Mediator in Microsoft case
November 19, 1999: 5:56 p.m. ET

Federal judge appointed to handle discussions between firm, government
By Staff Writer John Frederick Moore
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NEW YORK (CNNfn) - A federal judge appointed a mediator in the Microsoft Corp. antitrust trial Friday, raising the prospects for an out-of-court settlement in the company's lengthy battle with the government.
     U.S. District Judge Thomas Penfield Jackson named Richard Posner, chief judge of the 7th Circuit U.S. Court of Appeals in Chicago, to handle so-called "voluntary" negotiations between Microsoft (MSFT) and the government.
     Under the order issued late Friday, Posner will act as mediator in a private capacity, meaning it is separate from the U.S. District Court's involvement in the case. Posner will determine the schedule and duration of the negotiations.
     Jackson found Microsoft to be a monopoly in a preliminary ruling in the case earlier this month. Most antitrust experts expected Jackson's findings of fact to stimulate a new round of settlement discussions between the two sides.
     "We look forward to working with Judge Posner," said Jim Cullinan, a Microsoft spokesman. "We think this is potentially a very positive step toward resolving the case."
     A Justice Department spokeswoman said the government anticipates meeting with Posner "to discuss a way to address the serious competitive problems identified in the court's findings of fact."
     Cullinan declined to comment on when Microsoft and government lawyers will meet with Posner for the first round of discussions.
     Microsoft shares gained 1-1/16 to close at 86 in Nasdaq trade. Its shares jumped to 90-1/2 in after-hours trade on the Instinet system.
Settlement hopes rise?

     The Justice Department and 19 states sued Microsoft in May 1998 for broad antitrust violations, including using its monopoly in the Windows operating systems market to thwart competition and harm consumers.
     Trial watchers believed the sweeping nature of Jackson's findings would compel Microsoft to engage in settlement talks.
     In light of the fact that Jackson sided with nearly all of the government's arguments in his preliminary findings, federal prosecutors have indicated they will seek harsh remedies against the firm in the likely event that Jackson rules Microsoft violated antitrust laws.
     Those remedies could include a breakup of the company, or forcing it to release the valued source code to its Windows operating system, which controls more than 90 percent of the world's personal computers, legal experts say.
     A settlement also could have more far-reaching results in Microsoft's favor. If Microsoft and the government reach a settlement, Jackson's finding of monopoly power would never become final, and firms seeking to sue the company would have to go through the difficult task of proving its monopoly position.
     Sun Microsystems Inc. (SUNW) and Caldera Systems both have private suits pending against Microsoft that bear some similarities to the federal case.
     "Microsoft needs a settlement more than the government," Harvey Saferstein, an antitrust lawyer at Fried, Frank, Harris, Shriver & Jacobson in Los Angeles, told CNNfn.
Sides far apart

     While both sides have long maintained that they have been open to an out-of-court settlement, they have remained far apart on key issues.
     Bill Gates, Microsoft chairman and chief executive officer, has said any proposed settlement must leave Microsoft free to add whatever features it chooses to its Windows operating system.
     Jackson's ruling, however, provides the government with ammunition against that stance. A cornerstone of the government's case has been that Microsoft included the Internet Explorer Web browser for free within Windows to thwart a potential threat to its monopoly power.
     Microsoft claims its actions have worked to the benefit of consumers; Jackson, however, ruled that by engaging in illegal tactics to thwart its competitors, Microsoft also harmed consumers.
     "Many of the tactics that Microsoft has employed have also harmed consumers indirectly by unjustifiably distorting competition," Jackson wrote.
     Microsoft officials have also indicated that the firm could take its chances on appeal. An appellate court has already overturned Jackson twice in the ongoing Microsoft matter.
     "Microsoft likes its chances in the appeals courts," Saferstein said. "Posner, who is an appellate judge, will tell them what is likely to happen in the appeals courts."
     Unless a settlement is reached first, the government will file a brief on Dec. 6 outlining how to apply antitrust laws to Jackson's findings of fact, with Microsoft due to file its responding brief on Jan. 17.
     The government will then get a chance to file a response by Jan. 24, with Microsoft's final response due Jan. 31
     Microsoft and government lawyers are due to deliver oral arguments on their proposed conclusions of law on Feb. 22.Back to top


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