News

Supremes Reject Microsoft Request

• By Stephen Swoyer
• 10/09/2001

In late June, the United States Court of Appeals for the District of Columbia upheld Judge Thomas Penfield Jackson’s finding that the software giant had violated the Sherman Antitrust Act by illegally “commingling” software code in its Windows 98 operating system and its Internet Explorer Web browser. The court determined that Microsoft had done so for the purpose of maintaining its monopoly market share.

Legal observers have said that a direct appeal to the Supreme Court constituted Microsoft’s last and best opportunity to vacate this finding, which, they say, was the single most damaging aspect of Judge Jackson’s original ruling. As a result of the Supreme Court’s decision, then, Microsoft is more vulnerable than ever to the threat of private litigation from competitors seeking damages.

“The most important issue in whether or not a private action is brought is usually the finding of liability,” explained Steven Newborn, co-head of the antitrust group for Clifford, Chance, Rogers & Wells LLP (Wash., D.C.) and a former antitrust litigator for the Federal Trade Commission, at the time of the Appeals Court’s ruling in June. “If you’re looking for damages, [Thursday’s] finding of liability is a blessing for private litigants.”

The Supreme Court’s decision came as a surprise to almost no one, however. In the aftermath of the appeals court’s decision in late June, most legal observers speculated that Microsoft would face a difficult, if not impossible, task if it chose to press forward with an appeal to the Supreme Court.

“There’s very little chance that the Supreme Court will overturn the lower court’s decision,” said one litigator with a prominent New York law firm at the time. “Most of the [lower court’s] judges were conservative Republicans, but they nonetheless voted unanimously [7-0] to uphold the finding [of liability]. I expect the Supreme Court to follow suit.”

Clifford Chance’s Newborn also concurred. “The Supreme Court … could do almost anything, but I think that they’d find it very difficult to reverse this specific finding of illegality,” he said.

As a result of today’s ruling, the case is officially remanded back to a lower court -– albeit it one with a new judge, Colleen Kollar-Kotelly -– for reconsideration of a new remedy.

In late September, Kollar-Ketelly ordered Microsoft and the Justice Department to begin a new round of settlement talks, which she indicated would continue until November 2^nd. If both sides don’t hammer out a settlement by then, Kollar-Ketelly directed that she would convene a hearing to decide the matter in March, 2002.

In early September, the Justice Department abandoned its push for a break-up of Microsoft, but indicated, instead, that it would lobby for the imposition of some of the interim conduct-related provisions that Judge Jackson issued at the time of his original antitrust ruling. The Justice Department said that it also wouldn’t pursue a re-hearing on the so-called “tying” claim that Microsoft illegally commingled code between its Internet Explorer Web browser and Windows 98. Justice indicated that it would take a closer look at Microsoft’s forthcoming Windows XP operating system, however.

Microsoft responded in late September with an undisclosed settlement offer. The two sides began negotiating shortly thereafter as a result of Judge Kollar-Ketelly’s order.