Microsoft seen as victor

A decision by the U.S. Department of Justice (DOJ) to withdraw from its long fight to break Microsoft Corp. into two companies is being seen by some observers as a victory for the desktop software monopolist and has left some wondering how effective any remedies imposed on Microsoft could be in the future.

The U.S. government Thursday advised Microsoft that it will not seek a breakup of the company as the landmark antitrust case returns this month to a U.S. District Court. The government, which is a plaintiff in the case along with 18 state attorneys general, also said it does not intend to pursue any action against Microsoft for "tying" its operating system with its Internet Explorer Web browser, an issue at the heart of government's original case.

While Microsoft has averted a breakup and the ongoing court battle over the issue of tying Windows and IE, the government has signaled that it will be aggressive in its efforts to impose a new behavioral and structural remedy on Microsoft. Trimming the case to focus specifically on a remedy should make it proceed quickly, the government said in a statement Thursday. "Pursuing ... the tying claim would only prolong proceedings and delay the imposition of relief that would benefit consumers," the DOJ wrote.

Even so, many observers view the plaintiff's announcement as a victory for Microsoft, although the company's status as a monopolist has been upheld by the Appeals Court.

"It's clearly a success for Microsoft, if for no other reason than the government has given up its biggest bargaining chip," said Dana Hayter, an attorney with Fenwick & West LLC in San Francisco and former attorney with the DOJ.

Giving up that chip does, however, mean that the case will move at a speedier pace, he said. "This can only make the case go faster," Hayter said. "It reduces the evidentiary burden on the government compared to what a structural remedy would require."

IT professionals attending the Embedded Systems Conference at the Hynes Convention Center in Boston expressed a range of views from resigned to questioning to surprised by the news, but the consensus among those interviewed seemed to be that Microsoft is the victor.

"This will be a continued monopoly by Microsoft," said Rich Hemmenway, who works for a large pharmaceutical company that he asked not be named. "It was predictable," he said of the Thursday's announcement from the DOJ.

Attendee Bill Pilaud was caught off guard by the news. "I'm very surprised," said Pilaud, who works for a large technology vendor he asked not be identified. He said he expects no changes to come from the antitrust case and argued that "the market will still essentially be controlled by Microsoft and its partners.

"You either work with Microsoft or you don't work at all," he said.

A new U.S. District Court judge has been assigned to the next phase of the antitrust case and will decide a remedy to impose on Microsoft.

While upholding a lower court ruling that Microsoft used its monopoly in the desktop operating market to squelch competition in other markets, the Appeals Court overturned the structural and behavioral remedies imposed by District Court Judge Thomas Penfield Jackson.

Jackson's behavioral remedies largely applied to how Microsoft dealt with hardware and software vendors, including licensing restrictions the company placed on vendors. Judge Jackson banned Microsoft in his remedial findings from bullying vendors who support competing products. He further ordered that Microsoft had to license products to OEMs (original equipment manufacturers) in a uniform way, with established licensing fees published on a Web site accessible to plaintiffs in the case and to OEMs.

In addition, Microsoft was forbidden from restricting how PC makers configured Windows computers they sold, including the sequence in which a computer boot and what applications appear in the start-up screen.

The judge also ruled that Microsoft open up some of its source code, APIs (application programming interfaces), communications interfaces and technical information to OEMs, ISVs (independent software vendors) and IHVs (independent hardware vendors) to ensure interoperability between industry products.

In response to the Appeals Court ruling, Microsoft already has loosened its restrictions on PC makers, although some critics have argued the software maker did not go far enough. Others contend that the government should stay out of IT issues because lawyers and legislators don't understand technology enough to guide the industry.

"It's dangerous when people involved in legalese and corporate interest get involved in technology," said Joe Brandt, a senior scientific programming analyst at the National Radio Astronomy Observatory in Green Bank, West Virginia. "They are going to miss the boat," said Brandt, who was at the Embedded Systems Conference.

That sentiment echoes the view of others in the industry, some of whom have argued that Judge Jackson should not have ordered Microsoft be split in two.

Rajesh Patil is one such software developer. A senior software engineer at Mindflow Inc., a software consultancy in Santa Clara, California, Patil works closely with Windows and Microsoft applications. He applauded the DOJ decision.

"Because the software understands the operating system and the operating system understands the software, it's easy for developers to write applications," he said. "They are so tightly bonded."

Patil, who has been developing on the Windows platform for more than seven years, said that he and his colleagues worried a break up could have created problems of compatibility between a number of Microsoft's software products in use within corporate computer system.

"If just the management split but the technology stayed connected that wouldn't be a problem, but if they also split the technology it could be a problem for developers," he said.

Although the company has avoided being split, the government still intends to push for a strong remedy that will stop Microsoft's illegal monopolist behavior, the DOJ insisted on Thursday.

"They need a remedy that will fix the harm that has already been done and deter future harm," Hayter said.

The DOJ plans to ask U.S. District Court Judge Colleen Kollar-Kotelly to give the plaintiffs enough time to investigate changes in the industry that have occurred since the trial concluded last year. The government wants to explore what remedies might be necessary to stop Microsoft's monopolistic behavior, especially now that the push for a breakup has been abandoned.

Both sides in the case are scheduled to file a joint status report with Judge Colleen Kollar-Kotelly by Sept. 14. The new judge, who was randomly assigned to the case through a lottery has also set an advisory hearing for one week after the status report is due.

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