Appeals Court Ruling:
United States v. Microsoft Corp.
Thursday, June 28, 2001
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 26 and 27, 2001
Decided June 28, 2001
United States of America,
Appeals from the United States District Court
for the District of Columbia
Richard J. Urowsky and Steven L. Holley argued the
causes for appellant. With them on the briefs were John L.
Warden, Richard C. Pepperman, II, William H. Neukom,
Thomas W. Burt, David A. Heiner, Jr., Charles F. Rule,
Robert A. Long, Jr., and Carter G. Phillips. Christopher J.
Meyers entered an appearance.
Lars H. Liebeler, Griffin B. Bell, Lloyd N. Cutler, Louis R.
Cohen, C. Boyden Gray, William J. Kolasky, William F.
Adkinson, Jr., Jeffrey D. Ayer, and Jay V. Prabhu were on
the brief of amici curiae The Association for Competitive
Technology and Computing Technology Industry Association
in support of appellant.
David R. Burton was on the brief for amicus curiae
Center for the Moral Defense of Capitalism in support of
Robert S. Getman was on the brief for amicus curiae
Association for Objective Law in support of appellant.
Jeffrey P. Minear and David C. Frederick, Assistants to
the Solicitor General, United States Department of Justice,
and John G. Roberts, Jr., argued the causes for appellees.
With them on the brief were A. Douglas Melamed, Acting
Assistant Attorney General, United States Department of
Justice, Jeffrey H. Blattner, Deputy Assistant Attorney Gen-
eral, Catherine G. O'Sullivan, Robert B. Nicholson, Adam D.
Hirsh, Andrea Limmer, David Seidman, and Christopher
Sprigman, Attorneys, Eliot Spitzer, Attorney General, State
of New York, Richard L. Schwartz, Assistant Attorney Gen-
eral, and Kevin J. O'Connor, Office of the Attorney General,
State of Wisconsin.
John Rogovin, Kenneth W. Starr, John F. Wood, Elizabeth
Petrela, Robert H. Bork, Jason M. Mahler, Stephen M.
Shapiro, Donald M. Falk, Mitchell S. Pettit, Kevin J. Arquit,
and Michael C. Naughton were on the brief for amici curiae
America Online, Inc., et al., in support of appellee. Paul T.
Cappuccio entered an appearance.
Lee A. Hollaar, appearing pro se, was on the brief for
amicus curiae Lee A. Hollaar.
Carl Lundgren, appearing pro se, was on the brief for
amicus curiae Carl Lundgren.
Table of Contents
I. Introduction 7
A. Background 7
B. Overview 10
II. Monopolization 13
A. Monopoly Power 14
1. Market Structure 15
a. Market definition 15
b. Market power 19
2. Direct Proof 23
B. Anticompetitive Conduct 25
1. Licenses Issued to Original Equip-
ment Manufacturers 28
a. Anticompetitive effect of the li-
cense restrictions 29
b. Microsoft's justifications for the
license restrictions 33
2. Integration of IE and Windows 36
a. Anticompetitive effect of inte-
b. Microsoft's justifications for inte-
3. Agreements with Internet Access
4. Dealings with Internet Content Pro-
viders, Independent Software Ven-
dors, and Apple Computer 47
5. Java 52
a. The incompatible JVM 52
b. The First Wave Agreements 53
c. Deception of Java developers 55
d. The threat to Intel 56
6. Course of Conduct 58
C. Causation 59
III. Attempted Monopolization 62
A. Relevant Market 63
B. Barriers to Entry 65
IV. Tying 68
A. Separate-Products Inquiry Under the
Per Se Test 70
B. Per Se Analysis Inappropriate for this
C. On Remand 86
V. Trial Proceedings and Remedy 90
A. Factual Background 91
B. Trial Proceedings 95
C. Failure to Hold an Evidentiary Hearing 96
D. Failure to Provide an Adequate Explana-
E. Modification of Liability 100
F. On Remand 103
G. Conclusion 106
VI. Judicial Misconduct 106
A. The District Judge's Communications
with the Press 107
B. Violations of the Code of Conduct for
United States Judges 113
C. Appearance of Partiality 117
D. Remedies for Judicial Misconduct and
Appearance of Partiality 120
1. Disqualification 120
2. Review of Findings of Fact and Con-
clusions of Law 123
VII. Conclusion 125
Before: Edwards, Chief Judge, Williams, Ginsburg,
Sentelle, Randolph, Rogers and Tatel, Circuit Judges.
