Microsoft antitrust trial reaches new crossroads

WASHINGTON -- In a federal courtroom here, a government antitrust lawyer last week read into the trial record a slew of documents purporting to show how Microsoft, through exclusive marketing deals with its computer hardware vendors, squeezed Netscape out of key channels for distributing Internet browsers.

While the alleged bullying tactics, which Microsoft's witnesses denied, took center stage at the trial, a quiet drama played out behind the scenes: Microsoft lawyers, armed with civil subpoenas, sought to examine sensitive data on the pending $4.2 billion buyout of Netscape Communications by America Online (AOL), the world's largest gate to the Internet.

By examining the merger documents, Microsoft hopes to bolster its argument that its antitrust case concerns a highly dynamic sector of the economy, one that has significantly changed even in the 18 weeks since the landmark trial began. At that time, Joel Klein, chief of the Justice Department's antitrust division, stood on the courthouse steps and said: "Microsoft has used massive monopoly power to harm competition and harm consumers, to limit what products can come to the market and prevent people with new and better ideas (from getting) a fair chance." But subsequent testimony by both sides -- buttressed by tens of thousands of pages of evidence, gleaned from 3.3 million documents -- has yet to answer a most basic question: Can the law that has been on the books for nearly 110 years deal effectively with a rapidly changing industry whose value rests almost solely on intellectual property? Whatever answers finally do emerge will not be soon in coming. That's because U.S. District Judge Thomas Penfield Jackson has put the trial on hold until at least mid-April to try drug gang members charged with murder. When the Microsoft trial resumes, each side will present three rebuttal witnesses and written proposals that they want the judge to approve. And when Jackson finally rules, the software giant expects to avoid any civil penalties by showing him that its actions in the marketplace, while highly aggressive, failed to harm consumers. "That's the bottom line," said William Neukom, Microsoft's veteran general counsel, who has sat at the head of the defense table at each trial session. In reviewing the 1890 Sherman Act, the U.S. Supreme Court has held that the antitrust law exists "for the protection of competition, not competitors." That ruling means the government must prove more than the fact that Microsoft's business practices hurt Netscape to the point that Netscape was forced to seek shelter from AOL. It must also persuade Jackson that Microsoft's conduct threatens the welfare of consumers. "It's really a question of the road not taken," said Tom Miller, the attorney general of Iowa, who has monitored the case closely, sometimes sitting at the prosecution bench. "We will never know how much useful innovation might have taken place that did not take place because Microsoft used its Windows monopoly power to stifle competition."

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