MS/DOJ – Next phase of case could be a long one

The next phase of the Microsoft Corp. antitrust case – deciding what remedies to impose on the software giant – has the potential of being as protracted and complex as the initial trial, according to a joint status report filed by both sides in U.S. District Court today.

The joint report, prepared by the government and Microsoft, calls for as many as 10 witnesses on each side, as well as new documentary evidence on events in the PC industry since the trial.

Microsoft and the government also acknowledge in the report to District Judge Colleen Kollar-Kotelly that they are in settlement talks. Both sides “will continue to seek settlement of this matter through private discussions, which are ongoing and should continue simultaneously with proceedings addressed to remedy,” the report said.

Within the report, both sides also detailed different approaches to scheduling. The government has proposed a schedule that would move the next phase along in a matter of months. Microsoft wants a more complex, detailed process, which the government said would delay the case “well into 2002.” A hearing is planned for Sept. 28.

The government, in the report, also said that it would model its remedy proposal after the long list of conduct remedies issued by the initial trial judge, Thomas Penfield Jackson, and would possibly seek some “additional” remedies it did not reveal.

Microsoft, in arguing for a longer remedy phase, said Jackson’s proposed remedies “are every bit as radical as the now-discarded proposal to break up the company.”

Microsoft is “working to resolve this case short of further litigation,” said company spokesman Jim Desler. “At the same time, we believe that an appropriate remedy can be formulated quickly given the court of appeals’ guidance,” he added.

Earlier this month, the government dropped its plans to seek a break-up of Microsoft. Doing so, Justice officials argued at the time, would remove a difficult and perhaps impossible objective from the table in favor of conduct remedies aimed at curbing the company’s anticompetitive practices.

It’s unclear whether an injunction against Microsoft’s practices in advance of a final remedy could be accomplished swiftly.

“This essentially constitutes another trial just slightly pared down from the initial one,” said Hillard Sterling, an antitrust expert at Gordon & Glickson, a law firm in Chicago. “The reality is that these remedy hearings are as complex as the overall trial on liability.”

Jackson, in his proposed remedies, called for a ban on “adverse actions” by the company against PC makers that support competing products. The remedies also called for uniform Windows pricing and licensing terms, flexibility for PC makers to configure the desktop, and other measures.

The appeals court sent the case back to the lower court last month after affirming a finding that Microsoft had used predatory behavior to maintain its monopoly. The court rejected, however, the lower court’s finding that Microsoft had illegally attempted to monopolize the browser market.

The appeals court also rejected the lower court’s finding that Microsoft had illegally tied its browser to the operating system, but said the issue could be reconsidered under a different legal standard. The government and 18 states involved in the case have decided to drop the tying claim in the belief that the monopoly maintenance charge is sufficient to warrant significant remedies.

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