THE MICROSOFT TRIAL: WHAT HAVE WE LEARNED?

So here we are, after a year of courtroom theater and millions of words of commentary, waiting for an out-of-court settlement to what is grandly titled "United States of America v. Microsoft Corporation". Conceivably, the biggest software trial in history could be wrapped up in time for Christmas. More likely, the case will grind on for another couple of years like a Wagnerian opera, reaching a grand finale before the Supreme Court itself.

Still, we're clearly at an intermission. This is a good time to look at the lessons we might have learned in Judge Jackson's courtroom:

H Lesson #1: Microsoft is a monopoly: Whoa! Big news here! Outside of Redmond, is there anyone on the planet who really believes Microsoft worries about the Linux Ogre, Larry Ellison's Net Computer, or a vicious iMac attack? Or who thinks Microsoft doesn't have a near- monopoly in word processors, spreadsheets, presentations, developer tools, HTML editors, and lots of other stuff? But monopolies aren't illegal--they're the natural prize for marketplace success. (In fact, many smaller software companies hold comparable monopoly poistions in their own niche markets.) Rather, the law prohibits wrongful conduct by monopolies. And here the trial has been a bust. High-tech mergers constantly get in trouble because the Justice Department makes up it market segment definitions on the fly, there are no meaningful guidelines for "coopetition," and it might be nice to know if it's really illegal to integrate stand-alone products. A true landmark case might have offered rules of conduct in these areas, but so far we're fumbling in the dark.

H Lesson #2: Microsoft genuinely deserves its predatory reputation: Eager deal-makers have always closed their eyes to warnings that Microsoft routinely steals secrets and shreds contracts. If nothing else, the trial has uncovered so much top-level conniving at Microsoft that doing business in Redmond now looks like an invitation to a mugging. Of course, it's tough to cut Microsoft out of all deals, but chances are its future partners will now send only their most skeptical negotiators--and a tape recorder.

H Lesson #3: Next time, plan for the end game: From the beginning, the Justice Department insisted that talking about "remedies" was premature. Maybe so, but now the DOJ looks like a dog who chased trucks--and finally caught one. Faced with an overwhelmingly favorable court ruling, the DOJ finds itself with a list of proposed penalties that all seem fatally flawed and likely to create chaos and suffering for computer users. Worse, any remedy the DOJ finally does propose is bound to be instantly second-guessed by 19 state attorney generals and a horde of other litigants. Ironically, the only participant in this trial who may be able to rescue the DOJ is probably Bill Gates. Our guess is that Gates will propose a meaningless penalty--such as "documenting all the Windows APIs"--and the DOJ will promptly claim victory and grant Microsoft broad immunity from further claims.

H Lesson #4: Justice delayed is justice denied: The Justice Department began sniffing around Microsoft back in mid-1993. Five years later, attorney general Janet Reno filed the current antitrust action. Since that time, the core issues in the case have shifted repeatedly. Netscape is gone as an independent company, the browser wars are little more than a historical footnote, Linux and the Palm OS have actually snatched a chunk of markets that Microsoft covets, and thousands of Windows entrepreneurs are jumping ship for fresh opportunities in the dot-com world. Once again, we've learned that the legal system takes so long to settle a fight among technology companies that it no longer matters which side was right.

H Lesson #5: Microsoft is politically untouchable: It's worth asking why, after six years of embarrassing courtroom disclosures, Microsoft remains one of the world's most admired corporations. The company's stock price is at near-record highs, sales grew 29% this year despite an absence of major product launches, and the opinion polls show that Bill Gates has become a true folk hero. What's going on here? The answer, we suspect, is that huge numbers of people have come to believe Windows is their computer--a flaky, troublesome device that nevertheless empowers and liberates. The Justice Department may think it's chasing corporate bad guys, but the public sees a precious institution under siege. Guess who wins?