Is Microsoft ready to make a deal?

A terse order rejecting Microsoft's bid for a delay, high-odds against getting a sympathetic judge and the imminent arrival of Windows XP could spur real negotiations.

WASHINGTON -- A harshly worded federal appeals court order and uncertain prospects before a lower court here could nudge Microsoft toward making a deal with the Justice Department in its antitrust case.

The software company may be running out of options to avoid coming to terms with the government, antitrust experts said after Friday's terse order by the U.S. Court of Appeals for the District of Columbia denying a bid to delay further proceedings while the Supreme Court considers whether to intervene. The order places the case back before a lower court to determine a remedy for Microsoft's antitrust violations.

Paul Rothstein, a Georgetown University law professor, said he thinks the appeals court was "trying to position things for a settlement" when it rejected the stay and rebuked Microsoft for having "misconstrued" an earlier appellate decision setting aside Judge Thomas Penfield Jackson's order to break up the Redmond, Wash., company.

"I think they felt that Microsoft may have been thinking they got a lot out of the court of appeals decision, and that could lead a party to demand a lot in a settlement. And I think they wanted to put a slight damper on that," said Mr. Rothstein, a former Microsoft consultant who worked on the company's appeal.

Barring a surprise intervention by the Supreme Court, the U.S. District Court here will hold as early as Friday a computerized lottery to pick a new judge to determine Microsoft's fate.

The company's odds of getting a sympathetic jurist are poor. Nine of the 10 active-service district-court judges here available to hear the case are liberals appointed by President Clinton who, to one degree or another, have established pro-government records in corporate misconduct cases. The 10th district-court judge, Royce Lamberth, is an unpredictable conservative whose best-known antitrust ruling sided with the National Football League's players union against NFL owners. Microsoft's prospects may be better if the case goes to one of the senior-status, or semiretired, circuit-court judges who often hear district-court cases, but it is unclear whether they will be eligible to take the case.

"I think both sides have a strong incentive to settle," said antitrust attorney Mark Schecter with the Washington firm Howrey Simon Arnold & White LLP. Microsoft has now "rolled the dice with the courts enough times" and lost, that the company may be "beginning to understand it can control its destiny better when it is dealing with the Justice Department."

Microsoft on Friday reiterated its previously stated eagerness to reach a deal with the Justice Department. "We remain committed to resolving the remaining issues in the case quickly through settlement," spokesman Jim Desler said. But the company has never indicated willingness to make major concessions.

Justice Department spokeswoman Gina Talamona declined to address any negotiations. "We are pleased with the court's decision and we look forward to proceedings in the district court," she said.

To date there has been no sign of serious negotiations between the two sides, though they did meet for the first time last month. Despite a change in administrations, the Justice Department has thus far maintained a hard line toward Microsoft publicly, without stating what kind of remedy it would like to see. Options range from a breakup of the company, now considered unlikely, to limits on integration of new products into Microsoft's flagship Windows operating system, the basis of its monopoly. The district court's April 3, 2000, ruling that Microsoft abused its Windows monopoly was largely upheld by the appeals court June 28, but sent back to a lower court for a new remedy.

The XP problem
After a new judge is picked in coming days, the Justice Department's position on remedy is likely to become known in court proceedings. Microsoft is on the verge of shipping its new Windows XP operating system, and one antitrust expert, Eugene Gellhorn of George Mason University, said he thinks "it's tough for the government to go forward without asking for interim relief" targeted at XP.

Critics have charged that Microsoft's bundling of a variety of new functions into the XP operating system, from instant messaging to digital photography, continues the company's anticompetitive attempts to fortify its monopoly in Windows. But Microsoft's legal maneuvering may have gained it some advantage by delaying district-court proceedings so that there is little time left until shipment of XP.

Microsoft had asked the appeals court to delay the remedy while it appeals its case to the U.S. Supreme Court, contending it may get the whole case thrown out based on inappropriate comments to the media by Judge Jackson. But in its order Friday, the appeals court said Microsoft "has misconstrued our opinion, particularly with respect to what would have been required to justify vacating the district court's findings of fact and conclusions of law as a remedy for the violation" of antitrust law. In essence, the appeals court was saying Microsoft has no hope of escaping Judge Jackson's finding of antitrust violations on the basis of his inappropriate comments.

"That's awfully harsh. They didn't have to say that," said Robert Lande, a University of Baltimore law professor. "They went out of their way to send a message to Microsoft." Mr. Lande and others said the tone of the rebuke suggests the only potentially sympathetic judicial forum left for the company is now the Supreme Court.

It is still possible Microsoft will ask the Supreme Court to stay the remedy process, but that is considered unlikely because such a bid would face long odds. "While we believe the process was best served through a stay, we are prepared to move ahead with getting the remaining issues in the case resolved while we await word on Supreme Court review," said Mr. Desler of Microsoft. The high court is expected to decide in the fall whether it will hear Microsoft's underlying appeal. WASHINGTON -- A harshly worded federal appeals court order and uncertain prospects before a lower court here could nudge Microsoft toward making a deal with the Justice Department in its antitrust case.

