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Microsoft Trial Set To Resume

Unless Microsoft and the Justice Department achieve some kind of miraculous breakthrough, the antitrust trial will resume in U.S. District Court on May 10, a judge ordered Wednesday.

The trial has been on an extended break while U.S. District Judge Thomas Penfield Jackson tries an unrelated criminal case.

Shares of Microsoft sank 3 3/8 to 89 5/8 Wednesday.

Attorneys for Microsoft (MSFT), the Justice Department and 19 states told reporters that they would not comment on the progress, if any, of settlement talks that began Tuesday at the Justice Department.

"If they are to be fruitful, those discussions cannot take place in public," said David Boies, the special prosecutor for the Justice Department, as William Neukom, general counsel for Microsoft, and Stephen Houck, assistant attorney general of New York, nodded in agreement.

The only thing that's evident from the talks is that no settlement has been reached yet. Jackson told the attorneys that the trial will resume with three rebuttal witness for each side on May 10 or on the first Monday after the other case is sent to the jury.

Jackson also told the attorneys to prepare a procedure for the remaining depositions in the case, which must be conducted in public. Microsoft will depose America Online (AOL) Chairman Steve Case and one other executive from AOL, Netscape Communications and Sun Microsystems (SUNW). The government will also be able to depose officials of the companies. (Editor's note: CBS News is the broadcast news provider for America Online.)

The judge has ruled that the recent merger of AOL and Netscape and the AOL-Sun alliance has significantly changed the competitive landscape in the Internet and computing business. He wants evidence on what impact the merger and alliance will have on Microsoft's alleged attempts to monopolize those markets.

The judge also told the attorneys that, following the final three witnesses, he'll give them 30 days to prepare their final arguments on the facts they think they've proved in the trial. After Jackson rules on the facts, the attorneys will argue what those facts mean to the law.

The government has accused Microsoft of using its monopoly in personal computer operating systems to dominate other markets, like the Internet, and of using its new power in those markets to reinforce its Windows monopoly.

The two sides remain far apart after more than four months of testimony. Neither seems ready to budge on key issues. And there seems to be a little bad blood between the two.

Microsoft reportedly offered to change some of its business practices but not to segregate its Internet browsing software from its dominant Windows operating system.

Microsoft CEO Bill Gates has been adamant that Microsoft will not yield on two key principals: the integrity of Windows and the ability of the company to make its products better. See related story.

Microsoft contends it has powerful precedents on its side that would liit the scope of any remedy, even if it loses in the district court.

The states smell blood. They think they and the Justice Department have presented a powerful case that shows that Microsoft's business strategy was almost exclusively geared to preserving, protecting and extending the dominance of Windows. They think they're winning the case.

They'd like to force Microsoft to allow other companies to develop and sell their own versions of Windows to break Microsoft's monopoly on operating systems.

But the company said legal protections for its own products would prevent any mandatory licensing to other companies. "There are laws in this country that protect the copyright of all companies that create intellectual property," spokesman Greg Shaw said Monday.

William Kovacic, a George Washington University antitrust expert, predicted Microsoft would find any proposal to surrender its Windows blueprint "out of the question."

He also characterized the proposal as a nuclear-weapon-style demand by the government, akin to calls for breaking up the company.

"If a breakup is a megaton weapon, then forced licensing is a high-kiloton yield - it's just a smaller nuclear package," Kovacic said.

Microsoft's legal team is hoping it'll come up with some damaging documents from America Online, Netscape and Sun that will show competition in the technology industry is much more vibrant than the government's case argues.

Microsoft consultant Vic Fazio, a former congressman from Northern California, pointed out Tuesday that IBM, which had a near lock on the mainframe business when federal antitrust regulators zeroed in in the 1980s, found that advantage erased by Microsoft and others with the advent of distributed computing -- and without government involvement.

"The marketplace," Fazio told a San Francisco audience, "moves a lot more quickly than government lawyers ever can. ... The market should be able to choose who succeeds today and also be able to choose another (victor) tomorrow."

Written By Rex Nutting, CBS MarketWatch

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