MS/DOJ - Judge seems to favour Microsoft breakup

Microsoft attorney John Warden told Jackson that a breakup could not be ordered without elaborate proof that what Microsoft had done in the past directly thwarted competition that would have ended Microsoft's market-dominating position.

Jackson sparred with Warden, referring to his earlier findings that numerous Microsoft actions had thwarted competition and violated antitrust laws. The judge then demanded to know what prior court decisions required the proof Warden said was necessary.

"There is no case that directly addresses this point," Warden conceded.

"I didn't think so," the judge shot back.

Earlier, most of Jackson's questions for government attorneys focused on why the government had not proposed a more far-reaching remedy. Under the plan from the Justice Department and 17 state attorneys general, the software giant would be split into two companies, one for its Windows operating systems and one for applications.

"The effect of a bisection will in effect create two separate monopolies," Jackson observed. "Both of which are dominant and eminently profitable," he added a moment later.

Justice Department attorney David Boies conceded that a court-ordered split was a "difficult issue" for the judge, noting that the government had considered a variety of proposals, including one that would split Microsoft into three equal companies, each selling a version of Windows.

Jackson asked Boies why that option was rejected, and later inquired about a plan submitted to the court by two computer industry trade groups that favored breaking up Microsoft into an operating systems company, an applications company and an Internet company. The judge called the submission an "excellent brief."

To bolster its case for a breakup of some kind, the government released two e-mail messages from then-CEO Bill Gates. In a 1998 message, Gates discussed the challenge from Symbian to Microsoft's efforts to provide software for cellular telephones. Symbian, a London-based provider of wireless technology, was planning to use Java and Sun Microsystems technology in its cell-phone software.

Gates said that would be "just declaring war on us." If Symbian followed that strategy, "we should do the most extreme things we can. This may mean not working with them in some other areas," he added.

In a 1999 message, Gates discussed Microsoft's plan for competing with Palm in the personal digital assistant, or PDA, market. After meeting with the CEO of cellular phonemaker Nokia, Gates suggested that Microsoft could retool its Office software to work better with Microsoft products than with Palm.

"We really need to demonstrate to people like Nokia why our PDA will connect to Office in a better way than other PDAs, even if that means changing how we do flexible schema in Outlook and how we tie some of our audio and video advanced work to run only on our PDAs," Gates wrote.

Microsoft co-founder Paul Allen also came up during yesterday's hearing. According to Jackson, lawyers for Allen had sent a letter complaining that Allen's Microsoft holdings would be affected by the proposed government breakup plan. The letter was not released.

Aaron Pressman writes for The Industry Standard.

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