- The Washington Times - Tuesday, February 27, 2001

Lawyers for Redmond, Wash.-based software giant Microsoft Corp. told the U.S. Court of Appeals yesterday the company did not illegally stifle competition.

Microsoft and the federal government fielded a barrage of questions from all seven judges in the company's appeal of a federal judge's ruling that the company violated U.S. antitrust law and should be split in two.

Lawyers spent the first of two days of oral arguments fighting about Microsoft maintaining a monopoly in the market for operating systems and about the company's practice of tying Internet Explorer, its popular Web browser, to the Windows operating system to market a single, dominant product.

Neither Justice Department lawyer Jeffrey Minear nor Microsoft attorney Richard Urowsky escaped the courtroom before undergoing aggressive questioning.

Microsoft is trying to reverse a decision last year by District Judge Thomas Penfield Jackson, who concluded the company violated antitrust laws by using illegal methods to protect its monopoly in computer-operating systems and said the company must be split in two. He also said the company tried illegally to use its dominance of operating systems to gain a monopoly of the market for Internet browsers.

The federal government, 18 states and the District filed their suit against Microsoft in May 1998.

The first half of yesterday's hearing was dominated by discussion of whether Microsoft maintained and expanded its operating-system monopoly by stifling competition from Netscape Navigator, a rival Web browser.

Mr. Urowsky told the appeals court the government's case was damaged by the availability of Netscape's browser.

"Nothing Microsoft did foreclosed Netscape from any portion of the marketplace," he said.

Offering evidence that Netscape was unscathed by Microsoft, Mr. Urowsky said the number of Navigator users increased from 15 million to 33 million from 1996 to 1998.

"Millions of people chose to use Navigator despite" the fact rival Explorer was included with Windows, said Mr. Urowsky, who is arguing the case before the same U.S. Court of Appeals that ruled for Microsoft in a related matter in 1998.

Although the number of people buying the product increased, Netscape's share of the market has fallen, according to San Diego-based Internet research firm WebSideStory.

The research firm says Netscape's share of the global browser market has fallen from 13 percent in June to 12 percent Feb. 21. The company had an 80 percent share of the market in 1996. Internet Explorer's share of the worldwide browser market has grown from 64 percent two years ago to 87 percent last month, the research firm said.

The federal government's lawyer seemed to have at least one sympathetic ear on the bench. Judge Douglas Ginsburg accused Microsoft of using "saturation bombing" tactics against Netscape.

But other judges asked Mr. Minear, the government lawyer, whether action against Microsoft would protect consumers or merely boost Netscape's market share.

"Is that what we're really talking about?" Judge Raymond Randolph asked. "One monopolist replacing another? Are we fighting for the newest, latest monopoly status?"

Microsoft's tactics have not harmed consumers, Steve Del Bianco, vice president of the pro-Microsoft group Association for Competitive Technology, said after yesterday's hearing.

"I am hopeful about the case, but I would like to hear more discussion of the lack of consumer harm from all this," Mr. Del Bianco said.

Microsoft opponents argue that the company's monopoly has harmed consumers by stunting research and development into new products that could rival Windows and Internet Explorer and keeping prices for that software high.

Observers following the case said questions from the panel of seven judges gave little indication yesterday of their thinking.

"Sometimes you just love getting tough questions. If you have good answers, you go a long way toward proving your case," said Ed Black, president of the Computer and Communications Industry Association, a District of Columbia-based group that opposes Microsoft.

Judge Jackson said in June that Microsoft must be split in two, with one company that develops and markets its software applications and one that makes and markets its operating systems and servers.

The operating-system company's products would include Windows 95, 98, NT and 2000, plus the mobile operating system Pocket PC and its new operating system.

Microsoft's applications company would include products like Microsoft Office, its Internet Explorer browser, the Outlook Express e-mail program and other software. It also would include its hardware, MSNBC cable network, Hotmail and the Expedia on-line travel service, among other businesses.

The appeals hearing resumes today, the last day of the appeal. Attorneys for the two sides will discuss the claim that Microsoft attempted to monopolize the market for browsers. In addition, the controversial subject of Judge Jackson's decision to split Microsoft in two will come up, as will his comments about the case.

The court didn't allow cameras in the courtroom yesterday, but it did agree to broadcast live audio of its proceedings for the first time on television and on Web sites to accommodate the heavy demand of people interested in the landmark lawsuit.

The court could take months to make a decision.

The antitrust case is the biggest since the government took AT&T; Corp. to court. AT&T; agreed in 1982 to a consent decree with the government that led to its breakup and the creation of the "Baby Bells" two years later.

Microsoft closed higher yesterday on the Nasdaq Stock Market, up $2.81 a share to close at $59.56.

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