U.S. District Judge Janet C. Hall in Bridgeport, Conn., ordered Microsoft (msft) to pay punitive damages of $1 million to Bristol Technology Inc., in the highest award ever imposed under the state's fair-trade statute. After a six-week civil trial last year, a federal jury found that Microsoft had violated Connecticut's unfair-trade practices act, but awarded Bristol damages of just $1.
Microsoft hailed the jury's July 16, 1999, verdict, which found in the company's favor on nearly every claim except the unfair-business-practices charge. It was seen as a vindication by Microsoft, which had argued in the trial that it simply engaged in tough negotiations with Bristol over the terms of a license for Windows software, which Bristol needed to build its products.
But Judge Hall's ruling Thursday, in response to Bristol's request for punitive damages, makes it clear the case isn't over -- and that it could even become a new legal battleground for Microsoft. That is because the decision offers strong support for reconsidering the jury's earlier rejection of antitrust claims, and the company already plans to seek a new trial, said Bristol's lawyer, Patrick Lynch of O'Melveny & Myers.
The Bristol ruling comes as the Redmond, Wash., software giant faces a breakup order by U.S. District Judge Thomas Penfield Jackson here. That order, which Judge Jackson stayed from taking effect, has been appealed by Microsoft. The Supreme Court could rule as soon as next week whether it will hear the case under an expedited appeal request made by the government.
Judge Hall distinguished her case from the government's antitrust suit, noting that the conduct at issue occurred in an entirely different part of the market. But the business tactics were the same: Microsoft's deceptive practices were deliberate and had been approved at the highest levels of the company in order to protect its market power, the judge found.
Judge Hall also found that senior Microsoft executives hadn't testified truthfully. The ruling quotes an internal Microsoft e-mail in which the company's chairman, Bill Gates, uses harsh language to describe the likely effect of Microsoft's conduct on Bristol.
A Microsoft spokesman said the company will appeal the ruling, "which isn't consistent with the jury's decision over a year ago." He said the ruling isn't comparable in any way to the government's lawsuit against Microsoft.
Bristol, based in Danbury, Conn., makes software that helps developers rewrite Windows programs for the rival Unix software. The company was left weakened by the dispute with Microsoft and was forced to cancel an initial public offering of its stock.
The court found that Microsoft engaged in a "classic bait-and-switch" tactic, deceiving customers and software developers into thinking they would continue to get the latest Windows technology for Unix conversion programs. The ruling cites a 1996 speech by Gates in which he misleads Unix developers on this, comments the court calls "at least, reckless and wanton."
Microsoft withheld the needed Windows license from Bristol "in an effort to undermine the competitive threat" of Unix, the court found. The judge likened the Unix threat to that of Netscape Communications Corp.'s Internet browser, which was at the core of the government's antitrust case against Microsoft.
Microsoft's actions were intended to make it more difficult to move Windows-based programs over to Unix, the judge said, as the company was launching a new version of Windows that would compete with Unix.
The court found Microsoft's explanation, that it had offered a new royalty agreement to Bristol, to be untrue.
Microsoft also faces scores of class-action lawsuits brought on behalf of consumers. Most of those cases have been consolidated in a Baltimore federal court and remain pending.