Oral Argument in Microsoft Appeal

(April 22, 1998).  The U.S. Court of Appeals in Washington DC heard oral arguments Tuesday morning in Microsoft's appeal of Judge Thomas Penfield Jackson's preliminary injunction in the case USA v. Microsoft.    The Court did not announce its decision, or indicate when it might rule.

Microsoft has appealed the December 11 Order of Judge Jackson, which included a preliminary injunction requiring Microsoft to provide original equipment manufacturers (PC makers) with the option of licensing Microsoft's Windows 95 with the Internet Explorer (IE) icon and other means of consumer access to the browser hidden..  This December Order was a ruling on the Department of Justice's (DOJ) October 20 "Petition by the United States to Show Cause Why Respondent  Microsoft Corporation Should Not Be Held in Civil Contempt" (and Memorandum in support).

The DOJ did not plead for a preliminary injunction.  Rather, it asked that Microsoft be held in contempt for violating § IV(E)(i) of the 1995 Consent Decree between Microsoft and the DOJ for allegedly tying the sales of its Windows 95 operating system to original equipment manufacturers (OEMs) to installation of its Internet Explorer software.   Microsoft's alleges that Internet Explorer is integrated into Windows 95, within the meaning of § IV(E)(i) of the Consent Decree.

The legal issues presented for review by the Court of Appeals include:

• Whether Judge Jackson erred in entering a sua sponte preliminary injunction without (1) providing notice to Microsoft, (2) holding an evidentiary hearing, or (3) making specific findings of fact, or by granting the DOJ relief that it had not requested.
• Whether Judge Jackson erred in not dismissing the proceeding after denying the DOJ's request for a finding of contempt.
• Whether Judge Jackson erred in construing IV(E)(i) of the Consent Decree.

The Court devoted considerable time to procedural issues pertaining to the trial court's issuance of a preliminary injunction.  While the DOJ prayer, or request to the Court, stretched onto four pages, and included many requests for injunctive remedies, it did not ask for a preliminary injunction.  Nor, Microsoft argued, did Judge Jackson follow procedure required in preliminary injunction proceedings.

The case was argued by Richard Urowsky for Microsoft and Douglas Melamed for the DOJ.  Urowsky is an attorney in the New York office of the law firm of Sullivan and Cromwell.  The three judges on this Court of Appeals panel are Raymond Randolph, Stephen F. Williams, and Patricia M. Wald.  Randolph was a lawyer in private practice before being appointed by Ronald Reagan.   Williams was a law professor before being picked by George Bush.   Wald, the lone liberal on the panel, dates back to the Carter administration.

While this hearing was a major media event, it was not a significant legal event.  Appellate courts merely determine if a trial court judge committed legal error.  Determinations are made upon the basis of the trial court record, and the appeal briefs filed by attorneys. Oral arguments are only a small and insignificant step in the appellate process.

In this case, teams of top lawyers wrote excellent briefs.  The Court could not learn much new from an oral argument.  However, these events give judges a chance to ask questions about any items that are not in the briefs.  For the public and press, oral arguments present a rare opportunity to observe the judges, who otherwise operate in seclusion, and never give interviews.

The Court had scheduled twenty minutes per side, but ended up taking ninety minutes.   The Court was particularly aggressive in its questioning of the DOJ.  However, Court of Appeals judges often grill one side, and then rule for the other.

The Court neither announced its decision, nor indicated when it would rule.  This too is standard.

Future DOJ Antitrust Suit

The present legal action is becoming increasingly irrelevant.  The present action is based on the allegation that Microsoft has tied the sale of Windows 95 to Internet Explorer (IE) in violation of the Consent Decree.  The preliminary injunction requires that Microsoft offer OEMs Windows 95 without IE icons.  Yet, as Urowsky stated at oral argument, none "have availed themselves of the version of Windows 95 designed by the Department of Justice.''

Also, Microsoft's public release of Windows 98 is scheduled for June; it will soon be selling very few copies of Windows 95.  This means that the DOJ's claim regarding Windows 95 will become moot.  Any claim that Windows 98 and IE are not an integrated product will be much weaker.  And any claims regarding future operating system releases, such as NT 5.0, would be very hard to pursue.

Any significant future attempts by the DOJ to regulate Microsoft's software production or sales practices, or otherwise rein in Microsoft, would thus likely come in the form of a new Sherman Antitrust Act case based an a different set of facts and legal theories.

On Monday, April 20, a new anti-Microsoft group announced that Netscape, a main impetus behind the DOJ current action, has hired former Judge Robert Bork to lobby the Antitrust Division to bring a new action.

Microsoft's Comments on the Hearing

"We believe there's a fundamental principle at stake in this case. We're standing up to protect the freedom of every software company to innovate and continually improve their products for consumers," said William H. Neukom, Microsoft SVP for law and corporate affairs, in a press release issued after the hearing.

"We believe the preliminary injunction issued by the Court would set a very dangerous precedent, by injecting government regulation into software product design," Neukom said. "We think consumers and the free market should decide what features should go into a software product, not government regulations. If the government tries to regulate complex issues of software product design, it will be bad for consumers, bad for innovation, and bad for the future of the US software industry."

"This is a straightforward contract case, and Microsoft has complied fully with the contract," Neukom said. "Protecting the freedom to innovate was a critical element of the 1995 consent decree. The consent decree specifically allows Microsoft to integrate new features and new capabilities into our products."