Microsoft Court Battle: Unfair Competition or Free Enterprise? BY Associated Press

Round 2 of the battle of the titans - USA v. Microsoft Corp. - is under way.

The behemoth softwaremaker says it should be allowed to improve its products without government interference. But the United States government says the company that Bill Gates built is unfairly elbowing its way into the Internet browser market.

So far, a federal court judge has sided with the government. Microsoft has been told to stop forcing computermakers to bundle together the Windows 95 operating system and the Microsoft Internet Explorer for viewing the World Wide Web.

But in an appeals court hearing April 21 that ultimately could affect nearly all home computer users, Microsoft argued that the judge went too far. The Justice Department also presented the government's case to the three-judge panel of the US Court of Appeals for the District of Columbia.

A ruling could come one to three months later, experts say, a period that includes the June 25 release date for Microsoft's new Windows 98.

Microsoft says its free Internet browser is so integrated with the latest versions of its popular computer operating system that it can't be easily separated. The browser is vital to the company because of the Internet's burgeoning popularity and its potential as a vehicle for electronic commerce.

The Justice Department, which is considering a broader antitrust case against Microsoft, contends the practice of "tying" the sale of Windows 95 to the use of Internet Explorer is anti-competitive and "plain wrong." Microsoft argues that it should be allowed to upgrade its products - by integrating new features - free of government meddling.

"Ultimately, the issue has been about a longer-lasting importance, a fundamental question of whether computer companies can keep adding new features to products," Microsoft general counsel Brad Smith says.

Microsoft chairman Bill Gates told CNN financial network on April 20 that his firm was willing to begin a public fight to protect its stance. "The people believe in allowing great products to move forward, and there's been a lot of misinformation put out by the competitors," he said. "They're willing to spend a lot of money, and so I guess that's a new area of expertise that we'll have to develop."

Microsoft officials have also said that US District Judge Thomas Penfield Jackson overstepped his authority when he appointed a "special master," Harvard University law professor Lawrence Lessig, to consider important technical issues in the case. Microsoft claimed Mr. Lessig was biased against it, and that the judge tried to give Lessig too much authority.

The hearing on those two issues was seen by many as a prelude to larger questions about Microsoft's business practices and whether it enjoys an illegal monopoly. Currently, 85 percent of the personal computers in the world use Windows. And 95 percent of the new computers on the market come with Windows 95 already installed.

Nearly a dozen state attorneys general have been looking at the company, and the Justice Department's top antitrust lawyer, Joel Klein, has pledged "an active and continuing investigation into several Microsoft business practices."

The debate has become such public spectacle in Washington that the April 21 hearing was moved to the courthouse's 200-seat ceremonial courtroom, more than twice the size of the normal room where these arguments take place.

It wasn't clear - even to Microsoft - how any court ruling might affect the launch of Windows 98, which also falls under the restrictions of a 1995 consent decree the company made with the government. Mr. Smith, the company's general counsel, said the original Justice complaint focused just on Windows 95. But any ruling forcing Microsoft to separate the browser from Windows 98 would be even more problematic because it's much more tightly integrated than under Windows 95.