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  Microsoft, Justice Argue Software Issue in Court
By Rajiv Chandrasekaran
Washington Post Staff Writer
Wednesday, April 22, 1998; Page C11

Lawyers for Microsoft Corp. and the Justice Department squared off yesterday in a federal appeals court over the distribution of Internet software, as other lawyers at the department continued to assemble a broad antitrust case against Microsoft that informed sources said could be filed in the next two weeks.

Microsoft argued that U.S. District Judge Thomas Penfield Jackson overstepped his authority in December when he sided with the Justice Department in issuing an injunction forcing the company to offer a version of its Windows 95 operating system without a "browser," or software that gives access to the Internet.

The company told the three-judge panel at the U.S. Court of Appeals in Washington that it should be allowed to add whatever new features it wants to Windows, which runs on more than 85 percent of personal computers.

The judges peppered a Justice lawyer with pointed questions about Microsoft's ability to offer "integrated products" and about Jackson's decision to issue his preliminary injunction without a full evidence-gathering process.

The hour-long arguments offered a preview of arguments the two sides might raise in any broader antitrust case, which probably would focus on Windows 98, Microsoft's next-generation operating system. Industry analysts say Microsoft plans to distribute it to computer makers around May 15.

Although Jackson's order was directed at Windows 95, the Justice Department has been considering asking the judge to apply it to Windows 98 as well, according to the sources.

Justice also would base its case against Windows 98 on the country's main antitrust law, the Sherman Act, which forbids companies to use monopoly power in one market to crush competition in another. The department is concerned that Microsoft, by adding browser software to Windows, is in essence driving out of business other browser makers, specifically Netscape Communications Corp.

The department's broader action, being discussed in high-level meetings, probably would challenge several other Microsoft business tactics as well, such as requirements it places on personal computer makers who license Windows, sources said.

Eleven state attorneys general also are investigating Microsoft and have started circulating among themselves a draft antitrust lawsuit against the company, which the sources said also could be filed in the next two weeks.

Microsoft's lead attorney, Richard J. Urowsky, insisted to the judges yesterday that a 1995 agreement with the Justice Department gives the company the right to put whatever it wants into Windows. The department contends -- and Jackson agreed -- that Microsoft's practice of requiring PC makers to distribute Microsoft's Internet Explorer browser as a condition of licensing Windows 95 violates that agreement.

Microsoft argued that Internet Explorer and Windows are "integrated" products; Justice contended that they are separate.

"Anything Microsoft decides should go into Windows . . . by putting it in that software package makes it an integrated product?" U.S. Circuit Judge Patricia M. Wald asked Urowsky.

"Yes, that is correct," Urowsky replied.

The Justice Department's lawyer, A. Douglas Melamed, told the judges that the products should not be treated as "integrated" because Microsoft also sells Internet Explorer separately from Windows.

But one of the judges, A. Raymond Randolph, questioned the purpose of having Microsoft distribute the two products separately. "How does that help consumers?" Randolph asked.

The judges also explored in their questions the legitimacy of Jackson's preliminary injunction, noting that the department never asked for such a remedy and that the judge did not give Microsoft an opportunity to explain how such a step would affect its business.

Jackson's process was "not the way we hand out preliminary injunctions up here," Wald said.

Microsoft also contends that Jackson overstepped his authority when he appointed Harvard University law professor Lawrence Lessig as a "special master" to comment on technical issues in the case. Microsoft claims that Lessig is biased and that the judge vested too much power in him.

But Wald expressed support for Jackson's decision to appoint Lessig. "We are in an area as judges -- as smart as we are -- where we don't always understand," she said.

Microsoft's general counsel, William H. Neukom, said in an interview after the hearing that he thought the judges "seemed to be well prepared and seemed to be taking this appeal very seriously."

© Copyright 1998 The Washington Post Company

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