(FORTUNE Magazine) – The Justice Department's antitrust case against Microsoft has been a spectacle--sort of a jurisprudential Super Bowl--and unless the two teams settle, it is likely to go on for years, wending its way ultimately to the Supreme Court. As of mid-January, the chances of a settlement seem slim: The scuttlebutt in Washington, D.C., is that the government wants to break Microsoft into two or more companies; in Redmond they're saying that's just not going to happen.

My guess is that Microsoft will lose the first round (trial judge Thomas Penfield Jackson seems more the Justice Department's cheerleader than the embodiment of impartial justice) but that it will win on appeal. For one thing, the government's case pushes antitrust law into places it's never been and probably shouldn't go; for another, it's becoming obvious that Microsoft is not the impregnable sultan of software that the government has made it out to be.

The weakest of the government's charges accuses Microsoft of "predatory pricing." Such cases are hard to prove. To win one, given Supreme Court precedents, you need to demonstrate that the predator (Microsoft) cut the price of a product (Web browsers) to less than its costs--defined as the marginal cost of the next unit sold--to devour its prey (Netscape). You'd also have to show that the predator had a reasonable expectation of eventually raising its prices high enough to recoup its losses (Microsoft's expenses for developing and promoting its browser).

Now, Microsoft was giving away its browser for free, so the price was zero. But Microsoft's marginal cost to let someone download a copy was...also zero. And since Netscape retaliated by giving away its browser, it's hard to imaging anyone spending a nickel to buy a browser ever again. So Microsoft won't recover anything there. Instead, the government argues that Microsoft will recoup its money by charging higher prices in the future for Windows. The government claims that because of "network externalities" (the idea that people use PCs so tied in to Windows that they'll find it impossible to switch to another operating system), Microsoft has a monopoly in operating systems and can charge whatever it likes.

Microsoft doesn't act like a monopolist: Big computer makers pay between $40 and $60 per copy for Windows--which doesn't seem like much, compared with prices of other software and given what you get. The Department of Justice argues that "no viable competitive alternative" to Windows exists or is likely to be developed if Microsoft is left alone. Some game theorists argue that a company need not even engage in predatory pricing once it has become dominant: The mere threat will be enough, they say, to scare off potential new entrants.

That hasn't been the case. Apple, which has its own operating system, is rejuvenated. Even if you limit the market to "operating systems for Intel-compatible" PCs, as the government did, alternatives such as IBM's OS/2 still exist, and new competitors, such as Linux, are emerging. On Jan. 16, one Linux outfit--TurboLinux--raised $57 million in capital from Dell, Compaq, Intel, and other companies. But the larger point is this: Does anybody seriously doubt that if Microsoft raised Windows prices to unconscionable levels, competition would intensify and more competitors arise? Only in Washington, D.C.

If anything, it's looking more and more as if Windows-like software packages will become extinct. Consumers in the future will access the Net with simple devices that may not even need elaborate, clunky operating systems, and they'll use free applications on Websites, just the way they can get free street maps and calendar programs today at sites like Yahoo.

Microsoft may well be a brutish competitor, but that doesn't make it a criminal. In American market capitalism, there is nothing wrong with trying to put your competitors out of business, per se. If the trial judge finds Microsoft guilty of predatory behavior merely because it acts like a thug--without showing that the company's actions meet the antitrust criteria set forth in case law--the courts will soon find themselves adjudicating all sorts of intramural disputes among the software makers of Silicon Valley.

Unless, as I predict, the verdict is reversed on appeal.

REPORTER ASSOCIATE Jane M. Folpe