Court shoots down Massachusetts appeal

A U.S. appeals court has rejected an effort by the commonwealth of Massachusetts and two IT industry groups to overturn the antitrust settlement between the U.S. Department of Justice (DOJ) and Microsoft Corp. The ruling rejects appeals by the commonwealth of Massachusetts, the Computer and Communications Industry Association (CCIA) and the Software and Information Industry Association (SIIA), which argued that the November 2002 antitrust settlement between Microsoft and the DOJ was not in the public interest.

But in the 83-page ruling, Chief Justice Douglas Ginsburg of the U.S. Court of the Appeals for District of Columbia said the three appellants in the case failed to prove the need for additional antitrust penalties against Microsoft. Among the additional penalties Massachusetts asked for were for Microsoft to release the code for its Internet Explorer (IE) browser and to separate the "commingling" of IE code and the Windows operating system.

The settlement, approved by U.S. District Court Judge Colleen Kollar-Kotelly, went far enough by allowing OEMs (original equipment manufacturers) and consumers to remove IE middleware from the operating system and install competing browsers, Ginsburg wrote. Removing middleware code that affects IE functionality would hurt consumers and independent software developers, and could be nearly impossible to do, Ginsburg said.

"The district court, by remedying the anticompetitive act of commingling, went to the heart of the problem Microsoft had created, and it did so without intruding itself into the design and engineering of the Windows operating system," Ginsburg wrote. "We say, well done!"

Microsoft Senior Vice President and General Counsel Brad Smith cheered the ruling. "We're obviously very gratified with today's decision, and we're pleased that it takes another significant step forward in adding legal clarity and putting the issues of the past behind us," he said during a Wednesday conference call with press.

Smith said his company's "job number one" was fulfilling its obligations under the antitrust settlement.

Microsoft was also pleased that the court's decision focused on the issue of whether to remove components of the Windows operating system, Smith said.

"Competitors and regulators have been focused on whether it would make sense to remove software code from the Windows product," he said. "Today's unanimous decision thoroughly affirms the principle that removing code from Windows is neither necessary nor helpful for our industry or consumers. To the contrary, the Court of Appeals made clear today that removing software code from Windows would be a huge step backward."

The question of whether to remove Windows code remains a central one in Europe, where the European Commission has ordered Microsoft to begin offering a version of Windows without Windows Media Player. Earlier this week, the European Commission temporarily suspended the enforcement of the order requiring this change, one day before it was scheduled to take effect.

Smith said he hoped Europeans would take note of Wednesday's decision, which "addresses many of the precisely same questions that are front and center in Europe."

Massachusetts, the CCIA and the SIIA wanted the courts to require Microsoft to remove middleware code from its products, and provide multiple versions of its products with some features removed, Smith said. "This unanimous decision clearly states that removing code would be a huge step backwards for consumers and for the industry as a whole," he added.

CCIA President and Chief Executive Officer Ed Black said he was disappointed but not surprised in the ruling. Getting the appeals court to overturn the district court's "presumption of discretion" was a difficult case to make, Black said.

"I don't think there's anybody who believes the settlement has had an impact," Black added. "In the real world, our claim has been validated. Unfortunately, no real competition has increased as a result of the ruling."

CCIA has no immediate plans to appeal Wednesday's ruling, Black said.

Massachusetts Attorney General Tom Reilly issued a statement saying the U.S. technology economy will not "reach its full potential unless regulators and the courts are willing to deal with Microsoft and its predatory practices."

"This was a fight worth fighting because it was about the future of our economy," Reilly added in his statement. "This decision is bad news for consumers, bad news for competition and ultimately will be bad news for our economy."

In the antitrust settlement, Microsoft was prohibited from retaliating against computer makers or independent software vendors that develop or sell competing software. Microsoft was also prohibited from retaliating against companies that ship PCs with both the Windows operating system and non-Microsoft operating systems.

Massachusetts, the CCIA and SIIA had asked for tougher remedies, including a broader release of Microsoft middleware APIs (application program interfaces) than the settlement required. Massachusetts wanted the court to require that Microsoft open up its entire IE code. Massachusetts and the two trade associations also asked the court to require Microsoft to include a Java runtime environment compatible with Sun Microsystems Inc.'s version of Java.

But Ginsburg wrote that the district court went far enough in prohibiting Microsoft from retaliating against computer makers and other competitors.

The Computing Technology Industry Association (CompTIA) hailed the court decision as one that "serves the interest of consumers and the industry."

"CompTIA is relieved that the ruling finally ends this untenably long case and allows the IT industry, including our 19,000 members, to get on with its business of innovating instead of litigating," Bob Kramer, vice president for public policy at CompTIA, said in a statement. "We have long held that the interest of the consumer should be placed over the parochial concerns of a small handful of competitors." -- IDG News Service