US appeals court acts to hear Microsoft case

By James Vicini and Scott Hillis

WASHINGTON: The full US Court of appeals acted unusually fast on Tuesday to take control of the landmark Microsoft Corporation antitrust case, but the Justice Department instead moved to take it directly to the Supreme Court for a final ruling.

It was a day marked by a flurry of lightning-quick action by two courts, the software giant which is fighting a judge's ruling that it be broken up, and by the Justice Department in a case that previously has crept along in small steps.

Microsoft said it was satisfied with the appeals court order to review the breakup, the most significant since the division of telecommunications giant AT&T Corporation in 1982.

U.S. District Judge Thomas Penfield Jackson last week ordered Microsoft split into two firms, holding that it had violated the nation's antitrust laws by using monopoly power to push aside potential competitors and harm consumers.

The Justice Department said it would ask Jackson to send the case for immediate review by the Supreme Court, the highest court in the land. The Supreme Court then could decide the case or could send it back to the appeals court.

"Immediate Supreme Court review of this case is in the public interest because of its importance to the American economy," the Justice Department said in a statement, outlining its strategy for bypassing entirely the appeals court.

"If Judge Jackson grants our request, we will ask the Supreme Court to hear Microsoft's appeal promptly," the Justice Department added.

The Justice Department move came right after Microsoft filed its notice of appeal and voiced confidence that the appeals court, which already has sided with the company in earlier decisions, would rule in its favour.

"Microsoft is looking forward to the next phase of this case, and we are optimistic that the appellate courts will reverse the recent ruling," Microsoft Chief Executive Steve Ballmer said in a statement.

The legal manoeuvring began on Tuesday with Microsoft once again asking Jackson for a stay of a raft of restrictions on its business conduct that he ordered last week as part of his final judgment.

Although Jackson said in his judgment that a breakup should be delayed until the end of the appeals process, he ordered the conduct remedies to take effect in 90 days.

Those conduct restrictions include forcing Microsoft to reveal more of the source code of its Windows operating system, allow computer makers to customise the look of Windows on their machines, and set public pricing guidelines for Windows.

Laying out its arguments in a 39-page document, Microsoft branded the measures as "draconian" and said they went far beyond the scope of the case, which dealt with the company's battle over Internet browsing software.

"The effect of these provisions will be devastating, not only to Microsoft, but also to its employees, shareholders, business partners and customers, and could have a significant adverse impact on the nation's economy," Microsoft said.

Jackson, however, refused to rule on the request for the stay until Microsoft formally filed its notice of appeal.

Late in the afternoon, Microsoft filed that formal notice, and also asked the appeals court for a stay of the business restrictions.

The full appeals court, on its own, then said it would hear the case because of its "exceptional importance," a rare move that cuts out the usual step of a three-judge panel deciding it first.

Microsoft has said the case should go through the normal process through the appeals court and it opposes having the case go directly to the Supreme Court.

Shares in Microsoft rose more than 3, to 70-1/8 in after-hours trading following the announcements. In regular trading, Microsoft rose 1 to 67-7/8.

Rob Enderle, a Microsoft analyst with Giga Information Group, a technology consulting firm, said of the rise, "There's a fundamental belief that the appeals court will be more favourable to Microsoft than the Supreme Court will."

(C) Reuters Limited 2000.