yet has nevertheless thrown Redmond a couple of large lifebelts.

On the plus side (for Microsoft), Judge Jackson's remedies have been thrown out, and Judge Jackson with them. So there will be no immediate breakup, and the court also drops some pretty heavy hints that breakup may well not be the appropriate remedy. It certainly criticises Jackson for not providing sufficient justification that breakup would fix the problems.

Also positive for Microsoft is that the browser tying issue is more or less a go back to go. The DoJ and Jackson are criticised for failing do go through the proper motions when it came to the matter of the browser monopoly. Effectively, the DoJ relied on use of the OS monopoly to leverage monopoly in the browser business, and Jackson followed this line. Not good enough, says the appeals court.

They also kick around the integration issue a little more. They incline a little toward Microsoft's claim that forced separation and/or prohibition of integration would "chill innovation," but at the same time they slip in a little corrective on their own behalf. Looking back to their overturning of Jackson's injunction on the bundling of IE with Windows 95, they point out that "the issue there was whether the bundle constituted an 'integrated product' as the term was used in a 1994 consent decree between the Department of Justice and Microsoft."

As we've pointed out in the past, according to the terms of the decree it was, as the DoJ had dimly allowed Microsoft to slip this catch-all get-out into the text. The judges now add that "the antitrust question is of course distinct" [from this]. Microsoft has made a great deal of this very small victory ever since, and the judges are clearly signalling that it's been barking up the wrong tree.

But there's more good stuff for Microsoft. They more or less reject Jackson's views on browser integration, and at times they lean towards Microsoft's views. For example, they seem ready to take on board the possibility that a clear definition of standards that developers can work with is a good thing; this resonates rather well with Microsoft's 'we make the standard, trust us, follow us' approach. They don't come up with any replacement views on the integration issue, that will be determined in other courts, if at all, but they do comment - without coming up with any obvious suggestions - on the difficulties inherent in producing remedies for offences that in some cases are now six years old.

In some cases the anticompetitive conduct is now "obsolete" and it's very hard to set about restoring competition. Which is not an entirely helpful observation as regards the law, but no doubt music to Redmond's ears.

All of this, as we say, comes against a highly unfavourable backdrop. Microsoft loses practically all the battles while looking pretty well set to win the war. Where the court agrees with Jackson (most of the time) the refrain is that Microsoft didn't provide any convincing evidence to the contrary, while the DoJ established its case well. There's even the odd snipe at Microsoft: its "primary copyright argument [it's our IP so we can do what we like] borders on the frivolous." Indeed.

Where the court disgrees with Jackson, it does so on the basis that the plaintiffs did not prove their case adequately, not because Microsoft disproved it. The appeals judges basically confirm that Microsoft's conduct of the case was utterly dismal - as you may have noted if you read much of the company's "evidence".

Their conclusion that there was an anticompetitive aspect to Microsoft's conduct as regards browsers is significant, as is their destabilisation of the tying aspect of the case. They go with much the cleaner shot in that they accept Microsoft's deals with OEMs, ISVs and ISPs were anticompetitive, so there's still a case there. But unless integration is challenged with more force, all of the integrationist activities since, .NET included, are likely to emerge unscathed.

The bottom line as regards the law is that Microsoft is still guilty of antitrust violations, and that these will require remedies. These will however be considered by the district court and a new judge; they might be as draconian as Jackson's remedies (perhaps more so, if a simple split in two can't be demonstrated as an adequate measure to restore OS competition), but don't count on it.

The message of the appeals judges could reasonably be interpreted as follows. They accept that Microsoft did wrong, and that something ought to be done about it, but they raise questions about what could be done, don't come up with any answers (not their job, of course), and knock over the answers that have been proposed so far. They could be said to be quietly agreeing with Jackson's view that antitrust law with reference to the technology business still needs to be established.

Back at the coal face Microsoft must now consider accepting conduct remedies, particularly if it can restrict them largely to its historical misdeeds in the OS market. If it can confine matters to restrictions on anticompetitive conduct that has been rendered obsolete by events, while not being chained as regards what it's up to now, then it really will have won the war. Alternatively, dragging on the court action might be in its favour, given that the sins will continue to get older and less relevant to what's really going on in the world.

The DoJ can take some comfort in the appeals court having supported most of its case, and will quite possibly be receptive to a deal on the basis that Microsoft addresses the issues it won. The actual outcome here will however depend in part on how hard the Bush DoJ is prepared to go in, and whether or not Bill's going to start throwing his toys out of the pram again.

And in addition to this, there are other wars to be won. As, according to the detail, Microsoft is still guilty as hell, Jackson's findings and conclusions remain a powerful weapon for private antitrust suits. The states attorneys general won't necessarily be pussycats even if the DoJ decides to be, and the European Commission is looking - very slowly - at what Microsoft's up to now. This show may be edging towards a pretty unimpressive conclusion, but there are plenty more of them on the way.

And the late Judge Jackson? Actually, while roundly abusing him, the appeals judges said there was no evidence of bias on his part, and viewed his judgements as sound in most areas. They kicked out his remedies for several reasons, because they threw out some of the things they were intended to address, because Jackson fouled-up by not holding an evidentiary hearing on them, and finally, because he was mouthy to the press. But they'd kicked them out way before they got to the last one.

In The Register's view the poor old judge has had a pretty bum deal here; maybe he was a little out of line, but the way the trial went you could understand his patience snapping sometimes. The appeals court devotes a fairly substantial section to all of the irresponsible things he said; but reading them you're struck by how reasonable and justifiable most of them are. Maybe not in lawyer-think though - we might return to these another time. ®

Related stories:
MS and DoJ: hap-hap-happy as pigs in filth
Judge Jackson is a big fat idiot
MS not evil, baby strangling monopoly after all, say judges

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