A US Court of Appeal has rejected Microsoft's request for a
rehearing on its decision that the software giant illegally bundled
together operating system and browser code.
The court denied the software maker's bid to reverse a ruling
handed down last month affirming the company illegally tied its
software code for the Windows operating system to its Internet
Explorer Web browser.
In a succinct order, the District of Columbia court also denied a
request from the US Department of Justice (DOJ) to fast track the
case back to the higher District Court in Washington, leaving the
remand schedule on the original timetable for a hearing on 12
August.
The Federal Appeals Court overturned the lower court's order to
break up Microsoft into two separate companies in a 28 June ruling,
but upheld the court's opinion that Microsoft was an illegal
monopoly in the operating system business, and that it had used its
monopoly power to squash competition by bundling Internet Explorer
and Windows 98.
The issue of commingling code is central to the DOJ case against
Microsoft and forms the basis for their desire to break the company
into two parts, one for the operating system business and one for
everything else.
Subsequent to the June ruling, Microsoft began to change its
licensing policies for computer manufacturers planning to install
Windows XP, the next generation of its operating system, due for
release later this year. Citing the ruling, it said computer makers
could choose the icons that will appear on the Windows desktop, and
would include an add-remove function to allow consumers to remove
Internet Explorer from their computers. The company is still locked
in combat with AOL Time Warner over exactly what icons will be
allowed on the Windows XP desktop.
Microsoft had hoped to see the commingling ruling reversed in a
rehearing, telling the court "critical evidence was overlooked - or
misinterpreted - on the technical question of whether Microsoft
commingled software code".
The lower court is expected to deal harshly with Microsoft,
according to Rob Enderle, an analyst at Giga Information
Group.
"It just depends on how draconian the remedy is going to be [in the
lower court]," he said. "It's only going to get worse off from
here."
Bob Schneider, an attorney at the Chapman and Cutler law firm in
Chicago, agreed that the lower court is unlikely to treat Microsoft
with kid gloves.
"The thrust of the original opinion is that Microsoft is a
monopolist... and I expect that the lower court will agree with the
District Court's conclusion and attempt to come up with a remedy to
modify their activity in the future," said Schneider.
He added the lower court might still decide to break the software
mammoth into two companies.
"If they do it, they'd have to do it in the way Jackson was
criticised for not doing it," he added, referring to US District
Judge Thomas Penfield Jackson, who originally ruled Microsoft
should be broken up. Jackson was later criticised by the Appeals
Court for not allowing an evidentiary hearing on the remedy.
Furthermore, Jackson was condemned for publicly criticising
Microsoft and holding secret interviews with journalists in his
courtroom.
Beyond the possibility of a break up, the court's refusal to rehear
its decision also puts Microsoft in a weakened position in terms of
settlement talks, Enderle noted.
Schneider predicted that if Microsoft takes the threat of a lower
court decision seriously, there is more than a fifty-fifty chance
it will enter into a settlement agreement.
Microsoft put on a brave face yesterday. Asked whether the court
decision was a blow, spokesman Jim Desler said, "Not at all. We are
committed to move forward... and resolve any remaining legal issues
as quickly as possible," he said.
Desler said it would be seven days before the lower court process
begins, at which time the court will begin to select a new judge
for the case. The spokesman added that Microsoft would take that
time to consider its options, including whether or not it should
take its appeal all the way to the US Supreme Court.