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Brighter outlook for embattled Microsoft

Appeal of breakup order is aided by shifts in the marketplace - and in White House.

The legal, economic, and political context of the US government's historic antitrust suit against Microsoft has changed so much in recent months that a court-ordered breakup of the software giant may have become much less likely.

It is still entirely possible that a US Court of Appeals - and, ultimately, the Supreme Court - could uphold Judge Thomas Penfield Jackson's sweeping decision that Microsoft is a predatory monopolist that needs to be broken up. State attorneys general may well continue to pursue the case, even if the federal government drops out.

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But with the economy's tech sector sputtering and a more conservative administration newly resident in the White House, some experts now believe the firm will at least escape from the case intact. As evidence, they point out that appeals-court judges sharply questioned some of Judge Jackson's central conclusions during oral arguments in Washington this week.

"I really think breakup is not a realistic possibility for Microsoft" at this point, says Robert Lande, a University of Baltimore law professor who has closely followed the case.

The long, tough fight between the Justice Department and 19 states on the one side, and one of the most successful business enterprises of the computer age on the other, is likely to have a historic impact on consumers and the future of the computer industry.

Last year, the first legal round of the battle concluded with US District Court Judge Jackson in essence throwing Microsoft out of the ring. He ruled for the Justice Department on virtually every point, finding that Microsoft had attempted to leverage a monopoly in computer operating systems into similar dominance of Internet browsing software, and that it had illegally bullied, or attempted to bully, its competitors into submission.

In public comments following his verdict, Judge Jackson has been even more pointed, comparing firm founder Bill Gates to Napoleon and questioning whether Microsoft officials were behaving like adults. Nor did he stop there - he even went so far as to criticize the appeals court that would review his conclusions, saying among other things that some of its justices were "supercilious."

The battle's second legal round began in earnest this week, with the US District Court of Appeals in Washington hearing Microsoft's contention that Judge Jackson's verdict was rife with procedural and substantive errors and that he was obviously biased against the firm.

The nature of judges' questions during oral arguments are not always a good indicator of how they will rule. Some of the court cases in last year's long election in Florida were decided in ways that seemed to contradict judicial leaning during questioning.

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But some legal analysts noted that Microsoft's appeal seemed to be getting a sympathetic hearing this week. At one point, for instance, Chief Justice Harry Waters wondered aloud whether it is the natural order of things for one firm to dominate computer operating system software, due to the benefits to consumers of standardization.

"Is that what we're really talking about? One monopolist replacing another?," he asked a Justice Department lawyer.

Judge Jackson did leave some openings for Microsoft to exploit, according to some legal experts. Some of his "findings of fact" - parts of a judicial decision which appeals courts usually treat with great deference - may have been overly broad. Judge Jackson has publicly said that he made his fact findings as sweeping as possible in an effort to avoid being overturned.

In the end, however, the appeals court may decide to overlook Jackson's self-admitted bluster.

"I think it is hard to predict from oral arguments how the court case is going to come out," says Steven Salop, a law professor and antitrust expert at Georgetown University.

"But the stock market certainly thinks that breakup is less likely, " adds Salop, noting that Microsoft stock has been on a generally upward trend.

Bush officials have said that they will wait and see how the appeals court rules before they decide what to do with the case. But unless Judge Jackson's ruling is ringingly affirmed, many believe the new administration could push the case toward settlement. With the rise of the Internet, Microsoft looks less and less like the master of the tech universe. Tech firms in general are showing profit and stock weak-ness.

When Clinton-appointed officials first filed this case in 1998, they implicitly described it as their first attempt at drawing up a regulatory framework for the tech-driven new economy. A Republican administration is likely less inclined to think a new economy needs new regulation, point out antitrust experts.

"The twists and turns of this case, you couldn't have predicted," says Mr. Lande of the University of Baltimore. "I guess the lesson is, you shouldn't bring an antitrust case you can't finish during your own administration."

(c) Copyright 2001. The Christian Science Publishing Society


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