Slashdot's "Instant" Legal Analysis of the MS Ruling

As soon as Judge Jackson's decision was available for download (from this mirror site, among others), I was on the phone with Washington DC attorney Don Weightman, who often serves as the informal "Slashdot legal interpreter" on federal law, especially for antitrust and regulatory matters. Click below for a transcript of the phone conversation Don and I had as we read the decision together. Don makes some great points!

Don - This decision from Judge Jackson is the best legal field guide I've seen to the new economy. It's great. This judge really gets it!

Robin - What do you mean?

Don - The judge appears to understand why and how people have been fighting the battle they've been fighting about software. Where Microsoft has been getting its competitive advantage and what it's been doing to keep it. What's more, there's a clear account of the relationship between big fish like MS and perhaps Sun and Netscape and the thousands of smaller developer who have to cope with program interfaces and live and die on the the competitive possibilities that the big fish allow them.

Note: Don says to pay particular attention to Paragraph 18 of Judge Jackson's ruling, which says the market MS controls is for PC operating systems, and also says Mac, Linux, and handheld appliances aren't in the same "ballpark" as PC OSes. Two other critical paragraphs Don notes are numbers 33 & 34, where the Judge describes why he considers that MS controls that market.

Paragraph 38 talks about the economics of software and #39 talks about positive network effect, or "why if everybody else has a piece of critical software you have to get it too." Paragraph 50 specifically mentions Linux, but Don says "I'll leave that one to you guys to decide how spot-on it is." :)

Beyond that, you might as well read the decision yourself. Don says, again, "This Judge really gets it!

Now back to the questions...

Robin - Now what happens? Does every software company that feels MS ever abused it file on them?

Don - I'm going to read to you from paragraph 93 ... "It is Microsoft's corporate practice to pressure other firms to halt software development that either shows the potential to weaken the applications barrier to entry or competes directly with Microsoft's most cherished software products." These are Judge Jackson's words for what happens to you if you try to compete with Microsoft. A lot of software company will be sharpening their word processors tonight...

Robin - How do you think consumers will react?

Don - When they realize that they've had to pay more for computers because MS has charged high prices for their OS, they may take the issue more personally. It's close to certain that someone, somewhere will file a class action suit.

Robin - What about the "browser wars" that actually started the whole thing? Where do they fit into all this?

Don - It looks as if (he stops for a moment to laugh some more) the Judge is finding that MS went after Netscape with both guns blazing, giving Explorer away with one hand and preventing Netscape's installation on new computers with the other, and that all of this was done for anti-competitive purposes. The other thing I'm seeing on the browser wars is that it's pretty clear that the Judge did not buy MS's story on why MSIE was bundled with Windows. He says, "Microsoft's actions have inflicted [collateral] harm on consumers who have no interest in using a Web browser at all" because Win98 runs more slowly it would if they hadn't put the browser in.

Also in paragraph 173 -- which I just quoted part of -- it says,"Microsoft has forced Windows 98 users uninterested in using [it] to carry software that, while providing them with no benefits, brings with it all the costs associated with carrying addtional software on a system. These include performance degradation, increased risk of incompatibilities, and the introduction of bugs."

Note: (At this point Don starts laughing and says, "It gets even better..") Really, you do need to read the decision for yourself! Don says, "You get the feeling that the Judge is a disgruntled Windows user!" But unlike most disgruntled Windows users, this one has the power to do something about it. Right on, Judge Jackson!

Robin - But Don, all the lovely legal language and Windows-knocking aside, isn't this decision going to end up getting appealed forever?

Don - Yes. However, it is unlikely that an appellate court will want to get its hands under the hood of the relationship between Windows and browsers and between MS and its competitors at level of detail shown by Judge Jackson's findings. It's possible to overturn this but it would be hard.

Robin - Don, how much do you figure MS has spent on legal fees so far, and how much more are they going to spend before this is over?

Don - I'm guessing that they've spent more than $50 million so far. And when you say "when all this is over," if you include the industry suits and class action suits brought by private plaintiffs, you could could be talking about real money. Even for MS.

Robin - What's "real money"?

Don - It depends on whether someone nails them for damages. A $10 rebate for each customer who has bought Windows would run into billions. When you add in the damages that could be claimed by other software makers besides Netscape [like Corel], and by users who ended up with MS products, perhaps at excessive prices, because others weren't available, then only the sky is the limit.

Robin - Do you think Bill Gates will have a "House For Sale" ad in the Seattle newspapers next Sunday?

Don - It depends on how fast and far Microsoft's stock price drops. It's already started to drop, according to a story that just went up on ZDNet.

Robin - Don't forget: all that happened today was that Judge Jackson decided MS was naughty. He didn't say what kind of punishment they should get, which he won't do until he hears a whole new set of arguments. Don's best guess is that the ruling on punishment won't come out "until early next year."

Don Weightman and I will try to get a "Microsoft antitrust legal issues" follow-up together by sometime next week. Or perhaps you would like to do it? If so -- and if you're qualified -- e-mail [e-mail] and we'll talk about it.

- Robin "roblimo" Miller

Re:Oddly enough

When we - and I mean Slashdot editors - have a question about a point of federal antitrust law or FCC regulation, Don is always happy to give us advice or steer us to someone who can. The "Broadband Wars" story to which you refer was his only previous *public* appearance here, but a lot more "behind the scenes" work goes into Slashdot than most people realize. (Believe it or not, Rob and Jeff don't spend all day playing with Rob's robot dog. They bust ass most of the time!)

