Don't break me down: MS asks judge to throw out plan

MS on Trial Late yesterday Microsoft filed its counter to the DoJ's breakup proposal. Naturally, Microsoft's version of the Proposed Final Judgement doesn't include a breakup, and as you'd expect it's a lot milder than the DoJ version. In a statement that made it pretty clear how it proposed to respond next week, the DoJ said: "Microsoft's proposal is ineffective and filled with loopholes. It would not have prevented Microsoft from engaging in many of the illegal acts found by the District Court, nor would it prevent the company from using its monopoly power in the future to engage in the same kind of illegal behavior to crush new innovations." But they would say that, wouldn't they? Microsoft's Proposed Final Judgement was a tricky document to write. The company still says it's innocent, but it still had to accept the findings of fact and law and propose alternative remedies that would be appropriate. So Microsoft accepts the DoJ's claims in the original Complaint of 18 May 1998, with the exception of the first claim, which is "unlawful exclusive dealing and other exclusionary agreements". Judge Jackson found that the DoJ had not proved this part of the case sufficiently, and that Netscape wasn't sufficiently prevented from distributing its browser - which seemed at variance with the evidence - but that's what the judge decided. The second claim admitted is unlawful tying; the third is monopolisation of the PC operating systems market; and the fourth attempted monopolisation of the Internet market. In the prayer for relief, the DoJ asks for costs, but there is no comment on this so far - although Microsoft says it is willing to pay the costs and fees of the Plaintiff States. Microsoft goes along with the claims by the States, with the exception of the third claim (leveraging the operating system monopoly) and the fifth claim (agreements in restraint of trade, which specifically refers to licensing conditions for the OEM screen and end-user boot restrictions). The States may well wish to challenge this. As was widely expected, Microsoft is willing to relax licence restrictions subject to its own set of conditions, such as icons not being allowed to overlap any Microsoft icon (this exception does tend to trigger unworthy thoughts about future dirty tricks). So far as access to technical information is concerned, Microsoft is against having to disclose any source code, and suggests that fees would have to be paid and Microsoft's intellectual property protected. Furthermore, ISVs that receive information must agree "not to write Platform Software, or applications for such Platforms, that competes with any Microsoft software...". The external monitoring conditions that Microsoft wants for compliance are mild to say the least: the DoJ Assistant Attorney General for Antitrust would have to give Microsoft "reasonable notice" of any monitoring. The softest suggestion is that Microsoft thinks it should only be subject to monitoring for four years instead of ten. Memorandum in Support of the Proposed Final Judgement In this accompanying Memorandum, Microsoft "respectfully disagrees with the Court's conclusion that Microsoft has violated the antitrust laws". The major argument is that the DoJ did not "find a clear causal connection between (i) the conduct adjudged unlawful in this case and (ii) Microsoft's current position as the leading supplier of Intel-compatible PC operating systems". This is repeated again and again, but in fact antitrust law does not require this, since it is implicitly assumed that monopolisation creates conditions that harms consumers, and Microsoft has admitted that it did monopolise. Nor does Microsoft like the DoJ's desire to restore competition to the market. And as for the remedy being reasonably related to the wrong, Microsoft just can't see why breakup should be warranted. Microsoft also says that the plaintiffs have no business interfering with Microsoft's "product design decisions." Microsoft also expresses the belief that "the conduct at the core of the government's case was legal at the time it occurred", which sounds a tad too much like wishful thinking, especially in view of the abundant evidence in Microsoft's emails. Nor will special pleading help, when Microsoft lays down its all for the nation: "Microsoft's significant contributions to consumer welfare and this Nation's economy" show, Microsoft claims, that "the remedy imposed here must be focussed and not punitive". The government's requested relief seeks to re-engineer the entire software industry and impose extremely burdensome restraints that are wholly unrelated to the case that was tried, Microsoft complains. Documents three and four are a Motion for Summary Rejection of the government's proposal, and a document in support of this. The general tenor is one of righteous anger that breakup had been proposed at all, and Microsoft throws all manner of arguments into the pot. The claimed crimes, says Microsoft, do not fit the proposed punishment. The Court is blamed for having "dramatically accelerated the trial of the action", and consolidating it with the hearing on a preliminary injunction - but Microsoft fails to point out that this was a different case. Microsoft also squeezes its Court of Appeals victories, and quotes a few Supreme Court decisions that it claims are relevant. Microsoft also thinks it unfair that the Complaint does not correlate with the desire "to rip apart the company that until recently had the largest market capitalisation in the world" - but why the market cap should matter remains unexplained. On crime and punishment, Microsoft observed that courts were not authorised in civil enforcement proceedings to punish antitrust defendants. Instead, "the remedy must be reasonably related to the wrong". So far as the punters are concerned, Microsoft says that: "The public has reaped substantial benefits from Microsoft's development of Windows and other software products." Microsoft is quite right to put the boot into Ernest von Simson's Declaration for the DoJ, noting it was "without any empirical support", and observing that "such musings hardly provide a legal justification for ripping Microsoft apart". But Microsoft's next point - that "no court has ever ordered significant structural relief in a contested case where the defendant obtained its position through growth rather than through acquiring its rivals" - invites a "so what" and some questioning of how Microsoft had grown - which was of course by buying-in products and people. Microsoft waffles on rather repetitively, offering its opinion that breakup would go beyond what is necessary. But there's no humility anywhere, and no effort to explain away the enormous profits that Microsoft has made in a short period of time by exploiting its monopoly. The claim that "The public has reaped substantial benefits from Microsoft's development of both Windows and Office" is too controversial to help Microsoft's case. It gets worse when Microsoft pleads that "cross-pollination between engineers working on different products such as Windows and Office has led to numerous innovations." This is just too close to the old undocumented calls and Chinese Walls scandals to be anything other than a two-edged sword. There are some not-very-enthusiastic jibes at how well-integrated IBM and Sun are, but there again, they haven't been found guilty of monopolisation. Of course it's all going to have "devastating effects on Microsoft's ability to develop innovative products". Position As to Future Proceedings on the Issue of Remedy The last filing sets out Microsoft's ideas as to how long it should be given to answer the DoJ's filing. In the worst case - if the court decides to consider breakup - it wants until 4 December to prepare for an evidentiary hearing. If breakup is rejected by the court, Microsoft said it could manage to be ready two months earlier, on 2 October. But if the court rejects both breakup and what Microsoft calls "disclosure relief", then 7 August would be appropriate, Microsoft suggests. Microsoft also claims to be concerned about its intellectual property being compulsorily disclosed. At times Microsoft is very transparent, and as has become very clear, there are two main reasons for seeking a delay: first, it's an attempt to rerun the case, since any outcome would be better than the present outcome; and second, it would give Microsoft more time to make a political case for having it dropped. There's a feeling that Microsoft has put forward a negotiating position, and might, for example, be prepared to accept that it should publish an OEM price list and dodgy discounting schemes like market development agreements. But it's too late to negotiate, and Microsoft's position is too far from any reasonably acceptable position. Next week, the DoJ has its chance to pick holes in Microsoft's filings. Meanwhile, Judge Jackson will have to decide if he agrees to give Microsoft more time for before the final hearing. ®