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Microsoft appeals ruling
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August 7, 2001: 6:22 p.m. ET
Company asks Supreme Court to reject finding it is anti-competitive monopoly
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NEW YORK (CNNfn) - Microsoft Corp. Tuesday asked the U.S. Supreme Court to overturn a federal appeals court ruling that the software company is an illegal monopoly that hurt consumers and smothered the competition.
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 Antitrust expert Leonard Orland talks with CNNfn's Bruce Francis about Microsoft's chances of winning its appeal to the Supreme Court. |
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While the court of appeals ruling had been a partial victory for Microsoft – it set aside a lower court order to split the company into two – the Court of Appeals for the District Circuit also left intact the lower court's findings that Microsoft (MSFT: up $0.22 to $66.35, Research, Estimates) broke the nation's antitrust laws.
Legal experts were split on the chances that Microsoft had of winning a Supreme Court hearing in the case.
Shares of Microsoft (MSFT: Research, Estimates), one of 30 stocks in the Dow Jones industrial average, fell back to about where they started Tuesday, losing 25 cents to $66.10 in quiet after-hours trading following the announcement. The stock had risen 22 cents to $66.35 in regular trading.
Microsoft's filing argues that the court of appeals findings of "deliberate, repeated, egregious, and flagrant" ethical violations by District Court Judge Thomas Penfield Jackson, who handled the case, should have meant his findings against the company would not remain in force.
"Such disqualification would require vacatur of the district court's findings of fact and conclusions of law," Microsoft argues in its filing Tuesday.
By arguing its case narrowly on the issue of the judge's bias, even if it loses Microsoft preserves a chance to come back later and argue that the conclusions upheld by the appeals court are wrong.
The appeal, which was widely expected, came just days before the case was to be handed off to a new judge to decide on punishment.
The Justice Department, in a brief statement, dismissed Microsoft's argument. "This was an issue addressed by the Court of Appeals," said Gina Talamona, a spokeswoman for the department. "We will respond promptly to their filing."
Iowa Attorney General Tom Miller, one of 18 state prosecutors in the case, said the states would argue against the Supreme Court hearing the appeal, as well as any delay in the case.
The federal appeals court earlier this summer threw out Jackson's ruling breaking Microsoft in two – even while it agreed with his decision that Microsoft was an illegal monopoly – removed him from the case and criticized his comments to news media in which he compared Gates to Napoleon and the company to a drug-dealing street gang. Through a spokeswoman, Jackson declined comment Tuesday, the Associated Press reported.
Click here for a look at special report: Microsoft on Trial
Robert Levy, senior fellow in constitutional studies for the Washington think tank Cato Institute, said the unanimous ruling by the Court of Appeals on the issue makes the Supreme Court unlikely to take the case at this point.
"This was a 7-0 decision by a court with considerable antitrust expertise," said Levy. "There's no split in circuits that the court needs to settle. There's also a chance of settlement. It's unlikely the court would want to interfere with that."
But Levy said if the Supreme Court surprises him and decides to hear the appeal, he believes there is then a good chance Microsoft could get the findings against it overturned.
University of Connecticut Law Professor Leonard Orlando said he thinks the Supreme Court will be concerned enough about the appearance of bias in this case that it will agree to hear the case. He said it is difficult to accept the court of appeals finding that Jackson showed bias when he was weighing remedies against Microsoft but not when he was considering whether its actions broke antitrust law.
"Microsoft paints a powerful picture in its filing," Orlando told CNNfn's The N.E.W. Show. "If the judge had the appearance of bias, it's hard to see how that could be true in week 26 and not true in week 25."
The appeal could further delay a final decision in the case, which could be bad for the company's shareholders, said Marc Klee, portfolio manager at the John Hancock Technology Fund.
"For Microsoft, getting this issue resolved once and for all is critical," Klee told CNNfn's Street Sweep Tuesday.
Click here for a look at software stocks
The court of appeals' ruling referred the case back to another district court judge to consider the initial findings and the appropriate remedies. In its appeal Tuesday Microsoft asked that the new district court case be delayed until the Supreme Court decides whether or not to hear the case.
As the company and the government continued their legal battles, they have been in talks about possible settlement of the case. Microsoft spokesman Vivek Varma said Tuesday's request does not rule out settlement talks, which are in a preliminary stage.
Microsoft Chairman Bill Gates, who was speaking at a conference on artificial intelligence in Seattle, did not take questions on the case.
Meanwhile, Microsoft is facing new charges from some critics, including Sen. Charles Schumer (D-N.Y.), that its Windows XP operating system also is anticompetitive. But calls to block the upcoming release of Windows XP because of competitive concerns are unlikely to succeed due to the political and legal issues involved, industry analysts say. 
-- from staff and wire reports
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