Anyway, I think Don deserves great thanks for having blown part of a Friday evening with his family to share his insights with us. He works long, hard hours -- and I happen to know that today was particularly busy for him. ;-)

- Robin

They're going to lose employees...

Probably the most immediate and tangible effect this will have on Microsoft is in employee turnover.

As I understand it, MS doesn't really pay that well, except employees get rich on the stock options. Suddenly those stocks aren't so attractive. MS will have trouble holding on to its talent, or hiring new staff.

Anybody know how much it would cost Microsoft to pay market rates for it's staff?

Agree, Judge "gets it"

I've read most of the "Findings of Fact" - skimmed some bits. Not bad reading actually. I'd followed the trial pretty closely (mostly by reading stuff at The Register [theregister.co.uk] who did include a lot of detail and analysis) and I can see where pretty much all the points Judge Jackson brought up. I agree pretty much right on with just about everything the good Judge said. I'm no lawyer though... but my studies in Economics helped!

I remember an article that appeared on Infoworld about a year ago, basically saying that if MS is offically declared a monopoly, it'll basically open the sluice gates for law-suits against MS.

It'll probabaly have a decent effect on the two other major current MS lawsuits - Sun against MS over Java (that Judge for that lawsuit is expected to re-rule on some major points soon) and the Caldera one which will go to trial soon. (couldn't find any references to Caldera in the "findings of fact" though)

Another interesting point is that it is (apparantly) possible for the DoJ to ask for any full appeal to go directly the the Supreme Court! (or something like that) Uh oh... ^-^

Finally... I wish the people I do share dealings with would do "future" shares - basically betting that the share price will fall, as I had some money I'd quite happily put on MS's shares falling. Oh well... It'll be interesting to see the affect on MS's main competitors.

Nice mercury news article

Jackson ruling sends powerful message [mercurycenter.com]

You have not read it

The judge ruled, as a finding of fact, that Microsoft is a monopoly and has maintained that monopoly through anti-competitive behaviour that resulted in collateral damage to customers, consumers, and third parties.

And this is not "naughty" behaviour? These facts completely suffice to determine that Microsoft has violated US law. The facts as stated open up further ground, for instance many companies could - Monday - file a lawsuit against Microsoft for costs incurred due to web browsing on computers that had browsers installed for no good reason.

HP could sue for increased support costs. It only takes 3 support calls before an OEM is no longer makes a profit. They had the lowest support calling rate in the business (better than Apple's) until Microsoft forced them to use a crappy boot sequence.

IBM could sue, WOW could they sue!

And, of course, AOL owns Netscape. They could *definitely* sue.

Plus this will help the Caldera case (even though Dr. DOS took place before the events covered in the document).

I am looking for a lot of lawsuits. And they will be for big - as in 8-9 digit figures - chunks of change.

:-)

Cheers,
Ben

reason why decision was on Friday at 6:30...

It's obviously to avoid stock market chaos. Now we have a weekend to analyze this, and people will talk about it. So on Monday, when MSFT goes down 10 or 20 points, it won't drag the rest of the market with this.

Re:He does get it. (CORRECTION)

In my second paragraph I used the word "illegally" .. it shouldn't be there -- this is just a Finding of Fact. Of course, one could deduce that Microsoft's actions are illegal (especially regarding the licensing issues), but this was not a legal ruling on the case.

Sorry if I caused any confusion.

He does get it.

I've read the first hundred pages of the FoF, and Judge Jackson really does get it. He spells out very clearly what Microsoft has done, how Microsoft did it, and why it's an abuse of monopoly power. He clearly spells out their position in the market relative to other operating systems. He goes to great lengths to define the difference between the OS, applications, and APIs.

In summary, he states that Microsoft illegally used it's control over the operating system market to gain advantage over Netscape and Sun in regards to the web browser and java runtime environment markets, through restrictive licensing agreements and deliberately smearing the line between application and operating system. (That is my understanding thus far -- there are quite a few smaller issues that he touches on)

I know a lot of people are going to read the press clippings that are saturated with some pretty charged statements from both Microsoft and the Judge Jackson. Unfortunately, they really don't give a good representation of the FoF, which is not only an easy read, but a very enlightening one.

I HIGHLY RECOMMEND THAT YOU READ THE FIRST 25 PAGES OF THE FoF. Educate yourself before you become a victim of the avalanche of spin doctoring that's going to consume the media for the next week.

HTML Version of the Findings is available

Note the the GPO site [gpo.gov] has not only PDF [gpo.gov] and WP [gpo.gov] but also HTML [gpo.gov] versions of the Findings up.

It May be a bit easier for some to read....

-JimC

Compete technically

This ruling has a chance to finally level the playing field.

Many of us are Linux and/or *BSD users. We've known for quite a while that we have a technically superior OS in many ways. There are also others like BeOS that are trying to compete on the ease of use of their OS.

All I would like to see is enough change instituted so that the playing field can finally be leveled, so that all users can chooses the operating systems and applications that suit their needs and tastes. (Thinking in terms of punishment is the right thing, because that doesn't necessarily change their future behaviour.)

Hopefully we can also see a movement to better embrace ISO, IETF, W3C, etc standards so that me using Linux, and you using Be, and someone else using Windows2005 can all share info, etc.

Now's the time to push for real positive change and not just see how much money we can bleed away from MS (although I'm sure that will happen too).

Hm. Appealed forever?

Not if it gets to the Supreme Court, it won't be.

It's probably not in MSFT's interests to be fighting this for that long, either, if they can get a settlement that'll end speculation over what the judicial system *might* do; and the DoJ lawyers would get to go home pointing to winning results in a *very* big case. Eh, guess we'll see.