Microsoft has won its appeal against a preliminary injunction to stop it from forcing PC makers to load both Windows 95 and Internet Explorer (IE).
A subsidiary victory cancels the appointment of Professor Lawrence Lessig as a special master to assist Judge Jackson with technical matters. But in a strongly-worded minority opinion, Judge Judith Wald accused the two majority judges of the Washington DC court of appeals of "judicial abdication in the face of complexity", and "effectively exempting software products from antitrust analysis" so that the majority opinion "shorts traditional antitrust law".
Wald puts her finger directly on the pulse: "An operating system designer who wished to turn two products into one could easily commingle the code of two formerly separate products, arranging it so that "Windows 95 without IE's code will not boot."
Windows 95 without IE would "represent a disabled version of Windows 95", she continued. Therefore IE would instruct the Add/Remove function to leave so much of the program in place that "four lines of programming" will suffice to activate it," said Wald.
She chides Judges Williams and Randolph for their interpretation of a controversial clause in the consent decree to which Microsoft agreed in 1994. The decree apparently permits Microsoft to "integrate" word processing programs, spreadsheets, financial management software, and virtually any other, now separate software into the operating system by identifying some minimal synergy associated with such "integration".
During the contempt case Microsoft maintained it is not the job of the government to design software. However, the majority judges commented on technical matters such as reprogramming, saying it would be "absurdly inefficient".
The opinion is a very revealing document, and contains both technical errors and evidence of bias towards Microsoft by the majority judges. The department of justice (DoJ) said the arguments it presented applied "equally to Internet Explorer 3 and 4", but the appeals court chose to refer only to IE4 when it found this useful to its pro-Microsoft view.
The appeals court decision was delivered just two days before the launch of Windows 98, which was in itself significant judicial body language. Those close to the case were not surprised by the outcome. Microsoft has won everything it has requested, bar a confirmation that Lessig was biased against Microsoft.
It is well-known that most appeals judges on the DC circuit follow the economic arguments of the so-called Chicago school, which believes antitrust enforcement is wrong and harms American competitiveness -- a view often held by judges appointed by a Republican administration. It had been expected that the appeal would be heard by three such judges, but Judge Silberman had to stand down because of a conflict of interest concerning Microsoft shares. Silberman was replaced by Judge Wald, a Carter appointment who is seen to be more liberal than the Republican-appointed Judges Williams and Randolph.
The DoJ has launched three main cases against Microsoft over its anticompetitive business practices. The first was initiated by the Federal Trade Commission in 1989, but following the failure of the politically-appointed FTC commissioners to accept internal recommendation to start an action against Microsoft for unfair competition, the DoJ took over the case. Rather than fight a protracted legal battle, Microsoft agreed in July 1994 to a consent decree - effectively a legally binding agreement to stop certain licensing practices - and for this reason the case is referred to as the licensing case.
The decree said in essence that Microsoft could not tie products, such as insist PC makers license MS-DOS if all they wanted was Windows. The point at the time was that DR DOS could replace MS-DOS, but Microsoft was locking it out of the market through its licensing contracts.
Unfortunately there was an ambiguous clause in the consent decree which has caused a great deal of trouble. It suggests "this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products".
In the second contempt case which the court of appeals has just decided, the DoJ asked the court to hold Microsoft in contempt of court for failing to obey the terms of the consent decree. The argument has been over whether Windows 95 and IE form an integrated product. It is important to note that Microsoft did nothing about developing or acquiring a browser until Bill Gates' Internet Tidal Wave memo of May 1995. The "integrated products" phrase did not refer originally to incorporating a browser with Windows 95.
The district court did not find Microsoft in contempt, but issued a preliminary injunction in December to stop Microsoft from requiring PC makers to load IE with Windows 95. In addition, Professor Lawrence Lessig was appointed a special master to assist the court technically. Four days later, Microsoft appealed against the preliminary injunction. At the end of December, Microsoft asked the district court to reconsider the appointment of Lessig, which it refused, and so Microsoft asked the court of appeals to revoke Lessig's appointment, claiming he was biased against Microsoft (he uses a Mac).
Wald mentions in the minority opinion a hitherto non-public observation by Lessig that the controversial clause forbids tying through contracts but not through technological efforts. This implies Windows 95 and IE3 could not be tied, but Windows 98 (incorporating browsing capability technologically) was permitted.
In February, the appeals court ordered Lessig to stop his work pending a hearing by the appeals court. The appeals court also decided to hear the two appeals together in April.
During this time the DoJ and 20 US states launched a third case against Microsoft - the browser case - which broader than the first and made under the 1890 Sherman Antitrust Act. The DoJ asked Judge Jackson's federal court for a tough preliminary injunction that would have obliged Microsoft to include Netscape Navigator, or to unbundle IE (which Microsoft maintains is impossible).
A second area of concern is the content of the initial screen, which Microsoft insists on controlling so users are mostly offered icons from Microsoft's partners, rather than any competitors. The DoJ also wants an end to Microsoft's contract provisions that do not allow its Internet partners to distribute and promote competing browsers. The states' case is similar, except it also asks for monopolies in the office suite market to be considered.
Microsoft said it wanted seven months to prepare its case, while the DoJ was no doubt hoping it would get a preliminary injunction before Windows 98 was released. Judge Jackson decided to combine the DoJ and US states' cases and compromise on the hearing date to September. This left Microsoft with the critical window it wanted -- the chance to launch Windows 98 without any immediate legal complications.
It seems likely that the contempt case will fade away, because the majority judges hinted the DoJ "may well regard further pursuit of the case as unpromising, especially given the alternate avenues developing in its recently launched separate attacks on Microsoft's practices." It was very revealing that the word "attacks" was used by the appeals judges, rather than "new case", and seemed to be a Freudian slip. The majority judges are no doubt comforted by the knowledge that eight of the nine supreme court justices are pro-monopoly, which makes any appeal by the DoJ to the supreme court unlikely.
The stage is now set for a new confrontation in September when Judge Jackson will hear the browser case.
What is far from certain is whether the DoJ has this time brought the right case. There is considerable talk in legal circles about the desirability of an essential facilities case, whereby Windows would be declared an essential facility, possibly with the source code being put in the public domain.
Although there has been much talk about breaking Microsoft into a number of separate companies, this does not appear to offer a solution in the near future.
The arrival of Windows 98 effectively decided the contempt case. What is sad is the continuing failure of the US judicial system to produce a definitive ruling on Microsoft's business practices while the technical issues that cause concern are still relevant.
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