Microsoft, Holdout States Square Off

WASHINGTON, D.C. -- Just days before their remedy hearing is scheduled to begin, Microsoft and the states pursuing antitrust litigation against it have filed with the court a number of oppositions to each other's proceeding plans.

Showing signs that the antitrust battle between Microsoft and nine states plus the District of Columbia is heating up, the court filings made over the past few days include terse language and back-and-forth disagreements over the testimony, witnesses, and even the timing of the hearing. U.S. District Court Judge Colleen Kollar-Kotelly has set March 11 as the date for this remedies hearing to begin.

According to a number of documents filed by both sides that were made available Thursday, Microsoft and the states appear to be at odds over the scope and context of the upcoming hearing. "Microsoft seems to misunderstand, as it has shown in its recent flurry of (prehearing) motions, the purpose and mission of the upcoming remedies hearing," reads one of the states' filings. "The remedies hearing is to enable the court to resolve disputed issues of fact so that it can, consistent with the law and the facts, fashion a remedy that most appropriately addresses Microsoft's unlawful monopoly maintenance."

Delay Requested

One conflict stems from Microsoft's emergency motion to postpone the hearing by two weeks, which it filed on Tuesday.

Microsoft asked to delay the remedy hearing because the states had amended their proposed remedy to Microsoft's anticompetitive business practices. The states responded that the software company just last week modified its proposed settlement with the U.S. Department of Justice and nine other states, but never formally filed the amended version in this separate case--even though that settlement plays a role in the ongoing litigation. Since that modified settlement with the Justice Department and the other nine states is the only remedy that Microsoft said should be assessed in its case with the nonsettling states, Microsoft in essence "back-doored" its own changes into these proceedings, the states claimed.

Microsoft had told the court that it needed more time to prepare for the hearing, since the states significantly modified the remedy. The states retorted that Microsoft overstated the scope of those changes. "But for Microsoft's idiosyncratic and unjustified reading of the states' original proposal, the overwhelming majority of these clarifications would never have been necessary," the states' document said.

Rehashing Matters?

Microsoft and the states are also at odds over whether testimony related to removing middleware code from Windows should be allowed in the remedy hearing. The software company argued that since the Justice Department and states did not seek to force Microsoft to remove middleware code from Windows--but simply the user access, namely desktop icons--in the original combined case, it should not be a subject of the holdout states' case now. The states claimed that testimony and evidence related to middleware code removal is "highly relevant to fashioning the relief necessary to address Microsoft's anticompetitive comingling of code."

Other issues at hand are whether the holdout states should be allowed to include testimony about events that took place before June 24, 1999, the last day of testimony in the case's liability phase, as well as testimony regarding Microsoft's business practices in markets besides the desktop operating system area, such as server operating systems, handheld devices, and set-top boxes.

Microsoft maintained that since an appeals' court decision last year found Microsoft in violation of antitrust law only in the PC OS market, evidence and testimony related to the other markets is irrelevant, adding that the appeals court's findings of liability create the basis for the remedy process. In their filing, the states claimed that Judge Kollar-Kotelly has already stated she would not limit the scope of the remedy hearing before it begins.

Witness Limits Sought

The parties also disagree over whether the states' lay witnesses--those who aren't legal experts--should be allowed to offer testimony regarding each side's proposed remedy. The states claimed that Microsoft's opposition to this testimony, on the grounds that it would amount to opinions from unqualified witnesses, is premature and unnecessary.

"The non-settling states complain that Microsoft's motion ... is an attempt to 'muzzle' their witnesses 'in sweeping fashion.' If by 'muzzle' they mean prevent them from cluttering the record with inadmissible opinion testimony from lay witnesses, then they are correct," countered Microsoft's filing.

Microsoft also asked the court to preclude the testimony of James Barksdale, former chief executive of Netscape, and Steven McGeady, a former Intel vice president, because their testimony would be repetitive of prior testimony or "wholly speculative." The states, not surprisingly, opposed that motion.