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  Ruling Halts 'Master' In Microsoft Case

By Rajiv Chandrasekaran and Elizabeth Corcoran
Washington Post Staff Writers
Tuesday, February 3, 1998; Page D01

A federal appeals court ruled yesterday that a Harvard professor appointed to study technical issues in the Justice Department's lawsuit against Microsoft Corp. must stop his work until a three-judge panel studies his role in the case more carefully.

The ruling, which hands a temporary victory to Microsoft, was issued by the U.S. Court of Appeals for the District of Columbia one business day after the software giant filed its latest legal brief seeking to dismiss the professor, Lawrence Lessig.

Microsoft contended that Lessig has demonstrated a bias against the software giant in electronic-mail messages he exchanged with executives at Netscape Communications Corp., a Microsoft rival. Microsoft also argued that the case should be examined by a federal judge, not a law professor.

In less-encouraging news for Microsoft, however, attorneys general from 11 states said yesterday that they have fired off subpoenas to the company requesting technical and marketing information about Windows 98, the next version of its computer operating system.

And today, the software industry's largest trade group plans to take the unusual step of breaking ranks with Microsoft, its biggest member, by issuing a set of guidelines on competition that effectively condemns some of the software giant's business practices and supports the government's antitrust case against the company.

Lessig, a technology expert, was appointed in December by U.S. District Judge Thomas Penfield Jackson to be a "special master" in the antitrust case, in which the government contends that Microsoft is violating a 1995 consent decree by unfairly tying its Internet browser to its Windows 95 operating system software. Jackson asked Lessig to study technical issues in the case and prepare a report for the court by May, a deadline that, it now appears, the professor will not meet.

In the interim, Jackson issued a preliminary injunction ordering the company to provide a version of Windows 95 without a browser. Last month, in a temporary settlement, the company agreed to let personal computer makers block access to the browser in the current version of Windows 95 while it appeals Jackson's decision.

The appeals court will hear arguments in the case on April 21, when Microsoft will ask that the matter be thrown out of court. Barring that, the company will ask that Lessig be removed and the preliminary injunction be lifted.

"We're very gratified by this decision," said Microsoft spokesman Mark Murray. "We felt that given the importance of this case, it should be heard by a federal judge, not by a private citizen. We have a great deal of respect for Professor Lessig, but we were concerned that the special master process could introduce unnecessary delays and potential bias . . . which would greatly complicate the resolution of this important case."

The appeals court did not indicate why it decided to put Lessig's examination on hold, which will remain in effect until at least April 21. The ruling was issued by circuit judges Laurence H. Silberman, Stephen F. Williams and A. Raymond Randolph.

A Justice Department spokesman, Michael Gordon, had no reaction to the decision. "We will comply with the appeals court order as we pursue our important case for consumers and computer vendors," he said.

Lessig did not return phone calls last night. A message on his answering machine said he would not comment on the case.

Microsoft, in supporting its claim of bias, cited a July 1997 e-mail that Lessig sent to a Netscape lawyer discussing problems Lessig had when he installed Microsoft's Internet Explorer browser on his Macintosh computer. It starts by stating: "Okay, now this is making me really angry, and Charlie Nesson [another Harvard law professor] thinks we should file a lawsuit."

Lessig, in a sworn statement submitted to Jackson, has denied any bias against Microsoft, saying he did "not have any personal bias or prejudice concerning either of the parties to this case and no personal knowledge of disputed evidentiary facts concerning the proceedings." He called the correspondence in question "a facetious response to an anticipated tease in an e-mail between friends."

The state antitrust investigators, like the Justice Department, are looking into whether the Redmond, Wash., software giant is using its market clout in operating system software to boost sales of its Internet browsing software.

The state investigators are asking some of the same broad questions as their federal counterparts. But while the Justice Department's case against Microsoft focuses on Windows 95, the current version of its widely used operating system software, the state attorneys general are looking at its successor. Microsoft has said it plans to release Windows 98 in the second quarter of this year.

The states involved in the investigation are New York, Connecticut, California, Florida, Illinois, Iowa, Massachusetts, Minnesota, South Carolina, Texas and Wisconsin.

Only Texas has taken any action so far; it sued Microsoft last fall, alleging that its non-disclosure agreements discouraged possible sources from talking to state investigators.

The attorneys general asked Microsoft officials for information, but "essentially they've stonewalled the states with Draconian confidentiality requirements and left us no choice but to issue subpoenas," said Connecticut Attorney General Richard Blumenthal.

Murray said Microsoft was only worried about disclosing data to competitors and suggested the attorneys general issue subpoenas, which would keep the information confidential.

Meanwhile, the Software Publishers Association today will release a set of "competition principles" for the industry that advocates that makers of "dominant" computer operating system software should not use their market power to help distribute other products or limit access to material on the Internet. Critics say Microsoft is doing such things with its popular Windows 95 operating software, which is installed on more than 90 percent of new personal computers.

Industry specialists say the Washington-based group's decision to criticize Microsoft is significant because it could encourage more people to cooperate with an ongoing Justice Department investigation into the company. The SPA, to which 1,200 software companies belong, intends for the guidelines to be used by government regulators when examining competitive issues in the software industry.

"The principles are nothing short of motherhood and apple pie for our industry," said Ken Wasch, the SPA's president.

Microsoft's government affairs director, Jack Krumholtz, called the document "a potshot" that has "no basis in current antitrust law."

Justice Department officials said yesterday that they welcomed the SPA's effort and suggested that it could help their investigation of Microsoft. "We're happy that the SPA is taking seriously issues of competition in their industry," said Daniel Rubinfeld, a deputy assistant attorney general in the department's antitrust division.

Other tactics condemned by the SPA include monopolizing space on retail store shelves and releasing "vaporware," industry slang for the announcement of a software product that does not yet exist in an effort to mute competitors' products.

Wasch said the SPA decided to craft the guidelines after surveying its members late last year. Of those who responded, 62 percent said the group should become more actively involved in antitrust matters, he said.

But Krumholtz contends that the task force that authored the document was stacked with several Microsoft rivals. He also questioned the accuracy of the survey, to which only 22 percent of members responded.

"It's unfortunate that the SPA has allowed itself to become a pawn of a few member companies," Krumholtz said. Microsoft, which pays $100,000 a year in dues to the SPA, has not decided whether it will renew its membership, he said.

© Copyright 1998 The Washington Post Company

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