DOJ vs. Microsoft could go on and on and on

Look for Department of Justice vs. Microsoft II possibly coming to a court near you in early 1999.

Microsoft possesses a monopoly in operating systems like Windows 95. That we know. And that, in and of itself, is not illegal. But what the DOJ will not tolerate is Microsoft maintaining that monopoly, or acquiring another one in browsers, through the improper use of licensing practices. In other words, Microsoft can't force its consumers to license its Internet Explorer browser (the "tied product") as a precondition to licensing Windows (the "tying product").

To date, the DOJ has succeeded in convincing the court that Microsoft's licensing practice likely amounts to an "illegal tying arrangement." The DOJ has also convinced the court that opening another lengthy antitrust case in order to prosecute Microsoft for illegal tying is unnecessary. Rather, the DOJ has charged contempt under the existing 1995 consent decree originally intended to eliminate such practices.

Recall, however, that although the government may have intended to prevent an illegal tying arrangement by filing this suit, neither its original complaint nor the consent decree made reference to such. It was Judge Thomas Penfield Jackson's liberal interpretation that opened the door to tying:

"Section IV(E)(i) [of the consent decree] was drafted in contemplation of the possibility that Microsoft was engaged in illegal `tying,' . . . it seems reasonable to interpret its language as it is generally understood in similar contexts." (emphasis added.)

Translation: I'm sure you meant to include a tying claim against Microsoft, allow me to adjudicate the issue anyway.

By issuing a preliminary injunction that covers "all successor versions" of Windows and Internet Explorer, and appointing a special master to evaluate Microsoft's integration strategies for the two products in the future, Jackson has even further broadened the scope of the case.

But as much as you stretch this case, there is no denying that a ruling by the court will be limited to Microsoft's illegal licensing practices. And while everyone gets caught up in the debate over whether Windows and IE are integrated or separate, antitrust violations separate from Microsoft's licensing practices may be the subject matter for another day, and another lawsuit.

Consider the following hypothetical course of events.

Today, both parties present their technical experts to the court to argue whether Windows and IE are integrated. Soon thereafter, the court holds Microsoft in contempt for playing fast and loose with its interpretation of the preliminary injunction. In June, Jackson determines that any version of IE also available as a stand-alone product, is an altogether separate product. Accordingly, he converts the preliminary injunction into a permanent one in order to prevent Microsoft from using "licensing practices" to achieve a monopoly in the browser market.

What message would that send Microsoft? The same message authorized under the consent decree : Go ahead, design "integrated products."

Don't be surprised, then, if Microsoft discontinues selling its stand-alone browser, and integrates Windows and IE so fully that there is little question in Microsoft's mind that a court would now find them to be a single product. Under that probable scenario, however, little has changed. Such an outcome is still strikingly similar to an illegal tying arrangement.

In that event, the DOJ would have to make a choice between bad and worse. Either file another contempt motion claiming that Microsoft has violated the permanent injunction, or file another lawsuit alleging various antitrust violations.

Bringing a contempt motion and avoiding another antitrust lawsuit altogether would obviously be more attractive, simple and inexpensive, especially if you're paying antitrust super lawyer David Boies' bills, as the DOJ is. But, if Microsoft does push ahead with integration, selling the two under one license, the DOJ might find itself bounced out of court, because, arguably, Microsoft would no longer be using licensing practices to tie two products together. Or would it?

Should that scenario play itself out, brace yourself for another lengthy antitrust suit stretching into 1999.

In support of another suit, one thing is certainly in the DOJ's favor -- a court will scrutinize Microsoft's integration of the two products and its business justification for such a move. The inference: Microsoft integrated the two in order to circumvent the letter and spirit of the injunction.

Assuming the DOJ can muster enough energy to bring another suit, the legal maneuverings could drag on for a decade. In the interim, Microsoft could successfully dodge the DOJ and for intents and purposes tie its products together. Precedent exists that such an integration will have the likely effect of suppressing both software innovation and competition, leaving consumers with the choice of Microsoft or Microsoft.

Back to reality. While Jackson will determine whether Microsoft is in contempt of the preliminary injunction, the D.C. Circuit has agreed to hear Microsoft's appeal from the preliminary injunction on an emergency basis. The D.C. Circuit could reverse the injunction and any sanctions shortly after the district court determines that Microsoft is in contempt. As a result, Microsoft might be temporarily held in contempt of an injunction that should have never been issued to begin with. The DOJ might find itself back at square one with nothing to show for its massive efforts to "get" Microsoft.

Alex Wellen is a New York-based attorney formerly with Pennie & Edmonds LLP experienced in intellectual property and antitrust litigation.