Skip to main content

No clear psychological winner emerged in the first of two days in appellate court for



and the

Justice Department

this week. A panel of seven judges peppered lawyers from both sides with straightforward questions, but didn't so much as hint at their leanings as they fleshed out the facts of the case on Microsoft's abuse of monopoly power.

The two-day hearing will review a trial judge's decision that Microsoft abused its monopoly of computer operating systems to strangle competition in the Internet browser market as well as his recommended break-up of the software giant.

The government opened Monday with its strongest foot forward, detailing Microsoft's predatory behavior toward competition and the legality of bundling its Web browser with its operating system. The appellate court said it would not overturn Judge Thomas Penfield Jackson's conclusion that Microsoft was guilty of anticompetitive behavior, limiting itself to the legality of his decisions.

Experts cautioned that the judges' sharp questioning Monday would not be indicative of their final ruling, which will not come before May. As Monday favored the DOJ, Tuesday's hearing will bring up the most controversial material: whether trial Judge Jackson was so biased against Microsoft that it affected his ruling.

Throughout Monday's arguments, judges were equally tough on DOJ lawyer and Assistant Solicitor General Jeffrey Minear as they were on Microsoft lead attorney Richard Urowsky. In discussing the computer sales channel with the U.S. government lawyer, judges asked if the


customer, the "quintessential novice," really cared whether he or she was given a choice between

Netscape's Navigator


Microsoft's Internet Explorer


Scroll to Continue

TheStreet Recommends

Similarly, when Urowsky fielded questions about Microsoft's anticompetitive actions, the judges wanted a thorough explanation of browser market share, threshing out the number associated with Netscape's 22% slice, some 60 million Navigator downloads. Did 60 million downloads equate to 60 million Navigator users? Additionally, it comes as no surprise that the judges were very interested in the bundling of the Internet Explorer browser and the Windows operating system, one of Judge Jackson's favorite topics in earlier antitrust trial proceedings. However, the appellate court acknowledged that "tying" was a less concrete segment of antitrust law than predatory behavior.

A good time was had by none.

Experts around the situation warned against interpreting judges' sentiments from their lines of questioning. "The judges were very direct with both sides," remarked Ken Starr, of Clinton independent counsel fame, on the Web site of


, a technology group that opposes Microsoft's software stranglehold. "It is clear that the court is trying to get its arms and hands around the issue."

Investors continued their Friday celebration of Microsoft's improved legal chances, pushing the stock up $2.81 to $59.56 although some said the rise had more to do with an article in


that predicted the software giant will restart its earnings growth in the second half of 2001. While Wall Street analysts stress that caution is still in order, the threatening clouds above Redmond have begun to disperse with the appeals trial. Experts agree that the most drastic break-up remedy is unlikely to be upheld by the more conservative Court of Appeals judges.

Keep the cork on that champagne, however: The court is still in a position to impose remedies on Microsoft, even if it decides against Judge Jackson's stiff break-up penalties. Chris Compton, antitrust partner at legendary Silicon Valley law firm

Wilson Sonsini Goodrich & Rosati,

warns investors about reading Monday's questions like tea leaves.

"The questions are intended to provoke, rather than signal where the judge is coming from," he explains. "When

presiding appellate Judge

Harry Edwards talks about Netscape and

Sun Microsystems

being the new monopoly, yes, that sounds pretty hostile. But even that I wouldn't read too much into. You have to hear the arguments over two days before reading into it It's just like with Napster -- the oral argument led a lot of people to feel the court would help Napster more than it did in the end."

Which leaves investors to rubberneck Tuesday at the second day of arguments, which emphasizes a set of issues that are less favorable to the DOJ. Tuesday the trial shifts to the remedies put forward by Judge Jackson and Jackson's own behavior in and out of court regarding the trial, both highly controversial topics that have the most potential to cause a new ruling at the hands of the appellate court.