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U.S. District Judge Thomas Penfield Jackson doesn’t want to hear anything more about it. The government’s case against Microsoft — and Microsoft’s incessant arguments that it has done nothing wrong under the antitrust laws — is closed, as far as he’s concerned. It was clear in Wednesday’s hearing on remedies in the government’s antitrust suit: Judge Jackson has heard enough from Microsoft. He asked the government to submit a “clean” copy of its proposed remedy, the breakup of the software giant into an applications company and operating systems company, on Friday, May 26. He accepted Microsoft’s request for 48 hours to comment. But it seemed likely the judge will order a breakup of the company, if his statements at the hearing are any indication. By a clean copy, the judge meant a proposed remedy that met several cosmetic concerns and spelled out certain terms that he thought were ambiguous in the government’s original filing on the issue. The judge made the announcement, stunning a packed courtroom that had expected a lengthy proceeding on possible breakup. He did so, almost as a non-sequitor, as John Warden of New York’s Sullivan & Cromwell, was arguing. He was urging the court that even the government’s proposed conduct restrictions would “disable” Microsoft from competing because the code to Microsoft’s Windows operating system would “basically, effectively be put in the public domain.” Microsoft contends that the intellectual property component of these restrictions would require extensive discovery and further hearings. “I’m not contemplating any further process,” the judge said, asking the government how long it would take to produce a “clean copy” of its proposed final judgment that would reflect the course of the day’s proceedings. The Microsoft case has been before Jackson for almost three years. On April 3 he ruled that Microsoft violated Sec. 2 of the Sherman Act. It was the first time in modern antitrust history that a judge declared an American company an illegal monopolist. The government alleged that Microsoft crushed any competitor that threatened its Windows monopoly; principally, it charged that Microsoft welded its Internet Explorer Web browser to the Windows operating system to eliminate the threat posed by its Web rival Netscape Communications Corp. Since the ruling, the government has proposed that Microsoft be broken in two. Microsoft has urged the judge to impose only restrictions on its conduct. During the day, the judge had noted, and David Boies, the government’s lead lawyer, agreed, that certain definitions in the government’s papers could be clarified. Warden asked for — and got — his 48 hours, though it is unclear how much time that will mean, given that those hours fall over the Memorial Day holiday. A moment after Jackson granted the 48 hours, Steven Holley of Sullivan & Cromwell was on his feet. Holley, along with fellow partner Richard Urowsky, is known as the most uncompromising advocate of Microsoft on the defense team. He and Urowsky have defended Microsoft for the longest time, fending off an investigation by the Federal Trade Commission in 1992. Holley rose with a 35-page document in hand, an offer of proof by Microsoft listing potential witnesses — among them Microsoft Chairman Bill Gates, whose deposition excerpts proved calamitous for the defense at trial — who would testify against the government’s breakup proposal. The judge grew angry with Holley when the lawyer suggested that Microsoft would call Dr. Robert Crandall of the Brookings Institute, who he said had analyzed “every major Sec. 2 Sherman Act case” and “other industry experts about the severe economic effects” of the proposed remedy. When Holley tried to mention the limited time Microsoft has had to prepare a response, the judge cut him off. “This case has been pending for two years now,” the judge said, clearly piqued. Jackson has finally had enough — enough of the videotaped demonstrations, the endless e-mails (there was another today) showing Microsoft’s relentless intent to crush competitors, and dueling economists. He is ready to issue a final order on remedies. He hinted at this much before the hearing’s lunch break. When Warden began his argument, the judge observed with some whimsy, “it’s somewhat ironic that your client expects to prevail on appeal but it is nevertheless asking to spend more time in this court.” Microsoft had offered several scheduling alternatives, the longest of which contemplated a final hearing in early December. Instead, it’s likely that a final ruling from Jackson is weeks away. Addressing the press after the hearing, William Neukom, Microsoft’s general counsel, said that was fine by him. “We are very near the appellate phase of this controversy,” he said. “We look forward to the appellate scrutiny.” Since the judge issued his conclusions of law April 3, Microsoft has stated bluntly that it has been looking ahead to the appeals court, where it won a sweeping victory against the government in a related case in June 1998, from the outset of the trial. During the hearing, the judge also seemed skeptical about the government’s breakup proposal, which would create two companies with dominant market products, namely, Microsoft Office and Windows. “Tell me why they would compete,” Jackson asked Kevin O’Connor, an associate attorney general in Wisconsin and the first to take the podium for the government. “Tell me why they would effectively inspire competition.” In response, O’Connor noted that the applications company would be free to port its Office suite, which now protects the Windows platform, to Linux, a competing operating system. Clearly flustered, O’Connor said, “I know Mr. Boies is prepared to deal with this when he gets up here,” drawing laughter from the gallery. David Boies, the lawyer hired by the Justice Department as lead trial counsel, demonstrated the methodical attention to detail that won the case on his final day in court before Jackson. He began with a list of 10 instances of anticompetitive conduct that Microsoft’s proposed conduct remedies would permit. Warden challenged two of these when he took the podium in response, allowing Boies to point out later that eight instances remained unchallenged. Boies also had two more Microsoft e-mails to share with the judge — and, inevitably, with the press. One of them, a July 11, 1999, missive from Gates, involved the Palm Pilot; the hand-held computing device that Microsoft insisted was a viable competitor to Microsoft during the course of the trial. The e-mail, written after the trial testimony completed last June, suggests that six months of revelations about piles of hostile, often embarrassing e-mail correspondence, had not altered the Microsoft chairman’s e-mail habits. It said, “We really need to demonstrate to people like Nokia why our PDA [personal digital assistance] will connect to Office in a better way than other PDAs even if that means changing how we do flexible schema in Outlook and how we tie our audio and advanced work only to run on our PDAs.” The e-mail, Boies suggested, shows “Microsoft’s continued strategy to use its power to use its control over the applications and operating system to manipulate the boundaries” between them. The government’s solution was to break that control — after what Boies described as “the most difficult issue” that the government faced, and one on which “very reasonable minds can differ.” But Jackson, who throughout the trial has demonstrated amusement at Boies’ presentations, didn’t let it go at that. He raised the option recommended by a brief filed by Microsoft’s competitors, which proposed a three-way split for Microsoft, creating a third company for Microsoft’s Internet Explorer web browser, the product that the judge found Microsoft used to destroy its Web rival, Netscape Communications Corp. Calling the amicus filing by the Computer & Communications Industry Association an “excellent brief,” Jackson asked Boies about the proposal. “That has a lot of advantages to it,” Boies admitted quickly. “To some extent, we were trading off simplicity for policy advantages.” To that, the judge called the government’s proposed remedy “anything but simple” because it entrusts Microsoft with coming forward with its own plan of dissolution in a four-month period. “And I would not think they would be a willing participant.” Boies said the government’s proposed order has “given Microsoft the opportunity” to come up with its own breakup plan. But he added that, “frankly,” if the company came back with a plan similar to the conduct remedies it has thus far offered, the government would go in and break up the company itself. “The government is prepared to do that,” he said. By the end of the day, though, Warden was back at the podium, quibbling with the judge over whether “forfeiture” of Microsoft’s intellectual property — and argument he had pressed earlier — meant the same thing as “confiscation” or “diversion” or “conversion” of Microsoft’s intellectual property. Shortly after that, Jackson said there would be no further process before him.

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