MS must stop bundling IE 4.0

The U.S. Department of Justice has won the first round in its court battle against Microsoft Corp.

The U.S. Department of Justice has won the first round in its court battle against Microsoft Corp. - but the victory is far from decisive. In a decision issued late Thursday, U.S. District Court Judge Thomas Penfield Jackson ruled in an interim order that Microsoft must "cease and desist" practices requiring computer manufacturers to bundle Windows 95 with its Internet Explorer browser.

But the judge failed to grant the DOJ's request that Microsoft be found in contempt of a 1995 antitrust agreement and fined $1 million a day in penalties. The judge also denied the government's attempt to force Microsoft into changing its non-disclosure agreements with PC makers.

It was just the first of several decisions to come in the matter. The judge appointed Harvard law professor Lawrence Lessing, a high-technology specialist, as a fact finder in the case.

A Microsoft spokeswoman stressed that the judge's ruling "was interim in nature," that Microsoft had won several key issues, and that it would have little impact on Microsoft's day-to-day operations.

The DOJ viewed the ruling as a victory, however. "What's most important is that starting tomorrow, choice will be restored to the market," said Joel Klein, who heads the Justice Department's antitrust division.

"This is obviously a major win for the Justice Department," said Rich Gray, antitrust lawyer and partner, Bergeson, Eliopoulos, Grady & Gray, in San Jose, Calif.

He said Microsoft will now be forced, at least in the interim period, to end its business strategy of tying Internet Explorer to sales of Windows 95.

That strategy had helped Microsoft gain a 30 percent to 40 percent share of the browser market in a short period at the expense of Netscape Communications Corp.

He also noted that the outcome of the case could well depend on the findings of the special master appointed as a fact finder.

"This [decision] gives PC makers the freedom to bundle what they want on their systems, but if Microsoft can't push IE this way, it will push it in other ways,'' said a director of marketing at a top-10 PC company. "For example, they can make some of their sites unviewable if you're not using a Microsoft browser."

The DOJ had argued that Microsoft broke a 1995 consent decree by requiring PC makers to bundle Internet Explorer in order to get Windows 95. Microsoft answered that IE is an enhancement of Windows, not a separate product.