Judges Hear Sides In Appeal Of Microsoft SettlementJudges Hear Sides In Appeal Of Microsoft Settlement

A federal appeals court Tuesday aggressively questioned key provisions of the antitrust settlement Microsoft Corp. negotiated with the Bush administration, but it stopped short of suggesting it may throw out the agreement and favor tougher sanctions against the world's largest software company. The six-judge panel from the U.S. Circuit Court for the District of Columbia appeared to acknowledge the settlement hasn't spurred the largest computer makers, for example, to install competing software from Microsoft's fiercest rivals, one principal aim of the landmark agreement.

Circuit Judge David S. Tatel said he "may agree" that computer makers still are discouraged from offering such rival software to consumers because Microsoft builds its own versions into its dominant Windows operating system, the engine that runs most of the world's personal computers.

Judge A. Raymond Randolph appeared convinced computer makers feared that confusion among customers over duplicate software programs would raise their technical support costs, cutting into already-thin profits.

Another judge, Judith W. Rogers, questioned lawyers about how the antitrust settlement denies Microsoft the "fruits" of its illegal business practices toward its commercial rivals during the late 1990s. She said some penance was necessary, "otherwise monopolists could squelch all comers without consequence."

The appeals court, which agreed in June 2001 that Microsoft had illegally abused its monopoly over Windows software, was expected in coming months to decide whether the Bush administration and 19 states negotiated adequate antitrust sanctions in a court-approved settlement.

Tuesday's hearing could be one of the final rounds of courtroom arguments since the government began investigating Microsoft's business practices nearly a decade ago.

The attorney general in one state, Tom Reilly of Massachusetts, and two anti-Microsoft trade organizations want tougher penalties. Reilly has argued that the settlement was so profoundly flawed that its approval by U.S. District Judge Colleen Kollar-Kotelly represented an abuse of her discretion.

Robert Bork, the former appeals judge representing Microsoft's rivals, told the circuit judges the settlement was "utterly inadequate." He complained that the government settled the antitrust case after it had already won significant courtroom victories, which is highly unusual.

"The government had this case cold, and there was no reason to negotiate away the things it negotiated away," Bork said.

But the court appeared to question whether it should instruct Kollar-Kotelly to reconsider terms of the deal.

The government traditionally has broad latitude to fashion such settlements with companies before an antitrust verdict, unless the judge can demonstrate the terms would violate the public interest. In this case, critics believe the courts should be more rigorously involved in setting sanctions because Microsoft was already determined to be an abusive monopolist before the settlement was negotiated.

"Don't we owe any deference to the Department of Justice and the judge?" Tatel asked Bork. Bork responded no, and complained that, among other problems, some provisions of the antitrust settlement were too ambiguous to be enforced effectively.

"Some people find ambiguity in a no-smoking sign," said Circuit Judge David B. Sentelle.

Deborah Majoras, a deputy assistant attorney general at the Justice Department, told the court that the settlement represented "prompt, certain and effective relief." She said Bork was "simply wrong" to suggest that the agreement hasn't already forced Microsoft to change its practices toward rivals.

Majoras stammered under unusually tough questions from the panel about the government's efforts to prevent the two anti-Microsoft trade groups from appealing the settlement.

But Majoras also won praise from Chief Judge Douglas H. Ginsburg for her "very powerful answer" describing how one proposal to remove some Microsoft software from Windows might cause other programs to malfunction.

The appeals court has generally proved a favorable venue for Microsoft. It removed two other trial judges in 1995 and 2001 who ruled against the company, Stanley Sporkin and Thomas Penfield Jackson. It also overturned a contempt ruling against Microsoft by Jackson, and the court blocked Jackson's plans to break apart the company before it threw him off the case.

The same appeals court unanimously agreed, however, with Jackson's ruling that Microsoft had illegally abused its monopoly over Windows operating system software, and it instructed Kollar-Kotelly to impose new sanctions. Within months--and soon after the Sept. 11, 2001, terror attacks--the sides instead negotiated the disputed settlement.