Microsoft Corp. on Monday denied it held a monopoly or had violated antitrust law, and asked an appeals court to throw out a lower court ruling that would break it into two separate companies.
In a 150-page brief ahead of oral arguments set for February, Microsoft said District Judge Thomas Penfield Jackson ruled incorrectly that its business practices were anti-competitive.
"Far from violating the antitrust laws, Microsoft's conduct was pro-competitive, producing enormous consumer benefits," the company told the United States Court of Appeals.
Microsoft argued that the "entire proceeding" before Jackson was "infected with error." And it said his order breaking up the company amounted to "radical relief."
Shares of Microsoft rose $3/4 to close at $70-11/16 on the Nasdaq market during a day when the market generally enjoyed rising prices on hopes the U.S. presidential election impasse was reaching an end.
Jackson ordered on June 7 that the company be broken up and also set other remedies, all of which have been suspended pending appeal.
The trial judge ruled that the company "placed an oppressive thumb on the scale of competitive fortune" through its unfair and illegal practices and that its anti-competitive actions "trammeled the competitive process through which the computer industry generally stimulates innovation and conduces to the optimum benefit of consumers."
Jackson found that Microsoft holds monopoly power in the market for personal computer operating systems with its Windows product and illegally used that power to exclude competitors.
NOT A MONOPOLY
But the Redmond, Wash.-based software giant told the appeals court that Windows is not a monopoly if the market is "properly defined" to include Apple Computer products, personal digital assistants like the Palm Inc's Pilot and other operating systems.
The company also challenged the finding that it had tried to monopolize the Web browser market, saying its vigorous competition with Netscape had not foreclosed the market to the rival browser, now owned by America Online Inc.
Jackson found that Microsoft decided it could not beat Netscape merely by giving it away so it decided to "constrict Netscape's access to the distribution channels."
Replied Microsoft: "There is no finding that the inclusion of (Internet Explorer) in Windows prevented Netscape from getting (Netscape) Navigator into the hands of consumers." It said that 160 million copies were distributed in 1998 alone.
Jackson also found that the company illegally tied its Web browser to Windows, forcing consumers to purchase the two together without any increased benefits. Jackson said the combination was to the detriment of consumers, because the firm forced computer makers "to ignore consumer demand for a browserless version of Windows."
Microsoft said Jackson's conclusion was wrong because the integration provided benefits unavailable with a separate browser, citing HTML help, Windows update and the user interface.
Jackson's overall handling of the case was also criticized in Microsoft's brief, in particular the adoption of the government's breakup proposal without holding further hearings and the judge's repeated public statements about the merits of the case, even during the trial itself.
A DIFFERENT JUDGE
"These public comments alone require that the judgment be vacated," Microsoft said. If any part of the judgment was not reversed, then the remainder of the case should be remanded to a different judge for a new trial, the company said.
The Justice Department and states that brought the case had urged the U.S. Supreme Court to directly hear the company's appeal. But the high court sided with Microsoft and sent the case to the lower appellate court, which ruled for the company in a related case in 1998.
A Justice Department spokeswoman said the government remained confident in its case and looked forward to its presentation to the appeals court.
"The judgment is well-supported by the evidence offered during a 78-day trial including thousands of pages of Microsoft's own documents," said spokeswoman Gina Talamona. The government is due to file its brief on Jan. 12.
Whatever the outcome, the case seems certain to be appealed to the Supreme Court, barring any settlement between the parties.
The result of the disputed U.S. presidential election could play a role. Political analysts and antitrust experts have speculated that an administration under Republican George W. Bush would be inclined to cut a deal with Microsoft if the company wins at the appeals court level.