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Microsoft launches attack
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November 27, 2000: 5:19 p.m. ET
In appeal brief, Microsoft argues lower court made factual, procedural errors
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NEW YORK (CNNfn) - Microsoft Corp. launched its counterattack against the Justice Department and a group of state attorneys general when it filed its main brief Monday in the appeal of its landmark antitrust case.
In a filing with the U.S. Court of Appeals for the District of Columbia, Microsoft (MSFT: Research, Estimates) asked the appeals court to overturn a district court's findings that it violated antitrust laws and an order that the company be split in two to prevent future anticompetitive behavior.
In its 150-page brief, the company argues that the government's lawsuit and the district court's rulings reflect a misunderstanding of the antitrust laws. The brief cites what Microsoft calls "numerous factual, legal and procedural errors in the case," states that long-held legal precedents support the company's position, and argues that the district court's judgment would stifle innovation.
Click here for CNNfn.com's coverage of the Microsoft case
The software company's brief is the first of written arguments that will be submitted between now and early February by the software giant and the Justice Department. The court set a deadline of Jan. 12, 2001, for the Justice Department's brief, which will have a limit of 125 pages. The two sides will then face off in oral arguments before the appeals court panel, which are set for Feb. 26 and 27.
 On April 3, District Judge Thomas Penfield Jackson concluded that Microsoft had violated federal antitrust laws by maintaining its near monopoly over personal computer operating systems by anticompetitive means and by attempting to monopolize the Web browser market. He also found that the software maker violated federal antitrust law by tying its Web browser to its operating system when it released Windows 98.
Last June, Jackson issued a final order requiring Microsoft to separate its Windows operating system business from its applications business and barring the company from engaging in practices that the court found led to antitrust law violations. However, Jackson's order doesn't go into effect until Microsoft has exhausted its appeals.
"The entire proceeding was infected with error," Microsoft said in a summary of its filing. "Revealing a profound misunderstanding of the antitrust laws, the district court condemned Microsoft's competitive response to the growth of the Internet and Netscape's emergence as a platform competitor, conduct that produced enormous consumer benefits."
Microsoft's filing repeated arguments the company has made several times in the past, and the Justice Department stood firmly by its case Monday.
"The judgment is well supported by the evidence offered during a 78-day trial, including thousands of pages of Microsoft's own documents. We are confident in our case, and look forward to presenting it to the Court of Appeals," the Justice Department said in a statement.
"Microsoft is still not coming to grips with what its own people were saying -- about their ability to set prices, their position in the browser market, and whether the browser was a separate product -- when these things were occurring," said Donald Falk, a lawyer at Mayer Brown & Platt, who had filed a "friend of the court" brief on behalf of two software trade groups. "They tell a nice story, but it's not the same story their people were telling at the time they were committing these actions."
Tying claim
Microsoft contested the district court's finding that the company had illegally tied its Explorer Web browsing software to its Windows operating system, preventing Netscape's Navigator browser from competing effectively in the market. Netscape is now owned by America Online (AOL: Research, Estimates), which has a pending merger agreement with Time Warner, the parent of Turner Broadcasting and CNNfn.
Microsoft said that the Justice Department's "tying" claim fails for two reasons. First, Windows and Explorer are not separate products because there are "significant benefits to the integrated design of Windows that cannot be duplicated by combining an operating system with a standalone Web browser like Navigator," the company said. Second, the alleged product tie didn't foreclose on competition in the browser market, Microsoft argued.
"I think Microsoft will win on the tying issue at the appeals court level, but whether they will win that point at the Supreme Court is another question," said Robert Lande, a professor at the Baltimore School of Law in Maryland.
Monopoly maintenance claim
Microsoft also argued against the district court's finding that it maintained a monopoly over the operating system market for personal computers. The Justice Department had argued that Microsoft's integration of Explorer into the Windows operating system and the company's promotion and distribution agreements with Internet service providers had prevented Netscape's Navigator from being distributed through computer makers and ISPs.
"Microsoft cannot control prices or exclude competition, and thus does not possess monopoly power in a properly defined market," the company said in a summary of its filing. "Microsoft did not engage in anticompetitive conduct because it did not foreclose Navigator or Java from any marketplace."
Java is a programming language developed by Sun Microsystems.
Abuse of discretion
The software giant said that Judge Jackson abused his discretion when he imposed the penalties on the company without first holding hearings on whether the remedies were appropriate, given the alleged offenses. The company also criticized Jackson for comments he made to the press after he issued his ruling.
"The district court was not at liberty to enter sweeping relief, over Microsoft's objection, without conducting an evidentiary hearing and affording Microsoft an opportunity to present evidence on all disputed issues," Microsoft said. "The entire decree should be vacated on these grounds alone."
"Microsoft's pitch seems to say that big antitrust cases have to take forever or they can't be brought, which would strangle antitrust law in a fast-moving industry," said Mayer Brown's Falk. "When you are weak on the facts and weak on the law, you pound on the judge."
Judge Jackson's public comments about the case during and after the trial violated the Code of Conduct for U.S. judges, the software maker claimed. Jackson had granted interviews to the Wall Street Journal and the Washington Post after he issued his ruling last June, an unusual move for a federal judge in an active case.
"By repeatedly commenting on the merits of the case in the press, the district judge has cast himself in the public's eye as a participant in the controversy, thereby compromising the appearance of impartiality, if not demonstrating actual bias against Microsoft," the company's filing said. 
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