Last filing lays out Microsoft antitrust defense

Peter Kaplan

WASHINGTON: Microsoft Corp. submitted a final written appeal to a federal
judge on Monday in an effort to fend off strong antitrust sanctions sought by
nine states.

In a 500-page summation of the company’s defense, attorneys for Microsoft
told US District Judge Colleen Kollar-Kotelly that the states’ severe
restrictions were designed to benefit rivals such as AOL Time Warner Inc. and
Sun Microsystems Inc., and would harm consumers by depriving them of a reliable
platform for software.

The states’ proposed sanctions "would preserve or boost the fortunes
of Microsoft's competitors without increasing competition or improving consumer
welfare," Microsoft said in the filing.

"These firms are concerned about head-to-head competition from Microsoft
that threatens their positions as market leaders, not about their ability to
challenge Microsoft’s monopoly in Intel-compatible PC operating systems,"
Microsoft’s attorneys argued.

Microsoft said the states’ plan would be impossible to comply with, would
end up hurting computer security and "dramatically impairing Microsoft’s
ability to develop new versions of Windows." Microsoft also told the judge
that the states’ case is rife with "legal flaws," in part because
their proposed sanctions go far beyond anything the company had actually done
wrong.

The states were scheduled to present the judge with their own written
arguments by the end of the day. Both sides are tentatively scheduled to make
their final oral arguments before the judge on June 19.

The pleadings were due a month after the two sides ended 32 days of testimony
-- including an appearance by Microsoft chairman Bill Gates -- on how best to
prevent future antitrust violations.

Kollar-Kotelly is also considering whether to approve a settlement that
Microsoft reached with the Justice Department in November. Among other things,
that deal would require that Microsoft let computer makers hide desktop icons
for some Windows features to allow the promotion of competing software.

The hold-out states, including California, Massachusetts, Iowa and
Connecticut, have rejected the settlement as too weak despite the signatures of
nine other states. The non-settling states say a modular version of Windows,
allowing features like the Internet browser and media player to be removed, is
needed to level the competitive playing field for non-Microsoft software.

The hold-out states also want requirements that would force Microsoft to
disclose more of Windows’ inner workings and license its Internet Explorer
browser royalty-free. But Microsoft has insisted that Windows is highly
dependent on all its parts and would not work properly with some features
removed.

The dissenting states have dismissed Microsoft's case as a
"monopoly-is-good-for-you argument" and say Microsoft has tried to
frighten the judge away from imposing stronger measures against the company.

A federal appeals court a year ago upheld the original trial court’s
finding that Microsoft illegally maintained its Windows monopoly through acts
that included commingling its Internet Explorer code with Windows to fend off a
rival browser made by Netscape.

But the appellate judges rejected the breakup order by the trial judge -- US
District Judge Thomas Penfield Jackson -- and sent the case back to a new judge,
Kollar-Kotelly, to consider the most appropriate remedy.

(C) Reuters Limited.