Court Decision Could Threaten XP Launch

Microsoft's October launch of Windows XP could be in jeopardy after a federal appeals court ruling Friday denied the company's request for a delay in its antitrust battle.

Microsoft asked the U.S. Court of Appeals for the District of Columbia to postpone its case from heading to a trial court, where a judge is expected to decide a new set of remedies to impose on the software giant.

Microsoft had requested a stay in the case until the Supreme Court reviews the June 28 ruling from the Appeals Court, which affirmed Microsoft was operating as an illegal monopoly. Friday's decision could open the door to the government blocking shipment of the new operating system, analysts say.

A Microsoft official says the company will continue working on multiple fronts to resolve the case. "We're prepared to move ahead with getting the remaining issues in the case resolved while we await word on the Supreme Court review," says Jim Desler, a Microsoft spokesperson.

In other words, the company will continue to pursue settlement talks with the U.S. Department of Justice. "We've stated before that we're committed to resolving the remaining issues through settlement," he says.

The DOJ applauded the Appeals Court decision. "We are pleased with the Court's decision, and we look forward to proceedings in the District Court," says DOJ spokesperson Gina Talamona. One state attorney general, Tom Miller of Iowa, also cheered the Court's order. "It is important to keep the case moving forward as quickly as possible in such a fast-moving industry," he says.

In the appellate ruling, the Appeals Court shot down behavioral and structural remedies imposed by District Court Judge Thomas Penfield Jackson. One of those remedies included splitting Microsoft into two companies: one to focus on operating systems, the other on software. The panel of appellate judges overturned those remedies, and ordered the case back to a trial court where a new judge is expected to impose new remedies, withdrawing Jackson from the case.

No Cause for Stay

In Friday's ruling, the Appeals Court said Microsoft failed to show that moving the case forward "would present a substantial question and that there is good cause for a stay."

The judges also said in the two-page order that Microsoft "misconstrued" the court's opinion "particularly with respect to what would have been required to justify vacating the district court's findings of fact and conclusions of law as a remedy for the violation."

The judges scolded Jackson for comments he made to the press two months before he issued his ruling in June 2000, concluding that he did in fact violate the Code of Conduct of United States Judges. The court, however, concluded that Jackson's private discussions with reporters "discerned no evidence of actual bias," and upheld eight findings of fact from his ruling.

After failing to win a rehearing on the issue of "commingling" its Internet Explorer browser code with the Windows operating system with the Appeals Court in July, Microsoft took its case to the Supreme Court. Now the company has taken the defense that Jackson's violation of the Code of Conduct makes his entire ruling moot.

"I think it [the ruling] is typical of what I would have expected," the Appeals Court to do, says Bob Schneider, a Chicago attorney following the case. The ruling also paves the way for the DOJ to potentially block the release of Microsoft's Windows XP operating system, due on October 25, he adds.

"Had [the Appeals Court] granted the Microsoft request, the lower court wouldn't have had jurisdiction to issue an injunction" preventing the release of the new operating system, he says.

The appeals court decision Friday "raises the risk for Windows XP," agrees Rob Enderle, an analyst with Giga Information Group. "It's likely we'll have an expedited trial. If the court appears to be leaning against Microsoft, it makes it more likely for an injunction to be issued before XP goes out into the market. And there's a chance that the trial could be over before it's released, or that XP could be pulled from the shelves early."

Microsoft's Desler declined to comment on how Friday's ruling would affect the release of Windows XP.