Judge uses verdict to torpedo MS appeal chances

Analysis Immediately after the judge's verdict yesterday Microsoft said it would appeal. Said Bill Gates: "While we did everything we could to settle this case, and will continue to look for new opportunities to resolve it, we believe that we have a strong case on appeal." But how strong is it? In his Conclusions of Law Judge Jackson spends some considerable time on Microsoft's case, and does his best to torpedo it. Microsoft's most recent pitches have been based on its interpretation of the copyright protection it has for Windows. This case is however comprehensively blown out of the water in the judge's Conclusions, and yesterday Gates was instead stressing that "the Appeals Court has already affirmed Microsoft's right to build Internet capabilities into the Windows operating system to benefit consumers." This is of course the Appeals Court ruling which overturned Jackson's earlier injunction regarding the bundling of Internet Explorer with Windows 95, so Jackson is in a tricky position here. He can't exactly say the Appeals Court was wrong in overruling him, but he needs to anticipate Microsoft attempting to expand this small potential crack into a hole big enough to escape through. In the politest possible way, Jackson endeavours to show that the territory covered by the Appeals Court was narrow, and that the verdict he's producing now is entirely in accordance with precedents set by the Supreme Court. With respect, you're wrong... In the case of the Appeals Court, "the issue... was the construction to be placed upon a single provision of a consent decree that, although animated by antitrust considerations, was nevertheless still promarily a matter of detemring contractual intent." He notes that this ought to be enough to allow him to move on, but adds: "Nevertheless, both prudence and the deference this Court owes to pronouncements of its own Circuit oblige that it follow in the direction it is pointed until the trail falters." The "deference" doesn't go very far. He comments that the Appeals Court displayed a "lack of confidence in the ability of the courts to distinguish between improvements in fact and improvements in name only, made for anticompetitive purposes. Read literally, the DC Circuit's opinion appears to immunise any product design... from antitrust scrutiny, irrespective of its effect on competition." In the nicest possible way, Jackson is saying the court was dumb. Microsoft has already built a substantial edifice on top of this, and will build lots more as its appeal goes ahead, but Jackson points out that taking this tack means that any "plausible claim" of advantage associated with the integration of products gives the integrator immunity from antitrust action. Now we get to the meat: "This undemanding test appears to this Court to be inconsistent with the pertinent Supreme Court precedents in at least three respects." It views the market "as the defendant would like to have the market viewed," it ignores reality, as the advantage "need only be plausible," and it needn't be proved. Judge takes his case to Supreme Court first He notes one Supreme Court precedent establishing that if the evidence at trial established there was customer demand for an integrated service or product as separate products, then this meant the defendant was guilty of tying, despite the defendant's contention that the products were one single product. This clearly applies to IE and Windows; demand for them as separate products was established at the trial, and Jackson notes that customers still perceive them as separate products. Following up on this he notes that the Appeals Court view is "at minimum... at odds with the Supreme Court's own approach." He reinforces this by following Supreme Court precedents closely in asserting that Microsoft possessed "appreciable economic power in the tying market," and that "a 'not insubstantial' amount of commerce was foreclosed to competitors." He points out the Supreme Court has stated the 'essential characteristic' of illegal tying is a seller taking action "to force the buyer into the purchase of a tied product that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms." He then gives a nod to the Appeals Court's warning regarding "the perils associated with a rigid application of the traditional 'separate products' test to computer software design," but signs off this section with: "To the extent that the Supreme Court has spoken authoritatively on these issues... this Court is bound to follow its guidance and is not at liberty to extrapolate a new rule governing the tying of software products. Nevertheless, the Court is confident that its conclusion, limited by the unique circumstances of this case, is consistent with the Supreme Court's teaching to date." As the case will almost certainly end up in the Supreme Court, aside from trying to undermine Microsoft's preferred appeals strategy, Jackson is putting up big signposts for the Supreme Court itself. It will surely have trouble disagreeing with itself, right? ® Related stories: Judge finds against MS on virtually all fronts MS guilty - can Prez Bush save it? MS guilty - a monopoly, and anti-competitive Complete Register Trial coverage