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Legal Dueling Microsoft, Justice Department Defend Contentious Antitrust Settlement

Sat., Jan. 21, 1995, midnight

The Justice Department and Microsoft Corp. defended their antitrust settlement Friday before a federal judge who sharply questioned its limited effect on the software company.

U.S. District Judge Stanley Sporkin, after a day of heated and humorous exchanges over the agreement, said he would take a few more days before deciding whether to approve it.

The settlement forces Microsoft to change the way it sells, or licenses, operating system software to personal computer makers. Critics have said the pact does not change the company’s most troublesome practices.

Assistant Attorney General Anne Bingaman, the Justice Department’s top antitrust prosecutor, told Sporkin the agreement reflected the case prosecutors knew they could win last summer, when it was made. The company is under scrutiny and will be sued if wrongdoing is found, she said.

“We had a licensing case,” Bingaman said. “We did not have another case at that time.”

Sporkin’s confidence in questioning the prosecutors’ judgment reflects his long career as enforcement chief at the Securities and Exchange Commission. He dramatized his inquiries with several funny references to that career.

When Bingaman began the hearing urging him to approve the pact, he quipped, “Will the government give me a pen to sign or can I use my own? I’ve got to have some role here.”

Citing his readings about Microsoft and legal filings submitted by Microsoft competitors and customers, Sporkin asked why a broad number of other complaints about the company weren’t pursued.

Antitrust settlements are subject to judicial review under a law known as the Tunney Act. Bingaman argued Sporkin would be violating the law if he were to reject the agreement on the basis of issues not covered in the charges filed against Microsoft.

The Microsoft case has been widely followed in the computer industry because the company is the biggest seller of operating systems, the programs that run the basic functions of a personal computer. Because of that dominance, it is able to drive standards on products by other companies, ranging from chip designs to the look of a computer game.

As he had indicated in a written order Thursday, Sporkin said he wondered why Microsoft wasn’t required to establish a barrier between its developers of operating software and applications software, which includes word processing and spreadsheet programs.

The judge spent a great deal of time probing why the company wasn’t prevented from making misleading statements about products in development, a marketing practice known as “vaporware” that tends to cause customers to wait before trying a competitor’s product.

A group of anonymous software companies, represented by attorney Gary Reback of Palo Alto, Calif., provided internal Microsoft documents that described a scheme to take customers from Borland International Inc. by announcing a competitive product months before it was ready.

“This is as close to a smoking gun as you’re going to find,” Sporkin said. He said Justice Department and Microsoft attorneys had misled him by saying at an earlier hearing that no such evidence existed.

Microsoft attorney Richard Urowsky said technology companies routinely announce products before they are available and said other judges have ruled that such announcements are illegal only when there is no product in development.

In one tense exchange, Sporkin said Urowsky had lost credibility for saying previously there was no evidence that Microsoft engaged in such announcements.

“I assumed you were using the term in the way it’s defined in the courts,” Urowsky replied. “I honor my duty of candor to the court.”

Bingaman later said those documents were among the more than 1 million collected by prosecutors in their investigation of Microsoft but reiterated her decision not to pursue that case.

Both the Justice Department and Microsoft questioned the timing of the parties represented by Reback, who filed their objections just last week, more than six months after the Tunney Act review began.

Objections in the past 10 days by IDE Corp. and a Washington-based group called the Computer and Communications Industry Association were also welcomed by Sporkin.

The judge granted none of the objectors a formal role in the case.

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