MICROSOFT COURT EXPANDS REPLIES - WITH APPEALS IN MIND.

On May 31st, Microsoft filed a detailed brief and criticism of the government's breakup plan in an attempt to demonstrate the lack of a basis on the record for the government's breakup plan. Microsoft's brief attacked virtually every element of the government's plan citing the proposal as defective, vague and ambiguous.

The government plan would result in two new companies, one holding the Windows operating system and the other, everything else, including all application programs such as Office Suite, Word, and Excel. This proposal ignores Microsoft's steadfastly maintained argument that Internet Explorer is merely a feature of Windows, and is not an independent application.

Microsoft included in its filing a justification for its decision to present an offer of proof in the record during the court proceeding of May 24. This document is a synopsis of what witnesses would have testified to had they been allowed to by the court. Microsoft had apparently concluded that it has nothing to lose by ignoring the Judge's comments discouraging further briefs, since Judge Jackson had apparently already made his decision to break the company up. The latest offer of proof included proposed testimony from industry leaders and academics who argue in opposition to any government breakup.

Microsoft's reply brief to the government's proposal requested a year within which to submit its own breakup plan and also requested that the ultimate decree remain in effect for four year, not ten years. Several of the suggested changes could have the effect, particularly on the appeal, of substantially weakening the government's proposal.

The government objected vehemently to Microsoft's filing of an offer of proof as mentioned above, and referred to it as a cynical ploy calculated to raise diversionary issues on appeal. However, it may well have been a sensible tact for Microsoft to have taken once Judge Jackson's intentions were so clearly visible.

In response to Microsoft's brief, the court has authorized the government to file a reply on Monday, June 5, with an additional two days until the morning of June 7, for Microsoft to respond to the government. These extensions are contrary to what the court had indicated was its position, but are probably designed to allow the government to beef up its proposal by responding to some significant arguments within the Microsoft brief. The government also conceded that certain of the changes suggested by Microsoft "seem to make sense". Therefore, a positive response to Microsoft's changes could strengthen the government's position on appeal.

The court has also indicated that it might seek to certify the case for hearing before the Supreme Court. This is not only because Judge Jackson wants to accelerate a review of his decision by the highest court, but probably because he wants to avoid a review of his decision by the United States Court of Appeals for the District of Columbia. There have been significant differences between the Court of Appeals and Judge Jackson's decisions in the past which suggests that they may not be wholly in agreement with his view of bundling of products as intrinsically anti-competitive.

It appears that Microsoft is pinning its hopes on an appeal process, first to the U.S. Court of Appeals, and ultimately, if necessary, to the Supreme Court. Thus, its efforts are designed to provide a record upon which the U.S. Court of Appeals or the Supreme Court can significantly reject or find reasonable alternatives for Judge Jackson's proposed breakup plan.

One thing that seems to be missing from all of the filings is the recognition that there is an ongoing technological revolution which dramatically alters the entire industry, and its partnerships, on a month-by-month basis. The timeframes contemplated in some of these proposals represent an eternity in this industry, which can change dramatically over a matter of weeks rather than months.