Originally created 11/09/99

Judge shows lack of trust in Microsoft



WASHINGTON -- The judge behind the blistering ruling against the Microsoft Corp. didn't question the honesty of Bill Gates outright, but he rejected almost every explanation of events offered under oath by the world's most famous billionaire.

The lack of faith that U.S. District Judge Thomas Penfield Jackson showed in Microsoft's trustworthiness could hurt chances for a less severe punishment -- or even for a settlement offer -- that relied on a company pledge of some future behavior toward rivals in the technology industry.

Once the judge determines which antitrust laws Microsoft broke, he could order punishments as severe as breaking up the company unless a settlement is reached, which many lawyers and analysts consider unlikely.

The sides repeated Monday night that they at least are willing to talk. Bob Herbold, Microsoft's chief operating officer, said the company has set as a condition that it still be able to dictate how its software is designed.

"We must protect the ability to innovate our products," Herbold said on "The NewsHour with Jim Lehrer." "We would love to settle this thing."

Discussing a possible settlement, Assistant Attorney General Joel Klein said: "I'm not willing to take, so to speak, half a loaf."

Investors showed they weren't ready to abandon Microsoft on Monday. In very heavy trading -- about five times the average for the company -- shares fell to $83.50 but then recovered to $89.93 3/4 , down just $1.62 1/2 from last week's close.

The judge, in his factual findings Friday, embraced the government's version of key events and Microsoft's motivations.

In one of its most sensational claims during the lawsuit, the Justice Department said Microsoft quietly met with software rival Netscape to illegally divide the market, a charge Gates himself called "an outrageous lie."

The judge called the offer "an effort to persuade Netscape to structure its business such that the company would not distribute platform-level browsing software for Windows." He didn't buy Microsoft's version of events throughout his ruling.

"That's the implication," said Robert Litan, a former senior Justice official now at the Brookings Institution. "He didn't come out and say it, but if you read between the lines, that's certainly what he ended up deciding."

"It's clear he didn't think they had much (credibility)," agreed Marc Schildkraut, a former Federal Trade Commission official who questioned Gates during negotiations with Microsoft in the early 1990s in the FTC's antitrust investigation. "The findings are very one-sided. It's a tough row for them to hoe on that ground."

Throughout Microsoft's case, statements by Gates and others outside the courtroom seemed at times to contradict their legal claims. Stephen Houck, the lead lawyer for the 19 states joining Justice in suing Microsoft, said the company suffered from the problem of "the doggoned witness."

Microsoft trial attorneys, for example, said the company's Web browser was inextricably intertwined within Windows, but other company lawyers wrote for an obscure patent last year that "a Web browser ... is separate from the operating system."

The judge decided: "Web browsers and operating systems are separate products."

Microsoft declined to comment on inferences the judge didn't find its trial witnesses truthful.

But the company's renowned aggressiveness -- and the implication that executives bent the truth under oath -- could hurt the chances for negotiating a settlement or escaping with moderate conduct-remedy penalties -- enforced promises not to behave in certain ways.

"Any opponent with a track record of defiance or untrustworthiness in the eyes of the law has to be treated as such," said Richard Blumenthal, attorney general for Connecticut, one of 19 states that sued Microsoft with Justice. "Whenever we talk settlement with an opponent whose credibility and trustworthiness are in question, we would demand very strict and specific measures of compliance, with severe penalties."

"To simply have a court order saying, 'please play nice and don't do these things' -- there are some serious questions whether conduct remedies would be enough," added Wayne Klein, Utah's assistant attorney general. "They're needed, but will they be enough?"

To assuage the judge, Microsoft also will need to overcome a courtroom episode two years ago when it infuriated Jackson. The government had accused the company of violating an agreement in its last major antitrust investigation.

When he ordered Microsoft in December 1997 to separate its Internet browser software from its dominant Windows operating system, the company complied -- but after it did, Windows didn't work anymore.

"It seemed absolutely clear to you that I entered an order that required you to distribute a product that would not work?" Jackson asked, outraged. "Is that what you're telling me?"

Harry First, the head of antitrust for the New York attorney general, said those types of legal maneuvers don't help the company convince the judge it can be trusted.

"How do they carry out these obligations? Do they cut corners?" First asked. "We've got a bit of a track record. Certainly this judge has seen it in front of him. The past is prologue."