Grounds For Appeal

By Chris Taylor

Could Bill Gates still have the last laugh? Microsoft's boss reportedly boasted to Intel employees back in 1995 that "this antitrust thing will blow over." Those words have echoed hollowly on each of the Judgment Days since, as Microsoft steadily descended into Judge Thomas Penfield Jackson's three circles of hell--branded a monopoly, found in violation of antitrust law and, finally, last week ordered to perform self-dismemberment. But Gates has at least one, and more likely two, lives left in this game--one if the U.S. Supreme Court takes the case immediately, as the Justice Department and Judge Jackson want, and two if the high court declines to hear the case until it goes through the U.S. Court of Appeals. Maybe--just maybe--it will blow over yet.

For months now, Microsoft has been investing its entire stock of faith in the Court of Appeals. Ask the company's attorneys, and they will tell you with unshakable confidence that the three-judge review panel of the appeals court, whoever those judges may be, will see the flaws in Jackson's reasoning and strike down all elements of his decision--not just the split-'em-up remedy but the findings of law and fact too.

But such total vindication is about as likely as the Cubs' winning the World Series this fall. "It's not a question of total reversal," says Washington antitrust lawyer Joseph Kattan, "but [of] whether the company gets broken up." Nevertheless, there are a number of factors that could help the company slip its noose at the 11th hour. Some are more persuasive than others:

Friendlier Courts

At first glance, the higher courts seem considerably more sympathetic to Microsoft than was Judge Jackson. In 1998 the Court of Appeals dealt the Department of Justice a body blow by reversing Jackson's injunction ordering Microsoft to quit tying its Web browser to Windows. That decision has since been glorified by Microsoft attorneys, who see it as their salvation. But as Assistant Attorney General Joel Klein points out, "The court said it was writing without the benefit of a factual record." Now they've got 78 days' worth of testimony, much of it arguing that Microsoft's motivation was more to hurt competitors than to help consumers.

Moreover, just because the pool of judges in the appeals court contains more Reagan-Bush appointees than Carter-Clinton appointees doesn't mean that it will automatically take Microsoft's side. Judge Robert Bork, a former conservative member of the court, is now retained by Microsoft's opponents. "I looked at the case and went with the other side," he says. So did one other prominent G.O.P.-appointed judge--Thomas Penfield Jackson.

Judicial Competence The harsh language of Judge Jackson's ruling makes no secret of his feelings toward Microsoft and its leaders--the text is sprinkled with words like untrustworthy and disingenuous. The feeling, Microsoft will make clear in its appeals, is mutual. "The judge simply got it wrong," says a senior Microsoft attorney. "He committed errors from the start of the proceeding and became more and more confused as time went on. He doesn't have special expertise in economics. He's a trial-court judge." Ouch.

Procedural Issues

There is some substance behind the catty language and what may be at least one serious miscalculation by Jackson: his decision to abruptly end the proceedings without allowing Microsoft to call witnesses (including Gates) to discuss the remedies. This kept the case from dragging on until the end of the year, but it also denied the company an opportunity to mount an important defense. "The refusal to entertain any further debate was a mistake," says George Washington University law professor William Kovacic. "What Jackson was basically saying is that nothing was going to change his mind."

Errors of Fact

Since Microsoft can't enter new evidence on appeal, the company must argue that the government and the judge put the wrong spin on the stuff that's already in the record. This is familiar territory for Microsoft, which has long insisted that all those venomous e-mails and extracts from Gates' videotaped deposition were taken out of context. For example, Microsoft will claim that its brutal campaign against Netscape during the browser wars was ultimately benign, not anticompetitive; both sides issued rapid-fire improvements to their Web browsers, millions of programs were distributed for free, and the Internet revolution continued apace.

Where's the Harm?

Such arguments undermine the government's case on its weakest leg: proving that consumers have somehow been hurt by Microsoft's actions. The more Microsoft can make its behavior seem proconsumer, the less appropriate the government's draconian remedy will appear--and the more likely the higher courts will toss the case back to Jackson for a less severe punishment.

Which is not to say the case is a slam dunk for Microsoft. The company stubbornly clings to fixed ideas that backfired in Jackson's court and could easily backfire again. For example, Microsoft still plans to argue that it is not a monopoly--even though it controls more than 90% of the PC operating-system market. And it continues to claim that well-established antitrust laws do not apply to an industry dealing in 21st century technology. The company's almost religious zeal on these points won't help its image in the appeals court. "If you indiscriminately attack the record on too many fronts, your good arguments get lost," warns Kovacic, "and Microsoft is in a position where it can't afford any more missteps."

But if there's anything Microsoft's competitors know about the software giant it is that the company learns quickly from its mistakes. If Microsoft stays tightly focused on issues like consumer benefit, it may be able to whittle away at the remedies and delay their implementation long enough to render them moot. Only then can Gates allow himself a modest chuckle. --With reporting by Viveca Novak/Washington

With reporting by Viveca Novak/Washington