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Microsoft Denies Engaging in
Anti-Competitive Behavior

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The most important antitrust case in the U.S. since the AT&T; breakup was back in court Monday, with software giant Microsoft arguing that its initiatives to promote its products did not break any laws or stifle competition.

Microsoft, best known for its Windows operating system, Internet Explorer browser, word processor Microsoft Word and spreadsheet Excel, is appealing a district judge's order that the company be split in two. The Redmond, Wash.-based company has been sued by the federal government, 18 states and the District of Columbia, which contend Microsoft violated federal antitrust law by using illegal methods to protect its monopoly.

Appearing before all seven judges of the U.S. Court of Appeals for the District of Columbia, Microsoft attorney Richard Urowsky attacked the government's chief argument, saying that Microsoft's bundling of its Explorer browser with Windows did not hurt rival browser Netscape.

Between 1996 and 1998, the period at issue, "Netscape's users increased 15 million to 33 million," he said. "Millions of people chose to use Navigator despite" the fact that rival Explorer was included with Windows, he said.

"Netscape had unfettered access to consumers," Urowsky said, adding that inclusion of Explorer with Windows helped Netscape "by providing convenient means of downloading from the Internet."

U.S. District Judge Thomas Penfield Jackson ordered the breakup of Microsoft last June, issuing his ruling two months after concluding that Microsoft violated antitrust laws by using illegal methods to protect its monopoly in computer operating systems — stifling competition. He also said the company tried illegally to expand its dominance into the market for Internet browsers.

"Microsoft, as it is presently organized and led, is unwilling to accept the notion that it broke the law," Jackson said.

Court Grills Lawyers

Lawyers from both sides faced a tough and inquisitive court Monday.

Urowsky was peppered with questions from Judge Douglas Ginsburg, who accused the company of using "saturation bombing" tactics against rival browser Netscape.

At one point, when the lawyer was denying that Microsoft used monopolistic practices in its contracts with computer manufacturers, Judge David Tatel said, "I don't see how you can get a reversal" on the issue.

Urowsky argued that the lower court was wrong to consider Microsoft's licenses with manufacturers illegal.

The licenses require that there be no alteration of Microsoft software when computers are first booted up and that the company's icons be displayed on the desktop.

Contending the licenses are legal, Urowsky said, "What is at issue in this dispute is only the very first time the computer is booted up."

He also said Microsoft was "exercising its rights under federal copyright laws" to protect its operating systems.

Government lawyers came under equal fire, as the judges asked the Justice Department to explain why it pursued Microsoft so vigorously.

The court's chief judge, Harry Edwards, told Justice Department lawyer Jeffrey Minear that the government looked at Microsoft as "a paranoid monopolist, someone who gets up in the middle of the night and shoots at any movement."

Minear, assistant to the U.S. solicitor general, argued that Microsoft spent huge amounts of money to promote its Internet Explorer browser, overwhelming competitors.

"The company used its monopoly power to stifle the competitive process," Minear asserted.

One topic set for argument is Microsoft's contention that Jackson showed his bias in remarks to reporters and book authors. He made scathing personal attacks on Microsoft Chairman Bill Gates, the company's legal team and the appeals court.

Jackson accused appellate judges of "making up 90 percent of the facts on their own" in an earlier Microsoft ruling, and said they lacked practical trial experience.

What Will Bush Do?

While the court battle between Microsoft and the Justice Department rages on, legal experts have wondered whether the Republicans would try to settle the case brought by the Clinton administration — and do so under far more favorable terms to Microsoft than the Democrats would have allowed.

While Bush was president-elect, spokesman Ari Fleischer said the new administration would review all government litigation. Without referring specifically to Microsoft, he said: "As a rule, the president-elect is not going to rush to litigation the way some people in Washington do. He does not think that serves the country well."

William E. Kovacic, a specialist in antitrust law at George Washington University, said the new administration would impact the mood on the federal appeals court.

"In conscious or unconscious ways, the court of appeals will feel fewer inhibitions to second-guess Jackson's findings concerning crucial pieces of evidence," Kovacic said. "Nothing good will come to the government plaintiffs from all of this."

But Andrew Gavil, a law professor at Howard University, said it was unlikely that new Justice Department antitrust chief Charles A. James would seek to modify the government's position until after the appeals court ruled. James "has a very conservative approach to antitrust," he said.

James has not provided any clues to his views on the case since his appointment.

Warren Grimes, an antitrust specialist at Southwestern University School of Law in Los Angeles, recalled that a lawsuit against IBM was filed at the end of the Johnson administration. The case was dropped in January 1982 by President Reagan's new antitrust chief, William Baxter.

"When one looks at the IBM example, it was the combination of a change in administration and a new antitrust chief and the passage of time," Grimes said. "The case had less punch in 1982 than it did in 1969."

Under Jackson's plan, one company would manage the Windows operating system and the other would manage all of Microsoft's software, such as its Office Suite and Internet Explorer browser.

— The Associated Press contributed to this report.

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