Lawsuit Against Microsoft Questions Nature Of Operating System Government Victory Could Force Software Giant To Unbundle Applications From Operating System

At the heart of the Justice Department’s latest antitrust complaint against Microsoft Corp. is a deceptively simple question that could have a far-reaching impact on the software world: What is a personal computer operating system?

In its challenge to Microsoft’s marketing practices for its Internet Explorer, the Justice Department charges that Microsoft is unfairly using its near-monopoly on operating systems to force computer makers to install the Internet browser. Microsoft counters that Internet Explorer is not a separate product but is rather an improvement of the Windows 95 operating system.

A Washington federal judge’s decision on that question could hamper Microsoft’s future plans for Windows 98 - a new operating system set for release sometime next year, which would fold the Internet browser’s capabilities into the company’s ubiquitous operating system. It also could question Microsoft’s long-standing strategy of continually incorporating new functions into the Windows software.

“If Microsoft wins this, there’s a fair question about whether there’s anything that can’t be subsumed into this huge, growing amoeba of the operating system,” said Ed Black, president of the Computer & Communications Industry Association, who applauded the Justice Department lawsuit.

If the Justice Department prevails, however, a ruling that the browser and the operating system are separate products could raise questions about Microsoft’s strategy for Windows 98.

“The Justice Department could argue that Microsoft’s just repackaged it into a new form, but the substance is the same,” said Washington antitrust lawyer Garret Rasmussen.

The case centers on language in Microsoft’s 1995 settlement of an earlier Justice Department antitrust lawsuit that accused the software maker of pressuring computer makers to favor its Windows software over the competition.

That settlement prohibits Microsoft from imposing conditions on computer makers that require them to install separate Microsoft programs to get the dominant Windows operating system.

The Justice Department says Microsoft has done just that with Internet Explorer.

“Microsoft went over the line when it chose to use its monopoly power in Windows to coerce computer manufacturers to also take its browser,” Assistant Attorney General Joel Klein said Monday.

Microsoft counters by pointing to language in the settlement that permits “integrated products.” Internet Explorer, the company says, is an acceptable, integrated part of the Windows system.

“We think it’s logical, appropriate and pro-competitive that, as new sources of information become available, you ought to be able to get there through the operating system,” William Neukom, Microsoft’s senior vice president for law, told the Bloomberg Forum. “This is a half-step of enhancement in a long story line of making information available to people from the PC.”

For years, smaller companies have complained to federal antitrust authorities about Microsoft’s aggressive effort to incorporate new functions into its Windows operating systems, letting computer users do things that formerly required them to buy separate, free-standing software programs.

Monday’s suit against Microsoft, however, represents the first time the government has raised questions about that process.

Microsoft’s many critics say it’s about time the government addressed the issue.

“It’s the first time they’ve begun to look at applications and how they’re integrated into the operating system,” said James Love, director of consumer advocate Ralph Nader’s Consumer Project on Technology. “The government has got to get in there and get some distance between the applications and the operating system.”

But antitrust officials have been reluctant to step in, antitrust lawyers say, because it’s difficult to convince a judge that consumers suffer when they get new features at no extra cost.

“Going after Microsoft for incorporating new features into a product is about the hardest thing you could imagine doing,” said Washington antitrust lawyer Joe Sims. “What is the line between making your product better and monopolizing another market?”