Judge Rules: Microsoft Broke Law

The judge found earlier, in findings of fact released last November, that Microsoft is a monopoly. This subsequent ruling occurs after mediation talks for a settlement broke down.

Jackson wrote, in the 42-page Conclusions of Law, that Microsoft violated both Chapters 1 and 2 of the Sherman Act, which is the U.S. antitrust law under which Microsoft was charged.

"The court concludes that Microsoft maintained its monopoly power by anticompetitive means and attempted to monopolize the Web browser market, both in violation of Chapter 2 of the Sherman Act," Jackson wrote. "Microsoft also violated Chapter 1 of the Sherman Act by unlawfully tying its Web browser to its operating system."

However, Jackson found that Microsoft's marketing tactics, including preferential deals for some business partners, were not illegal. He wrote, "the facts found do not support the conclusion, however, that the effect of Microsoft's marketing arrangements with other companies constituted unlawful exclusive dealing under criteria established by leading decisions under Section 1."

The U.S. Justice Department and attorneys general of 19 states have pursued legal action against Microsoft for nearly two years.

Microsoft Vows Appeal

Microsoft officials have already declared the company will appeal the ruling.

"Today's ruling was not unexpected, given the District Court's previous rulings," says a Microsoft statement. "Microsoft will request an expedited review by the U.S. Court of Appeals, following a remedies phase and final decree. The appeal will stress a 1998 U.S. Court of Appeals decision that affirmed Microsoft's right to support the Internet in the Windows operating system."

Microsoft Chair Bill Gates defends the company's attempts to settle the case.

"Microsoft did everything it could to settle this case, and will continue to look for new opportunities to resolve it without further litigation," Gates says. He said the settlement talks ended by decision of the mediator, U.S. Court of Appeals Chief Judge Richard Posner, and that Microsoft had been willing to continue.

"The right of appeal ... is part of the legal process," says Steve Ballmer, Microsoft's president and chief executive officer. "I couldn't be more proud of this company. I believe in its people, its technology, and its vision. The ruling does not change the opportunity before us."

Both Gates and Ballmer emphasise that Microsoft's priority remains innovation in its industry.

"Our passion for being the best has been misinterpreted," Ballmer says, adding he will spend the next couple days reassuring customers and partners that Microsoft will continue to focus on its business.

"We believe we have strong grounds for an appeal based on this ruling," says William Neukom, Microsoft's executive vice president for law and corporate affairs. "It's important for people to understand that today's court ruling is just one step in a legal process that could last several years."

Judge: Microsoft Stifled Competitors

Although the judge ruled that Microsoft's marketing deals with other vendors were not unlawful, his verdict endorses the U.S. government's position on other key points of the case. It paints a damning picture of anticompetitive behavior by a company bent on controlling the Internet browser market and maintaining its operating systems monopoly.

Microsoft behaved as a "profit-maximizing firm" in its approach to stomping out competition in middleware, specifically when it came to dealing with Netscape Navigator and Sun Microsystems's Java technology.

"Microsoft early on recognized middleware as the Trojan horse" that if left to march on would "enter the market for Intel-compatible PC operating systems unimpeded," Jackson writes in his verdict.

"Simply put, middleware threatened to demolish Microsoft's coveted monopoly power. Alerted to the threat, Microsoft strove over a period of approximately four years to prevent middleware technologies from fostering the development of enough full-featured, cross-platform applications to erode the applications barrier," Jackson writes.

Microsoft's effort "succeeded in preventing -- for several years, and perhaps permanently -- Navigator and Java from fulfilling their potential to open the market for Intel-compatible PC operating systems to competition on the merits," Jackson finds.

(Nancy Weil of the IDG News Service contributed to this report.)

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