Microsoft to judge: Yes ... but!

Software maker plays for time as it contemplates Judge Jackson's reaction to company's less-restrictive remedy proposal

It was the last word in cognitive dissonance. Throughout the course of its long antitrust trial, lawyers for Microsoft fought tenaciously to resist suggestions that the software maker's actions were in any way anti-competitive. But in offering a remedy proposal of its own to federal court on Wednesday, Microsoft seemed to acknowledge at least some of the allegations from the laundry list of charges brought against it by the US government and 19 states.

According to Microsoft's legal chief, that was the furthest thing from his mind.

"We are not signalling that," said Bill Neukom, Microsoft's executive vice president for law and corporate affairs.

Microsoft is simply fulfilling the judge's charge, Neukom said. At this point in the trial the company had a responsibility to propose a remedy as if Judge Thomas Penfield Jackson's previous conclusions of law were valid.

"The fact that we are in good faith proposing to the judge this way does not in any way interfere with our opportunity to see a review of these conclusions on appeal," Neukom said.

And indeed, Microsoft again signalled today that it will appeal previous rulings by Jackson, who found the company to be a predatory monopoly that had violated antitrust law.

Sweeping criticism of breakup plan

Microsoft continues to strongly object to that description. But its more acute concern is to convince Jackson of the folly in the government's proposal to break up the company. The software maker ridiculed the breakup proposal in a sweeping critique, describing the suggested penalty as draconian and unwarranted by the facts presented in the case.

Earlier in the day, company CEO Steve Ballmer described Microsoft's proposal as proportionate to Jackson's conclusions of law.

"And while we respectfully disagree with those conclusions of law," Ballmer said, "we have made a proposal today that we think is responsive to the issues that this judge has found and would allow our industry to move forward in the kind of aggressive, positive way that is has in the past."

The verbal struggle between the two antagonists has assumed the rhetoric of a death match. Indeed, the knock-down, drag-out language contained in Microsoft's brief pulled no punches: The government proposals were "radical" measures, whose net effect would be to confiscate the company's carefully nurtured valuable intellectual property and intrude on Microsoft's ability to design competitive products.

Echoing comments made by senior company officials in recent days and weeks, the brief argued that the public has reaped many benefits from the development of Windows and other products under a single roof. "Many of these benefits would not have been possible but for Microsoft's unified structure, which enables Microsoft to conceive and implement new ideas that span operating systems and applications," according to one document filed by Microsoft lawyers arguing that the judge reject the government's breakup proposal.

Instead, Microsoft's proposed final judgement offers several olive branches in areas where the company believed restrictions or limitations would not cripple its ability to compete. During the trial, its lawyers objected to suggestions that strict wording of dos and don'ts in Microsoft's OEM licence agreements were anti-competitive. Yet the company's proposed remedy bent on many of the same points regarding the OEM licence that were hotly debated during the trial.

In one respect, Microsoft is playing for time. In the aftermath of Jackson's conclusions of law last month, the company's stock price has plummeted while the company has suffered the mother of all disruptions to its business. The company has since begun handing out more stock options to prevent an exodus of valuable employees, but Microsoft today acknowledged that as long as uncertainty over remedies lingers the threat of a breakup hangs over the company's collective head like a veritable sword of Damocles.

"Not only may Microsoft lose irreplaceable employees, but third parties may be unwilling to enter into routine business agreements with Microsoft while its continued corporate existence remains in doubt," the brief warned.

Now the ball is back in Jackson's court. The judge, who throughout the case demonstrated impatience with unnecessary delay, has signalled his desire to bring this trial to a swift resolution.

But in laying out its remedy proposal, Microsoft offered a subtle incentive to Jackson by offering a variety of timetables it said would apply if the judge accepted some or all of the government's proposals. Indeed, if Jackson agreed to the breakup demand, Microsoft said it would need an additional six months for discovery and pretrial proceedings remedies, meaning the next hearing would begin in December.

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