In a dispute that remains a murky swirl of legal, commercial and technological interpretation, one thing, at least, was unambiguous: Tuesday's U.S. appeals court decision was a big victory for Microsoft. Overturning Judge Thomas Penfield Jackson's order in the Justice Department's limited October 1997 antitrust case against Microsoft, the three-judge panel restored Microsoft's ability to require the sale of its Internet Explorer browser with its Windows 95 operating system.
Today, of course, is the official release date for Windows 98 -- so Windows 95, and the law surrounding it, is henceforth a moot subject. The real battle between Microsoft and the Justice Department is now proceeding via a much broader new suit the government filed last month, one that would apply to Windows 98.
Still, this week's decision is being widely heralded as "undercutting" the new suit. Some of its language eerily echoes Microsoft's own oft-repeated public-relations mantra, "We must be allowed to innovate!" The decision's most-quoted sound bite reads: "Antitrust scholars have long recognized the undesirability of having courts oversee product design, and any dampening of technological innovation would be at cross-purposes with antitrust law."
At the very least, the new ruling indicates that there are many appellate judges who will be far less sympathetic to the government's antitrust case than Jackson. Beyond that, the appeals court's majority provides potentially powerful arguments for Microsoft's side in the bigger new case, which is scheduled to proceed in September.
If you view this decision as a dress rehearsal for the September trial, as some legal experts do, then things indeed look bad for the Justice Department. But the larger case isn't over yet. If you look more closely at the arguments -- not only of the court's majority but of the dissenting opinion filed by Judge Patricia Wald -- there's a lot of room for further interpretation and even reversal down the line.
The substantive issue in dispute in the October 1997 case centers on the wording of a consent decree Microsoft and the Justice Department signed in 1995. That decree prohibited Microsoft from using its control of the operating system market to gain advantage in markets for other products -- but allowed a specific loophole for "integrated products."
What's an "integrated product"? This week's majority ruling -- taking what it describes as a "narrow and deferential" approach -- spills much ink attempting to define the term as broadly as possible: "We think that an 'integrated product' is most reasonably understood as a product that combines functionalities (which may also be marketed separately and operated together) in a way that offers advantages unavailable if the functionalities are bought separately and combined by the purchaser." The court elaborates that these advantages do not need to be proven -- all Microsoft has to do is make a "plausible claim" to them.
The appeals court goes on to embrace Microsoft's claim that its Internet Explorer browser is providing all sorts of wonderful new "functionalities" to users beyond mere Web browsing, including "system services" used by other applications (chiefly for the presentation of information encoded in HTML, the language of Web pages) and a grab-bag of other operating-system improvements -- like letting "users customize their 'Start' menus, making favored applications more readily available" or "[making] possible 'thumbnail' previews of files on the computer's hard drive, using the HTML reader to display a richer view of the files' contents."
So, according to the appellate judges, the saving grace for Microsoft -- the evidence that proves the company has not simply "tied" together two unrelated products but created a new "integrated" product that's legal under the consent decree -- lies in a small handful of desktop interface features that IE enables. Are these features vital? Do they make any kind of significant difference in the way users use Windows? Has any user ever clamored for them?
As I wrote last September, the answer to all these questions is "no." So what is Microsoft's true motivation for "seamlessly integrating" IE and Windows? Its much-professed, user-serving drive to "innovate"? Or its much-feared drive to compete?
The court's ruling depends on the assumption that Microsoft first set out to provide a useful technological enhancement for its customers -- and then chose to achieve it by weaving the browser into Windows. If that also incidentally allows Microsoft to extend its monopoly into a new category of software, oh well; that couldn't possibly have been Microsoft's intent, could it?
Both the evidence the Justice Department has gathered for its new case and Microsoft's tradition of a hyper-aggressive corporate culture suggest a far different sequence of events. It seems more likely that Microsoft first set out to control the browser market (and neutralize any threat from its chief competitor, Netscape) -- then chose to achieve that goal by weaving the browser into the operating system, under the guise of providing useful technological enhancements for customers. Conveniently, these dubious "enhancements" now provide the company with a cover story to placate antitrust scrutiny.
These are the issues that a court ought to be exploring. But the appellate majority simply takes Microsoft at its word; the judges seem either unwilling or unable to put themselves in the shoes of the typical user and question the company's claims in any way. For that perspective, you'll have to read Judge Wald's dissenting opinion (you'll find it appended here after the majority opinion).
The majority ruling, as Wald sees it, opens the consent decree's "integrated products" loophole so wide as to render the whole consent decree ineffectual: The court is providing Microsoft with "too safe a harbor with too easily navigable an entrance." She writes: "It is difficult to imagine how Microsoft could not conjure up some technological advantage for any currently separate software product it wished to 'integrate' into the operating system."
An "integrated product" is now whatever Microsoft says it is: "The majority's test would seem to permit Microsoft to 'integrate' word-processing programs, spreadsheets, financial-management software, and virtually any other now-separate software product into its operating system by identifying some minimal synergy associated with such 'integration.' In effect, the majority has fashioned a broad exemption from the antitrust laws for operating system design."
Wald's view, of course, did not carry; the majority ruling is what counts today. But this is only one round in what's likely to remain a long-running conflict. Even if the Justice Department doesn't appeal this ruling and focuses its efforts on the new suit, the questions Wald has asked are not going to disappear. And everyone concerned about how Microsoft uses its extraordinary power in the software marketplace ought to keep asking them.
Sure, the government should tread carefully when intervening in the treacherously complex and fast-shifting technology marketplace. Recklessness is inappropriate. But its opposite doesn't serve the public very well, either. This week's decision makes you wonder: At what point on the spectrum of judicial behavior does "narrow and deferential" cross over into "craven and blind"?
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