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Microsoft's Legal Cleanup Day

By Cynthia L. Webb
washingtonpost.com Staff Writer
Tuesday, November 9, 2004; 10:30 AM

Perhaps Microsoft was hoping for all eyes to be on the much-ballyhooed launch today of its "Halo 2" video game, but the company's efforts to clean up its lawsuit headaches can't be overshadowed by virtual gunslinging.

In a major milestone for Bill Gates & Co., the software giant announced two settlements yesterday that are significant markers for Microsoft, which has been working furiously to nix lingering antitrust woes. The company is shelling out $536 million to rival Novell Inc. to quash antitrust claims and also settled with the powerful Washington-based Computer & Communications Industry Association, a trade group and longtime Microsoft opponent whose members include Oracle Corp., Red Hat Inc. and Sun Microsystems Inc.

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Both Novell and the CCIA have agreed to end their participation in the European Union antitrust case against Microsoft. That's a big deal, since the CCIA has been a thorn in Microsoft's side and a holdout in its antitrust battles. The CCIA also agreed not to ask the U.S. Supreme Court to review the company's U.S. lawsuit (Microsoft, for its part, is now a CCIA member, among other concessions). Novell and Microsoft still have one hang-up tied to the word-processing application WordPerfect, which Novell used to own. Novell said it still plans to slap Microsoft with a fresh antitrust suit later this week in Utah. Microsoft said the claim does not have merit. Novell's lingering claim is small potatoes compared to the settlements overall, which help clear some major obstacles for Microsoft's legal fights.

"These settlements suggest that the United States government and most of the computer industry have now moved beyond their decade-long pursuit of the company for antitrust violations. And that development, the company argues, should cause regulators in Europe, where Microsoft still faces a significant challenge, to rethink their approach," the New York Times said. The settlements are with "two of its largest remaining antagonists, ensuring that its antitrust deal with the Justice Department will not be appealed to the U.S. Supreme Court, and removing two active proponents of a case against the company in the European Union," The Washington Post reported.

"The agreements were part of a three-year drive by the Redmond, Wash., software giant to make peace with adversaries, mostly through financial settlements, and end years of wrangling over its business practices. But Microsoft still faces additional legal fights, including battles with European antitrust regulators and with rival RealNetworks as well as a new lawsuit from Novell," the San Jose Mercury News explained. The paper said the CCIA "waged a decade-long legal and lobbying battle against Microsoft" and "was the last group considering a challenge to the landmark settlement." The Wall Street Journal reported: "The agreements were hailed by Microsoft as signs that the company, which has been embroiled in antitrust actions since the early 1990s, was on the road to settling all remaining claims."
The Washington Post: Microsoft Placates Two Foes (Registration required)
The New York Times: Microsoft to Pay $536 Million to Novell in Antitrust Case (Registration required)
The San Jose Mercury News: Microsoft Settles Claims (Registration required)
The Wall Street Journal: Microsoft Reaches Settlements With Novell and Industry Group (Subscription required)

In a conference call with reporters, Microsoft general counsel Brad Smith said the "agreements represent another substantial milestone in Microsoft's resolving the issues that have divided our industry over the past decade. The agreement literally brings to a close, finally, the longstanding U.S. antitrust lawsuit that began in 1998." He also said the "agreements demonstrate clearly that we are prepared to meet anyone half way to see if we can resolve our differences. ... We think that our industry and consumers are better served if we can find common ground with others in our industry. Only when we can't find common ground should we turn to the courts or to the government."

The New York Times focused on other remarks from Smith on the same theme: "Microsoft, Mr. Smith added, has shown it can settle competitive issues in cooperation with others in the industry. 'This sends a strong message that we and other companies in our industry do have the capacity now to sit down face-to-face and resolve the thorny antitrust issues that in the past were left instead to government to resolve,' he said." But such statements might not bode well for competition overall, a law professor told the paper. "Such sentiments, said Andrew I. Gavil, a professor of law at Howard University, reflect just how far Microsoft appears to think the pendulum of antitrust policy has swung in its direction. 'That's a very old argument that dates back to Rockefeller -- just let us cooperate and we'll work things out for ourselves,' Mr. Gavil said. 'What does that really mean? Less competition.'"

For those keeping score, Microsoft -- since its landmark settlement with the Justice Department in 2001 -- "has now paid nearly $3 billion to resolve private cases with America Online, Sun Microsystems and a variety of states and groups of consumers in the wake of the antitrust rulings against it. Microsoft also gave Sun Microsystems roughly $900 million to settle patent claims and $350 million for licensing some of Sun's technology in a broad deal promising close technical cooperation between the once-bitter rivals," the Post said.

"Besieged by antitrust lawsuits for much of the last decade, the company has moved methodically to settle them in the last couple of years. It has now paid or committed to pay in excess of $3 billion -- roughly a single quarter's profit," the Los Angeles Times said of the settlement scorecard. "Analysts said that as Microsoft's legal woes receded, the company would feel more free to experiment with new markets and integrate new features into core products such as its ubiquitous Windows operating system. 'Hopefully, it will give them some room to maneuver,' said Piper Jaffray analyst Eugene Munster."
The Los Angeles Times: Microsoft to Settle Two Cases (Registration required)

EU Case Unclear

Finding common ground is still a key to Microsoft's woes across the pond and it's still murky how much punch if any yesterday's settlements will offer to its European case.

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