X-SciTech

Clash Of The Internet Titans

By CBSNews.com staff CBSNews.com staff

January 22, 2002 / 4:33 PM EST / CBS

Netscape, now owned by AOL Time Warner, has revived a feud from the 1990s, suing Microsoft for using anticompetitive business practices to ensure the dominance of the Explorer Internet browser over Netscape's pioneering Navigator.

In papers filed in federal court Tuesday, AOL argued that Microsoft made deals with computer manufacturers and Internet providers to shut Netscape out of the marketplace and destroy what could have been an alternative to Microsoft's desktop dominance.

AOL's suit is fueled by the government's antitrust suit against Microsoft. A federal appeals court sided with the government last year, saying that Microsoft used anticompetitive practices to crush Netscape. The Bush administration and nine states settled their case in November; AOL says it is backing nine other states that refused to sign on to the settlement.

"Netscape's lawsuit is a logical extension of the findings entered by the District Court and unanimously affirmed by the Court of Appeals that Microsoft thwarted competition, violated the antitrust laws and illegally preserved its monopoly at Netscape's expense," AOL General Counsel Randall J. Boe said in a
statement.

Microsoft spokesman Vivek Varma said AOL is trying to compete with Microsoft in the courts rather than the marketplace.

"We don't think this lawsuit has anything to do with consumers," Varma said. "AOL has been using the political and legal system to compete against Microsoft for several years. This is just the next legal tactic in their business plans."

AOL wants monetary damages - which under federal law would be triple the actual damages found by the court - as well as an immediate injunction against "ongoing and further damage" to Netscape.

One possible option, if a judge rules in favor of AOL, would be to force Microsoft to sell a stripped-down version of its Windows operating system so computer manufacturers could choose which Internet browser to offer. That has also been requested by nine state attorneys general suing Microsoft in federal court.

U.S. District Judge Thomas Penfield Jackson, who heard the federal government's case against Microsoft in the Netscape matter, found that Microsoft tried to keep consumers from being able to choose Netscape.

"All of Microsoft's agreements, including the non-exclusive ones, severely restricted Netscape's access," Jackson wrote.

CBS News Legal Consultant Andrew Cohen called Tuesday's lawsuit, "the private flip side of the public antitrust case against Microsoft which has been going on for years and which just recently was settled by some but not all of the governments involved. In that case, the feds and the states were suing on behalf of consumers. In this case, the lawsuit is for Netscape's sake alone."

Microsoft spokesman Jim Desler said the company had not reviewed the Netscape lawsuit and could not comment on specific allegations but added: "AOL purchased Netscape for $10 billion, now AOL wants to blame Micosoft for Netscape and AOL's own mismanagement."

The 20 page Netscape suit filed in U.S. District Court for the District of Columbia said Microsoft acted illegally beginning in 1995 and that "Microsoft's illegal actions and the harms to Netscape are ongoing."

Netscape's suit seeks to prevent further anti-competitive behavior and asks for treble damages, to be determined at trial, to make up for lost browser licensing revenue and market share, among other things.

Microsoft bundled the browser with its Windows operating system, leading to the government suit.

The Justice Department had argued at trial that Microsoft feared Netscape's popular browser could evolve into a computer platform that could rival Microsoft's Windows operating system.

The appeals court cleared Microsoft of the specific charge of trying to monopolize the market for Internet browsers but said Microsoft, through various business practices, had unfairly competed with Netscape and other companies.

District Judge Colleen Kollar-Kotelly is due to hold hearings in March on proposals by the nine states arguing for tougher penalties against Microsoft. Around the same time she will hold separate hearings on whether the settlement is in the public interest.

AOL is one of several companies due to testify on behalf of the states seeking tougher penalties. After acquiring Netscape, AOL purchased the cable television and media empire of Time Warner in 2001 to become AOL Time Warner and is seen as one of Microsoft's chief competitors.

The holdout states want Microsoft to sell a cheaper, stripped-down version of its Windows operating system as well as give competitors access to the inner workings of the Internet Explorer browser and allow them to sell their own customized version of the Web browser.

Earlier this month, another federal judge scuttled a proposed settlement of consumer class-action suits against Microsoft.

District Judge J. Frederick Motz said the plan to have Microsoft donate computers and software to poor schools could give the company an edge in a market where Apple Computer Inc. has traditionally enjoyed a strong market share.