Contending that the government has failed to prove a single allegation, Microsoft Corp. argued yesterday that the antitrust case against it is fatally undermined by both legal precedent and the realities of an ever-shifting technology market.
In an unyielding 70-page brief to Thomas Penfield Jackson, the federal judge overseeing the case, Microsoft jabbed at the Justice Department and the 19 states that have accused the company of illegally exploiting its dominant Windows operating system to bully rivals and take a leading share of the Internet browser market.
More gingerly, the company took issue with Jackson's findings of fact, issued in November. Saying that it "respectfully disagrees with many of the Court's findings of fact," Microsoft denied that it enjoyed monopoly power, claiming that it faces serious threats from rivals such as Apple Computer Inc. and the Unix and Linux operating systems, as well as from information appliances and wireless telephones that don't run Windows.
Those threats have yet to hurt Microsoft's bottom line. Through a coincidence of timing, the brief was submitted as Microsoft announced that quarterly profit had soared 22 percent on strong holiday sales of personal computers. Earnings rose to $2.44 billion, up from $1.98 billion during the same period last year, while revenue climbed to $6.11 billion, up from $5.2 billion. Beating estimates by 2 cents, the company earned 44 cents per share.
News of the earnings was released after the stock market closed. Shares of Microsoft rose $3.06 1/4, to $115.31 1/4, in trading yesterday.
Microsoft's brief is the first of two shots the company will have in shaping any conclusions of law Jackson might issue. Justice and the states have already submitted their brief, and in the coming weeks the two sides will have the chance to respond to each other's submissions. Oral arguments are scheduled for February, and Jackson is expected to offer his own conclusions in March. If the judge concludes that Microsoft broke the law, the remedy phase of the trial--when Microsoft's punishment is decided--is likely to take several more months, with a final ruling anticipated in June.
Meanwhile, mediation talks are continuing in Chicago, where Judge Richard Posner is trying to nudge and guide the two sides to an out-of-court settlement. Expectations that Posner would succeed were greatly diminished last week after reports that Justice would seek to break Microsoft into three pieces, a remedy the company has flatly rejected.
In its brief yesterday, the company stated that the government has presented a case bereft of compelling evidence and riddled with flimsy legal logic. Justice never showed that the company "engaged in anti-competitive conduct that significantly contributed to the maintenance of an alleged monopoly in operating systems for Intel-compatible personal computers," Microsoft stated. Nor has the government demonstrated that Microsoft "had a specific intent to monopolize the purported market for Web browsing software," according to the brief.
An official at the Justice Department said yesterday that the Microsoft filing "ignores the court's findings of facts and distorts key legal precedents." The company's arguments would hand Microsoft "unlimited freedom to use its power to crush competition, harm consumers and stifle innovation," the official said.
Answering charges that it has unfairly blocked computer makers from modifying Windows, Microsoft pointed to a handful of previous copyright decisions, including a case involving the British comedy group Monty Python. In that matter--which revolved around ABC's efforts to edit three Monty Python skits--the federal appeals court stressed that "unauthorized editing" of a copyrighted product constitutes an infringement. Windows, the company argued, deserves similar protections.
With an artisan's care, Microsoft lifted favorable sentiments from Jackson's findings, a document considered a major setback for the company. For instance, the company quotes Jackson's finding that "Microsoft did not actually prevent users from obtaining and using" the Netscape Web browser, leaving out the next few words of the sentence: "(although they tried to do as much in 1995)."