The software company may be running out of options to avoid coming to terms with the government, antitrust experts said after Friday's terse order by the U.S. Court of Appeals for the District of Columbia denying a bid to delay further proceedings while the Supreme Court considers whether to intervene. The order places the case back before a lower court to determine a remedy for Microsoft's antitrust violations.

Paul Rothstein, a Georgetown University law professor, said he thinks the appeals court was "trying to position things for a settlement" when it rejected the stay and rebuked Microsoft for having "misconstrued" an earlier appellate decision setting aside Judge Thomas Penfield Jackson's order to break up the Redmond, Wash., company.

"I think they felt that Microsoft may have been thinking they got a lot out of the court of appeals decision, and that could lead a party to demand a lot in a settlement. And I think they wanted to put a slight damper on that," said Mr. Rothstein, a former Microsoft consultant who worked on the company's appeal.

Barring a surprise intervention by the Supreme Court, the U.S. District Court here will hold as early as Friday a computerized lottery to pick a new judge to determine Microsoft's fate.

The company's odds of getting a sympathetic jurist are poor. Nine of the 10 active-service district-court judges here available to hear the case are liberals appointed by President Clinton who, to one degree or another, have established pro-government records in corporate misconduct cases. The 10th district-court judge, Royce Lamberth, is an unpredictable conservative whose best-known antitrust ruling sided with the National Football League's players union against NFL owners. Microsoft's prospects may be better if the case goes to one of the senior-status, or semiretired, circuit-court judges who often hear district-court cases, but it is unclear whether they will be eligible to take the case.

"I think both sides have a strong incentive to settle," said antitrust attorney Mark Schecter with the Washington firm Howrey Simon Arnold & White LLP. Microsoft has now "rolled the dice with the courts enough times" and lost, that the company may be "beginning to understand it can control its destiny better when it is dealing with the Justice Department."

Microsoft on Friday reiterated its previously stated eagerness to reach a deal with the Justice Department. "We remain committed to resolving the remaining issues in the case quickly through settlement," spokesman Jim Desler said. But the company has never indicated willingness to make major concessions.

Justice Department spokeswoman Gina Talamona declined to address any negotiations. "We are pleased with the court's decision and we look forward to proceedings in the district court," she said.

To date there has been no sign of serious negotiations between the two sides, though they did meet for the first time last month. Despite a change in administrations, the Justice Department has thus far maintained a hard line toward Microsoft publicly, without stating what kind of remedy it would like to see. Options range from a breakup of the company, now considered unlikely, to limits on integration of new products into Microsoft's flagship Windows operating system, the basis of its monopoly. The district court's April 3, 2000, ruling that Microsoft abused its Windows monopoly was largely upheld by the appeals court June 28, but sent back to a lower court for a new remedy.

The XP problem
After a new judge is picked in coming days, the Justice Department's position on remedy is likely to become known in court proceedings. Microsoft is on the verge of shipping its new Windows XP operating system, and one antitrust expert, Eugene Gellhorn of George Mason University, said he thinks "it's tough for the government to go forward without asking for interim relief" targeted at XP.

Critics have charged that Microsoft's bundling of a variety of new functions into the XP operating system, from instant messaging to digital photography, continues the company's anticompetitive attempts to fortify its monopoly in Windows. But Microsoft's legal maneuvering may have gained it some advantage by delaying district-court proceedings so that there is little time left until shipment of XP.

Microsoft had asked the appeals court to delay the remedy while it appeals its case to the U.S. Supreme Court, contending it may get the whole case thrown out based on inappropriate comments to the media by Judge Jackson. But in its order Friday, the appeals court said Microsoft "has misconstrued our opinion, particularly with respect to what would have been required to justify vacating the district court's findings of fact and conclusions of law as a remedy for the violation" of antitrust law. In essence, the appeals court was saying Microsoft has no hope of escaping Judge Jackson's finding of antitrust violations on the basis of his inappropriate comments.

"That's awfully harsh. They didn't have to say that," said Robert Lande, a University of Baltimore law professor. "They went out of their way to send a message to Microsoft." Mr. Lande and others said the tone of the rebuke suggests the only potentially sympathetic judicial forum left for the company is now the Supreme Court.

It is still possible Microsoft will ask the Supreme Court to stay the remedy process, but that is considered unlikely because such a bid would face long odds. "While we believe the process was best served through a stay, we are prepared to move ahead with getting the remaining issues in the case resolved while we await word on Supreme Court review," said Mr. Desler of Microsoft. The high court is expected to decide in the fall whether it will hear Microsoft's underlying appeal.