States help keep Microsoft antitrust case alive

Massachusetts and West Virginia face a daunting but not impossible task in appealing the Microsoft antitrust decision, a move that keeps alive for at least a year the threat of additional remedies against the software maker, according to legal experts.

These two states are appealing U.S. District Court Judge Colleen Kollar-Kotelly's Nov. 1 decision rejecting most of the remedies sought by nine nonsettling states -- remedies that would have forced Microsoft to unbundle Windows, turn Internet Explorer into an open-source application and allow the porting of Office to other operating systems, such as Windows, among others.

In her Nov. 1 decision, Kollar-Kotelly backed the U.S.-led settlement reached last year with Microsoft that imposes some business restrictions such as requiring Microsoft to share interfaces, but she otherwise rejected any drastic changes to the company or its products.

Seven of the nine nonsettling states, including California, Connecticut and Iowa, decided to accept last month's decision.

Massachusetts and West Virginia will return the case to the U.S. Court of Appeals in Washington, which will be asked in the appeal to decide whether Kollar-Kotelly misread the court's 2001 decision.

In that earlier decision, the appeals court outlined a test, based on three separate Supreme Court cases, for a remedy. It said a remedy should "terminate the illegal monopoly," as well as "unfetter" the market from anticompetitive conduct. A remedy should also deny the defendant "the fruits" of its violation and ensure "that there remain no practices likely to result in the monopolization in the future."

"The key question is whether she [Kollar-Kotelly] has carried out the mandate of the court of appeals," said Stephen Houck, the former lead trial counsel for the 18 states that pursued Microsoft in its initial antitrust trial. He said he believes the appealing states can raise "significant legal issues that are fair game for arguing."

The appeals court rejected a remedy calling for a breakup of Microsoft but upheld the lower court ruling that Microsoft had illegally maintained its monopoly.

But Andrew Gavil, an antitrust professor at Howard University in Washington, said the Appeal Court's decision offered Kollar-Kotelly a "tapestry of choices" for remedies that reflected the desire of the seven judges to reach a unanimous consensus. "And she selected the elements that resonated the most with her," said Gavil.

Instead of focusing on remedies that denied Microsoft, for instance, the "fruits" of past actions, Kollar-Kotelly focused on the causation -- a legal term for considering whether Microsoft's operating system dominance is a result of its anticompetitive acts. The Appeals court decision said that absent this link, a remedy is limited.

Kollar-Kotelly didn't find a causal connection and pointed out in the her decision that harm to "one or more competitors" however severe, "is not condemned by the Sherman act in the absence of harm to competitive process."

Steven Newborn, an antitrust expert at New York-based Clifford Chance Rogers & Wells LLP, said the odds of a successful appeal aren't bad, but he believes the appeals court may be tired of this case.

"I think everyone is sick of this case -- and I think it's very difficult to overcome the feeling that this thing as run its course."

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