By MICHAEL GEIST
From Friday's Globe and Mail
Over the next few weeks, consumers around the world will experience a new Microsoft marketing onslaught. Experience will be the operative word, as the company releases its latest software upgrade — Microsoft XP, short for Microsoft experience. The U.S. Department of Justice's decision to drop its efforts to break up Microsoft, along with its claims that the software giant was illegally tying software to its operating system, will lead to claims that the DOJ has had enough of this experience and is now ready to settle. Indeed, the past few months have brought a new trial judge, new appeals to the U.S. Supreme Court, and new allegations about Microsoft's conduct in the release of Windows XP. With all of these developments, new legal tactics may make sense. It is premature, though, to say that this experience is over. In fact, the DOJ actions, along with the lawsuits launched by 18 state attorneys general, are far from done. A breakup and tying claim may be off the table, but an appellate court decided as much in June when it overturned the remedies portion of the first trial judge's decision. Thursday's announcement merely means that the DOJ does not intend to pursue those lines of the case that the appellate court had already called into question. Consider, however, what remains in the DOJ's arsenal. The appellate court upheld the trial court findings that Microsoft enjoys monopoly power in the personal computer operating system market. It also upheld findings that the software giant abused that power by entering into illegal contracts with computer manufacturers and Internet service providers and by threatening companies such as Intel and Apple. Moreover, the DOJ is looking to add to its case by delving into more recent developments such as the release of Windows XP and disputes over the interoperability of instant messaging and media player software. Buried at the bottom of Thursday's press release was an indication that "the [Justice] Department will ask the court for a period of expedited discovery to investigate developments in the industry since the trial concluded, and to evaluate whether additional conduct-related provisions are necessary, especially in the absence of a breakup." The DOJ's release sounds like this dispute just got bigger. That interpretation would bring the United States in line with legal developments elsewhere. The European Commission last week announced plans to expand its Microsoft investigation into whether the company is illegally tying its Windows Media Player to the Windows operating system. This week, Daum Communications, South Korea's largest Internet portal, filed a complaint with the Korean Fair Trade Commission against Microsoft over the Windows XP release. The Korean FTC promised to investigate Daum's concerns about Microsoft's activities in the instant messaging market. Although some competition regulators, notably Canada's Competition Bureau, seem surprisingly content to sit on the sidelines, Microsoft's legal battles clearly continue unabated. In fact, recent legal developments suggest that Microsoft should seriously consider a change in legal strategy. As the company tangles with regulators worldwide, it now finds its every move, however legitimate, being called into question. With its new operating system and its .Net initiative set for release, now is the ideal time for Microsoft to drop its staunch defence of past actions, along with its legal manoeuvrings, and make a serious attempt to settle. Throughout the trial phase of this litigation, Microsoft remained adamant that a serious compromise was not in the cards. Following the appellate decision confirming its illegal monopolistic practices, the company seemed content to drag out the case for as long the legal system might allow. Now the DOJ has sent a clear warning that the case is no longer solely about Microsoft's past conduct, but its future plans too. Whether Microsoft heeds that warning will depend upon what it has learned from experience. Michael Geist is a law professor at the University of Ottawa Law School and Director of E-Commerce Law at the law firm Goodmans LLP.
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