MS/DOJ – Closing arguments held in MS remedy case

In courtroom arguments punctuated by blunt attacks and harsh criticisms, the two sides in the Microsoft Corp. antitrust case made their closing arguments before a federal judge, who gave little hint of what remedy she has in store for the software giant.

After a full day of courtroom arguments, U.S. District Judge Colleen Kollar-Kotelly, cracked a smile and said, “Obviously, I’m going to take this under advisement,” a comment that elicited a burst of laughter in the courtroom.

Wednesday’s hearing came after both sides were given some last-minute homework by Kollar-Kotelly. In an order issued late Tuesday, she told both sides to list their remedy priorities. The judge didn’t say why she wanted those priorities, but it could hint at an attempt by her to strike a middle ground.

“Priority No. 1 really is disclosure,” said states’ attorney Steven Kuney, referring to the state-backed remedy that would require Microsoft to give third-party developers extensive access to Windows technical information, including source code, to ensure interoperability.

Second on the priority list: remedy provisions that give PC makers flexibility in systems configuration while barring any retaliation by Microsoft. “This is absolutely dead-bang central,” said Kuney.

Adherence to industry standards was a third priority.

Surprisingly, one remedy that was a focal point of the state’s proposed reforms – but wasn’t in the top three spots – was a provision requiring Microsoft to produce a stripped-down version of Windows free of the company’s other applications. Other remedies cited as priorities included the distribution of Java with Windows and the porting of Microsoft Office to other operating systems, such as Linux.

Microsoft attorneys, however, rejected a judge’s request to provide a list of “least onerous” remedies that “yet remain effective as a remedy.”

Microsoft attorney John Warden said the state’s remedy proposal “is fundamentally flawed in numerous respects,” and he said they can’t fix it “by changing a few words here and there.”

The judge, who is expected to write her decision during the summer, could use those priorities to craft her own version of a remedy.

Microsoft attorneys were expected to offer a similar list of priorities but were told by the judge to focus instead on those “least onerous” that “yet remain effective as a remedy.”

Kollar-Kotelly’s order yesterday did acknowledge criticisms that the pending Bush administration settlement has too many exceptions. The judge asked Microsoft to look at the settlement’s exceptions and limitations and identify those that can be reasonably modified.

Microsoft also rejected the possibility of answering that question. “We believe that these criticisms are groundless,” Warden said.

In courtroom arguments, Kuney told the judge that last June’s Court of Appeals decision, which upheld a lower court finding that Microsoft had illegally maintained its monopoly in operating systems, provided “absolutely crystal clear direction” on the need for tougher remedies than those reached by the Bush administration last fall with Microsoft.

Kuney spent a good deal of effort this morning trying to drive home the point that the remedy must take into consideration technologies that now hold market positions similar to those that were held by Java and Netscape Communications Corp.’s Web browser in the mid-1990s. That includes technologies never discussed in the 1998-99 trial, such as interactive television, network operating systems and handheld devices.

Kuney told the court that it has to consider new markets and that the remedy “has to protect other nascent platform threats.”

“We can’t go back; time has marched on. … So we’re left, you’re left, with a much more difficult task than otherwise would have been the case,” he told the judge.

Kuney’s courtroom delivery was frank and straightforward. It was states’ attorney Brendan Sullivan who turned on the emotion, accusing Microsoft of offering a “doomsday defense” in threatening to pull Windows from the market and stop all research and development if the nonsettling states’ remedies were adopted.

“I don’t think Microsoft will rename its campus Sleepy Hollow,” said Kuney at one point.

Sullivan accused the company of acting “thuggish-like.”

“I suggest to you that Microsoft still doesn’t get it and you [the judge] are the only one left to tell them what it’s about,” said Sullivan.

“We haven’t failed to get some message,” said Warden. “We’re not claiming that we’re immune from the law.”

Indeed, Warden said Microsoft has gone to lengths to comply with the Court of Appeals decision. He argued that the states’ remedy plan went beyond the illegal acts cited by the appeals court.

“The remedy reconstructs Microsoft’s business; it’s a form of industrial engineering,” said Warden, who called the states’ plan punitive and argued that it amounts to illegal confiscation of Microsoft’s property.

Warden also argued that the states failed to show that Microsoft’s acts had hurt Java and Netscape. And he said there was no finding that Microsoft would have lost its dominant position but for its anticompetitive acts.

Microsoft’s actions did no more than add “one inch to a 100-foot wall,” said Warden. Moreover, he said, Windows remains “under assault” by a “multitude of competitive forces.”

This remedy phase follows a U.S. Court of Appeals decision one year ago this month that rejected a lower court ruling to break up the company but upheld a finding that Microsoft had illegally maintained its monopoly in the operating systems market.

The U.S. Department of Justice and half of the 18 states in the case settled. Nine other states — California, Connecticut, Florida, Kansas, Iowa, Massachusetts, Minnesota, Utah and West Virginia, as well as the District of Columbia — continued the case, seeking tougher remedies.

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