Microsoft's Battles, Old and New

In a surprising end to the Microsoft antitrust hearings, Microsoft lawyers refused to comply with a judge's request that they offer possible concessions to the nine states suing the company.
U.S. District Judge Colleen Kollar-Kotelly had asked both sides to rank their competing proposals and wanted Microsoft to say whether it could accept any of the "least onerous" state penalties.
During closing arguments Wednesday, Microsoft lawyer John Warden refused to give any ground.
"This proposed decree is fundamentally flawed," Warden said of the state penalties. "We can't remedy any of this by changing a few words here and there."
The judge, who had asked both sides to find middle ground, smiled slightly through Warden's statements.
Kollar-Kotelly has to decide whether to institute the states' harsh sanctions against Microsoft as punishment for breaking antitrust law. She is also weighing a much less demanding federal settlement made last year.
The arguments capped two months of testimony. Kollar-Kotelly is expected to make her decisions later this summer.
When asked to address some of the ways the federal settlement with the company could be modified, Warden offered to eliminate some extra penalties that Microsoft agreed to during negotiations.
Warden similarly dismissed Kollar-Kotelly's request that the company consider how perceived loopholes in the federal deal could be fixed.
Warden called the criticisms "groundless," and said they were "by people who would benefit by its changes," referring to the company's competitors.
"We have been through this. We negotiated. We went as far as we can go," Warden said. "That's the deal."
Lawyers for the states targeted company chairman Bill Gates during their arguments. Gates and other Microsoft executives used "thuggish-like tactics" against rivals Netscape and Sun, lead lawyer Brendan Sullivan said.
"It's really astounding to think that someone of Mr. Gates' background let it happen," Sullivan said in only his third speech of the hearings.
The states' lawyers focused on Gates' testimony in the hearings as well as his companywide e-mails.
Lawyer Steven Kuney said threats were "part of the fabric of how they do business." He also mocked Gates' testimony that the proposed penalties would crush innovation and hurt the industry.
"Somehow they know better than anybody else what is good for the PC ecosystem," Kuney said. "And what is good for Microsoft is good for the economy, consumers and everybody else."
While joking that the task was like "giving up your children," Kuney complied with Kollar-Kotelly's wish by prioritizing the states' penalties. He said making sure Microsoft discloses enough technical information to software developers is most important to the health of the technology industry.
That information would make sure that competing software works well with Microsoft's dominant Windows operating system. Microsoft has been criticized for holding back such information.
Kuney also mentioned more flexibility and protection for computer makers from restrictive contracts and retaliation by Microsoft.
During the hearings, lawyers for the states at times posed hypothetical questions based on changes in their proposed penalties. Kollar-Kotelly indicated in her order that she may want the states to make those changes, and Kuney said the states would be willing to make some modifications.
Warden called the state proposals "harmful to consumer welfare" and unfair to Microsoft.
Warden highlighted several state proposals, including ones that would put the Internet Explorer Web browser into the public domain and force Microsoft to let companies use its Office productivity software for other operating systems.
The Justice Department would have to agree to any changes Microsoft would want to make to the federal settlement, which has yet to be approved.
The original judge in the antitrust case, Thomas Penfield Jackson, ordered Microsoft broken into two companies. An appeals court upheld many of the violations but reversed the breakup order and appointed Kollar-Kotelly to determine a new punishment.
States that rejected the government's settlement with Microsoft last fall and are pressing for tougher penalties are Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia, along with the District of Columbia.