Microsoft Corp. may have taken a pounding in the first round of its antitrust case, but some legal specialists say it's too early to predict a knockout.
In a searing ruling issued on Friday evening, U.S. District Judge Thomas Penfield Jackson declared Microsoft a monopolist that has stymied innovation and injured consumers with its aggressive tactics. Jackson's "findings of fact" sided with virtually every one of the government's allegations and rejected almost every part of Microsoft's defense.
That significantly strengthens the Justice Department's hand in any settlement talks and raises the likelihood that Jackson will impose a tough penalty--even breaking up the company--when the case enters the remedy phase next year.
Still, Microsoft is hardly cornered. It has viable, though somewhat risky, options that fall well short of wave-the-white-flag surrender, according to legal experts.
The company could drag out the proceedings for years, hoping that changes in the high-tech market make the case seem anachronistic. The company could also take its chances with the Court of Appeals for the D.C. Circuit, wagering that the higher court, which has reversed Jackson before, is more tolerant of Microsoft's brand of aggressive competition.
"Time is on Microsoft's side here," said Robert H. Lande, a law professor at the University of Baltimore. "Two years from now, when the Supreme Court gets the case, Microsoft can make the argument that the factual record is obsolete."
On Friday, Jackson gave both sides a schedule to submit legal briefs that address how antitrust law applies to his findings of fact. Microsoft's final rebuttal brief is not due until Jan. 31, and the judge has not specified whether he will hold oral arguments before issuing his "conclusions of law." Only after that ruling is issued, probably not before March, will he tackle the issue of sanctions.
Attorneys at Justice have not formally requested a remedy, but they are already working on the issue. "We'll analyze the full spectrum of conduct and structural remedies," Joel I. Klein, the head of the antitrust division, said yesterday.
But even if Jackson imposes the stiffest of penalties, life for Microsoft's employees and customers is unlikely to change any time soon. That's because the company can avoid any sanctions until its appeals are exhausted, a process that could last well into 2002 if the case ends up in the Supreme Court.
A settlement in the case is possible, and Microsoft has plenty of reasons to get this matter behind it. Beyond the public relations problem of being branded a monopolist, Microsoft also faces the possibility that the case could spur new private antitrust lawsuits that lean heavily on Jackson's findings.
Instead of suing for peace, however, Microsoft could just keep litigating. Though Jackson is trying hard to render his decision appeal-proof, the emphatically pro-government tenor of the findings could, paradoxically, make them vulnerable to challenge, legal analysts say. An appeals panel might conclude that if Jackson saw the whole thing in black and white, he clearly missed some shadings. And once Jackson renders his conclusions, Microsoft could contend that the judge applied the wrong law to the facts or that the facts were not relevant.
Such arguments might meet with a receptive audience. Last year, a three-judge panel reversed Jackson after he slapped an injunction on Microsoft, sharply disagreeing with the judge's conclusion that the tying of Windows with Internet Explorer was illegal.
"One thing that salves the wounds is that though Jackson doesn't see things your way, Microsoft has a date with judges who do," said William Kovacic, a professor at George Washington University Law School. "They're more likely to look at the fact that Netscape started with 90 percent of the browser market and steadily lost market share to Microsoft and say, 'Now, tell me what's wrong with that.' "
The company would enter the appeals process with plenty of ammunition. Courts are still struggling to set clear standards for the behavior of dominant firms in the high-tech industry.
Finally, there's the very slender chance that the next president will decide that the case is so wrongheaded that it ought to be abandoned. The possibility underscores that monopolization cases are lengthy battles and it's tricky to forecast a victor at the conclusion of the first skirmish.
"I don't think this led Microsoft to conclude that at end of the day they'll lose," said Charles F. "Rick" Rule, a legal consultant to Microsoft. "Friday's findings didn't have anything to do with the law, and the law hasn't changed."
ONWARD AND UPWARD
As Microsoft Corp.'s Windows has essentially taken over the world of personal computers, the company's stock price, sales and profit have soared, and it has become the most highly valued corporation in history.
Stock price, monthly closes
March 31, 1986: 19 cents
Friday: $91.56 1/4
Net sales and income, in billions
(This graphic was not available)
SOURCE: Bloomberg News