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Microsoft ruling imminent
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June 7, 2000: 1:29 a.m. ET
Judge expected to order breakup of software giant in historic antitrust trial
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NEW YORK (CNNfn) - Following a final filing Tuesday by Microsoft, the federal judge overseeing the landmark antitrust trial against the software maker is now free to issue a final ruling that could call for splitting the company in two to prevent it from committing future violations of federal and state antitrust laws.
If Judge Jackson does order such a split and the order survives the appeals process, it would mark the largest court-initiated division of a company since AT&T agreed to be broken into a long-distance company and seven regional phone companies under a 1984 consent decree.
 Antitrust lawyers expect Judge Jackson to rule by Friday afternoon, although he could rule as early as Wednesday following the early filing by Microsoft. The judge has moved the Microsoft case on a very swift timetable, seeking to avoid a repeat of the decade-long proceedings in the government's antitrust cases against IBM and AT&T. Microsoft has vowed to appeal the District Court's ruling, which could take up to two years if the case goes to a federal appeals court, rather than to the Supreme Court.
The government asserts that splitting Microsoft into an operating systems company and an applications company would shatter Microsoft's monopoly over PC operating systems, leading to greater innovation in the software industry and more consumer choice. Microsoft, by contrast, says that breaking up the company would "have a chilling effect on innovation in the high technology industry" and harm consumers by preventing the company from developing the next generation of Windows software.
The Justice Department's proposed split is designed to prevent Microsoft from using its monopoly power over PC operating systems to crush competition from "middleware," such as Netscape's Navigator browser and Sun's Java technology. Middleware is software that operates between an operating system and another type of software application.
Microsoft filing reveals nothing new
The path was cleared for Jackson to issue his final ruling when Microsoft on Tuesday submitted its response to the Justice Department's latest proposal to split the company in two. Ever since the Justice Department and a group of 17 state attorneys general first proposed the breakup on April 28, Microsoft has called it extreme, radical, and unwarranted by the facts in the antitrust case. For the past week, the two sides have bickered over the fine print in Justice's proposal, with Microsoft contesting items as small as a comma or whether the split should be called a "reorganization" or a "divestiture."
The filing Microsoft made Tuesday was only seven pages long and spoke fairly broadly about what the company says are defects in the government's proposed final judgment. By contrast, a filing Microsoft made on May 31 contained 39 pages of line-by-line criticisms of the proposal.
In its seven-page filing, Microsoft said the comments the government made in the latest iteration of its breakup plan "merely confirm that its requested relief is punitive in concept and effect," and that splitting up the company "will inflict severe harm on Microsoft and third parties."
Click here to read the full text of Microsoft's filing
On Monday, government attorneys filed a revised breakup plan, advising Jackson to reject almost all of the changes Microsoft wanted to make to the breakup proposal, and agreeing only to a few grammatical and semantic changes. The Justice Department said that four months would be enough time for Microsoft to draft a divestiture plan, rather than the 12 months Microsoft requested, should Jackson order such a split.
In Tuesday's filing, Microsoft said that the government has either ignored problems with its proposed remedy or made them even worse with "extreme readings of various provisions" and by refusing to clarify other provisions. The few changes to which the government has agreed "are purely cosmetic and do nothing to remedy the serious substantive deficiencies of the decree," Microsoft's filing said.
Justice Department spokeswoman Gina Talamona on Tuesday said the latest filing "rehashes Microsoft's old arguments, ignores the extensive violations found by the court, denies the need for serious relief and grossly distorts our proposed remedy."
It's not over yet
Some trial watchers said the speed with which Microsoft submitted its latest filing and the stinging tone of the language signal that the company is anxious to get the appeals process under way.
"Microsoft is frustrated, a little bit angry and basically saying, 'Let's get on with it,'" Harvey Saferstein, an antitrust attorney with Fried Frank Harris in San Francisco, said in an interview on CNNfn's Moneyline News Hour Tuesday. [275K WAV or 275K AIFF]
The wild card now, however, is what restrictions Judge Jackson imposes on Microsoft immediately, rather than delaying until the appeals process ends, Saferstein said. While Judge Jackson is expected to delay the implementation of measures that would be irreversible, such as dividing the company, he may place into immediate effect wide-ranging restrictions on the way Microsoft deals with competitors and prices its products.
 Last month, rightly expecting that Microsoft would appeal, the government
asked Judge Jackson to be given 15 days to choose whether to bypass the appeals court and seek immediate review by the U.S. Supreme Court. Antitrust experts expect the government to try to obtain an immediate review by the high court because it would speed the process and because the appeals court has favored Microsoft in a previous antitrust action against the company.
However, the Supreme Court is likely to reject any effort by the Justice
Department or Judge Jackson to bypass the appeals court, antitrust lawyers have said. The high court prefers to review the slimmed down legal record that appeals courts create rather than wading through long, complicated lower-court trial records.
An immediate review by the Supreme Court is not entirely out of the question. An amendment made to federal antitrust laws in the mid-1970s makes it more feasible to bypass the court of appeals in cases of significant national importance.
Microsoft (MSFT: Research, Estimates) shares added 2-3/4 to close at 69-5/8 in Nasdaq trade Tuesday ahead of the filing. 
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