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Nowhere To Go But Up

When you've hit rock bottom, there's no place to go but up.

That's probably the way that Microsoft views its legal position - not to mention its appellate future - as it prepares to argue Monday before the U.S. Circuit Court of Appeals for the District of Columbia that the trial judge got it completely wrong when he ruled under federal anti-trust law that the software company is a harmful monopoly and should be broken up into smaller companies.

In fact, so one-sided were the rulings last year by U.S. District Judge Thomas Penfield Jackson that even if the appellate court were to side with the company on only one of the many issues raised on appeal, even if the appeals judges were to tinker with Jackson's ruling in some small way, it would be a big benefit to the Redmond, Washington giant. Something is simply better than nothing, which is precisely what Jackson gave Microsoft following the lengthy and famous anti-trust trial.

Some experts said in the wake of that trial that Microsoft knew all along that it wouldn't get a good break from Judge Jackson, who simply didn't buy the company's defense that it was not acting as a monopoly. These folks said that Microsoft's strategy all along has been to get the case before this federal appeals court with the best record possible to aid its efforts. That strategy - a risky one even in normal circumstances - now will be put to a high-stakes test.

But in spite of the usual appellate burden placed on parties that lose at trial, Microsoft has a lot going for it in this phase of the case. First, the appellate court once already has overturned Judge Jackson in a related case against the comany, suggesting that appellate judges are not likely to give the trial judge much deference here. It has to give great comfort to Gates and Company that this appeals court already has given us an indication that it doesn't necesarily view Microsoft and its corporate actitivies the same way that Jackson does.

Second, the court Microsoft now finds itself before is much more likely to be sympathetic to it - politically and philosophically - than was Jackson. There are four conservative Republicans on the bench - enough to create a majority on the seven-judge panel. These judges are much more likely to take a laissez-faire approach to the company than was the activist trial judge.

Third, Jackson himself has opened a few appellate doors for the company with his ill-timed and (some say) inappropriately negative comments about Microsoft chairman Bill Gates. After the trial over which he presided, Jackson said that Microsoft had showed "obstinacy" and that Gates had a "Napoleonic concept of himself." The remarks, alone, won't be enough to reverse Jackson's ruling but they will give those appellate judges another reason for doing so if they are otherwise inclined to side with Microsoft.

Finally, and this is a longshot, Microsoft may be able during oral argument to take advantage of the econmic downturn and, some say, increase in software alternatives since Jackson's break-up ruling last year. Even though such late-developing conditions are not formally a part of the record below - even though the appellate judges technically should not consider them - most judges don't live in a vacuum and several might be less inclined to break up the powerful company now than they were in 1999 or 2000.

Judge Jackson's factual findings, legal conclusions and remedy ruling were so far-reaching that it is virtually impossible to conceive of the appellate court affirming them in all respects. It also is hard to fathom the court reversing Jackson's ruling in all respects and giving Microsoft an out-and-out victory on appeal. Even if the appellate judges don't agree Jackson's ruling and his breakup order, they'd be hard-pressed to toss the whole case out.

The much more likely scenario, then, would be for the court to affirm Jackson on most of his rulings but stop short of affirming the break-up of Microsoft into two companies.

That would probably delight Microsoft but tick off the feds and the states involved, who argue that Microsoft cannot be trusted to police itself since it failed to do so after a 1995 consent decree. And then we'd be looking for a decision by the Justice Department about whether to take the case to the Supreme Court. That's the Bush Justice Department and it is anyone's guess whether the new kids in town will be willing to proceed as vigorously against Microsoft as were their predecessors.

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