US Report: Microsoft plays hardball

Critics are pouncing and legal experts are scratching their heads after Microsoft asked the court late Tuesday to find 20 states guilty of violating its intellectual property rights.

One thing's certain: in responding in the aggressive fashion it has to the sweeping antitrust lawsuit brought against it by the Justice Department and 20 state attorneys general, the software maker is giving no ground. "This would certainly be an indication that Microsoft has no intention of being conciliatory," Mike Pettit, executive director of anti-Microsoft group Project to Promote Competition & Innovation, said of the counterclaims.

Microsoft's formal response to the DoJ's sweeping antitrust suit in U.S. District Court in Washington, D.C. -- a typical nuts-and-bolts filing -- disputed all of the government's main claims. But the separate intellectual property counterclaim filed in the same court is being interpreted by legal experts as a tactic designed to signal the DoJ that it won't back down. In the claim, the company charges that federal copyright laws trump the state's antitrust allegations. It further asks the court to find that the states deprived Microsoft of its rights under the copyright act.

Microsoft claims that the states are seeking to illegally alter Windows 95 and 98 by giving computer makers the option to change the software. Under federal law, only the owner of copyrighted material can change it or grant permission to do so. The filing also is an attempt by Microsoft to consolidate the case by trying to get state claims tossed out on the basis that they violate federal laws. The company already has succeeded in getting the state and federal suits combined into one.

It's common for intellectual property issues to be raised during antitrust cases. But it's less common to name government regulators as defendants in such claims and accuse them of depriving a company of its intellectual property rights. "That, to me, is more aggressive. I don't how likely that is to proceed," said David McGowan, an associate professor of law at the University of Minnesota's law school. "It's a very strong assertion by Microsoft that it has intellectual property rights that allow it to do some of the things it's accused of doing."

By filing the counterclaim, Microsoft is putting a twist on a common tactic used by smaller companies that have been sued by larger companies for patent infringement. In those cases, the smaller company - the one being accused of violating the larger company's intellectual property rights - will claim antirust violations, or that the bigger company gained contracts by leveraging its monopoly.

Microsoft, in this case, is doing the reverse, claiming an intellectual property defence in the face of an antitrust suit. Warren Grimes, a professor at the Southwestern University Law School in Los Angeles and a former FTC attorney, expects the trial to provide a showcase for the tension between state and federal laws. It's also likely to demonstrate the conflict between a party exerting intellectual property rights and another party seeking to prove antitrust violation claims.

"The question here is: to what extent does Microsoft have lawful copyrights or patent rights that allow it to do what it's doing, or to what extent is it going beyond those rights?" Grimes said.