Opinion for the Court filed Per Curiam.
Per Curiam: Microsoft Corporation appeals from judg-
ments of the District Court finding the company in violation
of ss 1 and 2 of the Sherman Act and ordering various
The action against Microsoft arose pursuant to a complaint
filed by the United States and separate complaints filed by
individual States. The District Court determined that Micro-
soft had maintained a monopoly in the market for Intel-
compatible PC operating systems in violation of s 2; attempt-
ed to gain a monopoly in the market for internet browsers in
violation of s 2; and illegally tied two purportedly separate
products, Windows and Internet Explorer ("IE"), in violation
of s 1. United States v. Microsoft Corp., 87 F. Supp. 2d 30
(D.D.C. 2000) ("Conclusions of Law"). The District Court
then found that the same facts that established liability under
ss 1 and 2 of the Sherman Act mandated findings of liability
under analogous state law antitrust provisions. Id. To rem-
edy the Sherman Act violations, the District Court issued a
Final Judgment requiring Microsoft to submit a proposed
plan of divestiture, with the company to be split into an
operating systems business and an applications business.
United States v. Microsoft Corp., 97 F. Supp. 2d 59, 64-65
(D.D.C. 2000) ("Final Judgment"). The District Court's re-
medial order also contains a number of interim restrictions on
Microsoft's conduct. Id. at 66-69.
Microsoft's appeal contests both the legal conclusions and
the resulting remedial order. There are three principal
aspects of this appeal. First, Microsoft challenges the Dis-
trict Court's legal conclusions as to all three alleged antitrust
violations and also a number of the procedural and factual
foundations on which they rest. Second, Microsoft argues
that the remedial order must be set aside, because the
District Court failed to afford the company an evidentiary
hearing on disputed facts and, also, because the substantive
provisions of the order are flawed. Finally, Microsoft asserts
that the trial judge committed ethical violations by engaging
in impermissible ex parte contacts and making inappropriate
public comments on the merits of the case while it was
pending. Microsoft argues that these ethical violations com-
promised the District Judge's appearance of impartiality,
thereby necessitating his disqualification and vacatur of his
Findings of Fact, Conclusions of Law, and Final Judgment.
After carefully considering the voluminous record on ap-
peal--including the District Court's Findings of Fact and
Conclusions of Law, the testimony and exhibits submitted at
trial, the parties' briefs, and the oral arguments before this
court--we find that some but not all of Microsoft's liability
challenges have merit. Accordingly, we affirm in part and
reverse in part the District Court's judgment that Microsoft
violated s 2 of the Sherman Act by employing anticompetitive
means to maintain a monopoly in the operating system mar-
ket; we reverse the District Court's determination that Mi-
crosoft violated s 2 of the Sherman Act by illegally attempt-
ing to monopolize the internet browser market; and we
remand the District Court's finding that Microsoft violated
s 1 of the Sherman Act by unlawfully tying its browser to its
operating system. Our judgment extends to the District
Court's findings with respect to the state law counterparts of
the plaintiffs' Sherman Act claims.
We also find merit in Microsoft's challenge to the Final
Judgment embracing the District Court's remedial order.
There are several reasons supporting this conclusion. First,
the District Court's Final Judgment rests on a number of
liability determinations that do not survive appellate review;
therefore, the remedial order as currently fashioned cannot
stand. Furthermore, we would vacate and remand the reme-
dial order even were we to uphold the District Court's
liability determinations in their entirety, because the District
Court failed to hold an evidentiary hearing to address reme-
dies-specific factual disputes.
Finally, we vacate the Final Judgment on remedies, be-
cause the trial judge engaged in impermissible ex parte
contacts by holding secret interviews with members of the
media and made numerous offensive comments about Micro-
soft officials in public statements outside of the courtroom,
giving rise to an appearance of partiality. Although we find
no evidence of actual bias, we hold that the actions of the trial
judge seriously tainted the proceedings before the District
Court and called into question the integrity of the judicial
process. We are therefore constrained to vacate the Final
Judgment on remedies, remand the case for reconsideration
of the remedial order, and require that the case be assigned
to a different trial judge on remand. We believe that this
disposition will be adequate to cure the cited improprieties.
In sum, for reasons more fully explained below, we affirm
in part, reverse in part, and remand in part the District
Court's judgment assessing liability. We vacate in full the
Final Judgment embodying the remedial order and remand
the case to a different trial judge for further proceedings
consistent with this opinion.
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