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MSFT defense in disarray
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February 26, 1999: 7:51 p.m. ET
Strong chance Justice will rule for government as antitrust trial recesses
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WASHINGTON (CNNfn)- The landmark Microsoft antitrust trial adjourned Friday for a lengthy recess with the company's defense in disarray and a strong likelihood the judge will eventually rule for the government.
Microsoft's fortunes have slid in recent weeks as its defense witnesses ran into a buzz saw of questions from legendary litigator David Boies, hired specially for this case by the government.
District Judge Thomas Penfield Jackson, whose tolerance for Microsoft witnesses had been on the decline, reached a new level of impatience a few hours before the recess began.
"No! Stop!" Jackson shouted at Microsoft vice president Bob Muglia, when Muglia refused to stop arguing with him about the meaning of an e-mail written Microsoft Chairman Bill Gates.
A lawyer who asked not to be identified because he works with Sullivan & Cromwell, the law firm representing Microsoft Corp. (MSFT), said he was puzzled by the mistakes.
"I really don't understand what is going on here," he said. "They are better than this."
The Justice Department and 19 states argue they have shown Microsoft holds monopoly power through its Windows operating system and abused that power to illegally crush competitors.
Microsoft is publicly confident the government has shown no such thing. "The government has failed to show any harm to consumers as a result of Microsoft's activities," company general counsel William Neukom told reporters Friday.
But just to be on the safe side, the closely allied Association for Competitive Technology recently released a 31-page report arguing against any court-mandated changes to the industry.
The unsurprising conclusion of "Breakup and Compulsory Licensing: Remedies or Bad Medicine?" was that none of the remedies under discussion by Microsoft's critics, such as breaking the company into three entities, are any good.
Judge Jackson will recess the trial for about 6 weeks. The trial will then resume in mid April for rebuttal witnesses, which could take several weeks.
There are several reasons for the recess. Judge Jackson has other trials to preside over, David Boies has another trial in March, and lead defense Attorney John Warden wants to take his family vacation.
Lawyers said the rebuttal phase will add little new to the case.
The only real surprise would be if Microsoft called multibillionaire Gates as a rebuttal witness. The company left the door open Friday when it declined to rule out that possibility.
Neither the Justice Department nor the 19 states that brought the case will talk about specific remedies, although a representative of the states said they are mulling over ways of restoring competition.
The government's case rests largely on thousands of pages of e-mails and internal Microsoft documents that reveal the company's thinking as it tried to win customers away from Netscape Communications Corp.'s Web browser to Microsoft's competing Internet Explorer.
Company officials testified they feared Netscape (NSCP) could use its Web browser as a platform to run software and undercut demand for the Windows operating system.
The government says Microsoft bullied other companies into siding with its product and integrated Internet Explorer into Windows as a way of winning market share rather than giving consumers special benefits.
Microsoft went into the trial with a seemingly simple and solid defense that it had fought hard but legally to be the No. 1 software company in the world and had maintained that position by providing the best software to consumers.
But when Microsoft's own defense witnesses starting appearing in mid-January the script wasn't followed.
In one searing cross-examination after another, Boies left the credibility of Microsoft witnesses in tatters.
The company was embarrassed by a botched videotape presented by Microsoft vice president James Allchin that was meant to show Internet Explorer separated from the Windows program ran slowly.
Boies said what Allchin had testified was a single demonstration was in fact several different computers or demonstrations spliced together. The judge said he was unable to rely on the tape.
And Boies accused Dan Rosen, another Microsoft witness, of fabricating evidence, eventually forcing him to recant. Rosen's credibility problems became so acute that Judge Jackson joked Microsoft's lawyer was setting out on a "heroic endeavor" when he began examining the witness.
Jackson has the job of deciding the credibility of each witness in the absence of a jury. And his judgments of credibility are likely to stick, even on appeal, if he chooses to believe one witness and not another.
Microsoft says that credibility questions are not the main issue and that the trial is really about the law.
John Warden, the company's lead litigator, acknowledged at a news conference that there have been "suggestions" the government has "succeeded in undermining our witnesses."
"When you don't have the laws or the facts you try to try credibility and that's what I think has driven them to this strategy," said Warden.
But Boies told reporters the government has been able to make its case out of the mouths of Microsoft's own witnesses.
"Whether you think their witnesses are credible or non-credible ... they've admitted monopoly power, they've admitted the absence of competitive constraints, they've admitted raising prices to hurt consumers, they've admitted depriving consumers of choice and they've admitted that the reason that they did that was because they were afraid that consumers would in their view make the wrong choice, which is the non-Microsoft choice," said Boies.
And no matter what Jackson rules, Microsoft lawyers often mention a ruling last year by the U.S. Court of Appeals in a related case that gave the company broad latitude to design products, overturning government concerns that it was anti-competitive.
But Stephen Axinn, an antitrust lawyer at Axinn, Veltrop & Harkrider in New York, said credibility may prove to be Microsoft's undoing.
Axinn said it was unlikely that an appeals court will "want to overturn 200 years of jurisprudence that has given the judge broad latitude to make credibility determinations."
After the twelfth and final Microsoft witness, Jackson has indicated.
-from staff and wire reports
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