Tense Alliance Between States, Feds In Microsoft Litigation

Nineteen states and the U.S. Department of Justice have proven to be uneasy bedfellows in an antitrust lawsuit against computer software giant Microsoft Corp.

The main reason the states are involved at all is because they believe the Redmond, Wash. firm escaped with a wrist slap in a previous federal suit the states didn’t participate in, legal expert David Bender says.

In that 1994 proceeding, Microsoft was accused of licensing abuses, and was allowed to enter into an antitrust consent decree the following year. That punishment was viewed as too lenient by many state attorneys general, according to Bender, a lawyer with White & Case in Manhattan.

“The states wanted remedies that were a lot stiffer than the federal government wanted. The states wanted an arm and a leg and the feds only wanted an arm.”” said Bender, who specializes in information technology and intellectual property cases.

This time around, it appears 19 states stand a good shot of getting their wish in a non-jury trial that U.S. District Judge Thomas Penfield Jackson is presiding over in Washington, D.C. The crux of the states’ and the federal government’s complaint centers around Microsoft’s practice of requiring computer manufacturers to include Microsoft’s web browser on new machines.

Microsoft is accused of quashing competition, harming consumers and dampening innovation in the computer business.

Judge Jackson still must deliver conclusions of law in the trial, which could end as early as this month. In November, Jackson issued findings of fact that said Microsoft used its monopoly power to bully computer manufacturers and annihilate rival software companies.

California, Connecticut, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, New Mexico, New York, Ohio, Utah, West Virginia and Wisconsin joined the Justice Department in filing the antitrust suit, along with the District of Columbia.

Many of those states are seeking the ultimate punishment for Microsoft — a breakup of the company — according to published reports. However, the states’ lead attorney, Iowa Attorney General Tom Miller, isn’t tipping his hand.

“The states have reached no consensus about the best remedies we might seek in the Microsoft case,” Miller said on an Iowa government web site. “Judge Jackson’s findings of fact support a wide range of possible remedies, and we continue to explore all those possible remedies.”

Friction between the states and the federal government regarding Microsoft has continued, leading Judge Jackson to appoint a federal mediator to the case in November.

In doing so, Jackson said he’d gotten wind of “divergent views.:

“The harmony between the states and the (Justice Department) so far has been, I think, enormously helpful. And I would like to see it continue,” Jackson said. “I would not like to have to deal with divergent points of view.”

For its part, Microsoft denies any wrongdoing.

“Our position is that Microsoft’s behavior has been good for consumers, good for innovation and good for the entire high-tech industry,” Microsoft spokesman Jim Cullinan said.

His firm can take heart from South Carolina’s decision to drop out of the Microsoft lawsuit in 1998.

Originally 20 states were part of the legal action, until South Carolina Attorney General Charlie Condon found out about a $4.2 billion computer industry merger.

“The attorney general picked up — I think it was USA Today — and read about the merger betweeen AOL and (computer browser manufacturer) Netscape,” said Robb McBurney, a spokesman for the South Carolina attorney general. “After coming into the office and analyzing the situation, it seemed to (Condon) that the market had corrected the situation.”

The views of the 19 states remaining in the Microsoft suit, and of their attorneys general, can be viewed at Iowa Attorney General Tom Miller’s web site.