Microsoft Suffers Setback In CourtMicrosoft Suffers Setback In Court

With the release of Microsoft's Windows XP just a couple of months away, the software maker and the federal government continue to--pardon the expression--commingle. That concept--commingling--has taken front and center in the seemingly endless antitrust case, with a federal appeals court Thursday denying Microsoft's petition that the court reconsider its June ruling that Microsoft had illegally commingled its Windows operating system and Internet Explorer Web browser. In a related decision, the appeals court also denied the government's motion to mandate the district court to make an immediate determination of penalties against Microsoft for its monopolistic practices. But the appeals court's ruling doesn't preclude the district court from doing just that.

Microsoft spokesman Jim Desler says the company filed the petition because it wanted clarification on what exactly the court meant by commingling. Desler says the fact that the meaning of the word wasn't made clear could provide Microsoft with some ammunition. "That may mean this commingling issue may be brought up within the context of the district court," he says. Microsoft also is considering taking the matter to the Supreme Court while the district court selects a judge to preside over the determination of penalties.

Rob Enderle, an analyst with Giga Information Group, has little doubt what the court meant by "commingling." Enderle says it's a matter of illegally tying a product that has significant competition--Internet Explorer--to the monopolistic Windows, thus providing Internet Explorer with a potentially unfair advantage over other browsers. The key question is whether such an illegal tie may exist in XP, but Enderle suggests that the government has its work cut out for it if its goal is to prevent the release of the new operating system. He says it's estimated that Microsoft could generate as much as $7 billion in XP-related revenues within two months. "Because this product has such a huge impact on the industry, it's going to be really tough to get an injunction."

The potential impact of XP has many observers assuming that Microsoft's recent court filings are an attempt to delay the case until after XP hits the market. But George Cumming, head of the antitrust practice at the San Francisco law firm Brobeck, Phleger & Harrison, says the appeals court's decision Thursday was a blow to such a strategy. Says Cumming, "If this is project slowdown, it's not working."