With its in-your-face defense of antitrust charges muddled by shaky witnesses and incriminating e-mails, Microsoft Corp. has a new message for government prosecutors: Can we talk?
The world’s largest software company has signaled its willingness to try to negotiate a settlement to the often acrimonious five-month trial, now in recess until mid-April.
“We’re taking seriously the judge’s suggestion that we consider settlement discussions,” said a company official familiar with the case.
Joel Klein, assistant attorney general, said in a statement, “We have not received any settlement proposal from Microsoft,” but the Justice Department “has always been and remains open to a settlement that fully protects consumers and assures that similar antitrust violations do not occur in the future.”
The Justice Department and 19 states, among them Illinois, sued Microsoft last May for using the monopoly power of its industry-standard Windows operating system to try to take over the market for browsers, the software needed to navigate through the Internet’s global computer network.
Microsoft mounted a starchy defense, styling itself a pugnacious but legal competitor in a particularly dynamic and unpredictable sector of the economy.
The tone for the Redmond, Wash., company’s wall-to-wall denial of government accusations was set by CEO William H. Gates’ deposition. In portions played in court, the company co-founder offers testimony that is at turns hair-splitting, non-responsive and sullen.
Microsoft promised to demolish the government’s case, but the company’s defense over the last three months has repeatedly foundered. The company’s witnesses offered tortured explanations of e-mail describing predatory conduct that at times appeared to test the patience of the trial judge, Thomas Penfield Jackson, who is hearing the case without a jury.
In broaching the possibility of negotiations, Microsoft is picking up on a cue from Jackson, who suggested in a conference in his chambers last month that both sides consider a settlement.
Since the case was filed, Microsoft has shown some flexibility, loosening restrictions on how computer-makers can tailor the appearance of Windows.
But how much further Microsoft is willing to compromise remains open to question.
A central theme of the government suit has been that Microsoft illegally bundled its browser, Internet Explorer, with Windows, which runs at least 80 percent of the world’s desktop computers.
The government, in essence, wants to force Microsoft to market software without tying it to Windows.
In floating the notion of a negotiated settlement, however, the Microsoft official indicated that any compromise cannot restrict its ability to add features to Windows.
“We’ve got to maintain the fundamental right to innovate. . . . We need to make design decisions based on the market and based on consumers,” he said.
Noting the rigidity of that position, an official close to the states bringing suit said, “We’re not overly optimistic.” The first move, the official said, is up to Microsoft.
In fact, emboldened by what is generally perceived as a strong courtroom performance, government lawyers increasingly are talking about remedies–should they win the case–that go far beyond rejiggering the contents of Windows.
Discussions now include breaking up the company or forcing Microsoft to make the proprietary source code for Windows available to anyone who wants to buy a license for it.
Still, the willingness to talk is the first softening since settlement negotiations collapsed on the eve of the filing of the antitrust suit last May.
At a minimum, Microsoft may be able to salve its battered public image with a show of cooperation, observed Shane Greenstein, associate professor of management and strategy at Northwestern University’s J.L. Kellogg Graduate School of Management. “They had a public relations problem because they’ve been seen as unreasonable,” Greenstein said.
Microsoft may be willing to accept so-called conduct remedies, such as a further easing of restrictions on alterations computer manufacturers can make to Windows.
But, said Greenstein, “none of the conduct remedies are particularly effective,” especially in light of Microsoft’s history of finding ways around government-imposed restrictions.
For public consumption, anyway, Microsoft is adamant that its own missteps have merely drawn attention away from the fact that the government has not proved its case. Said the company spokesman, “We think that if you clear away a lot of the side issues, we think we have a strong case based on the law.”
But Donald Kempf, an antitrust attorney with Kirkland & Ellis, said Microsoft now likely wants to settle. Given its weak performance in court, the company cannot expect to win, either at trial or on appeal.
“The biggest hurdle they have now is that the credibility of their witnesses has been shattered,” said Kempf. “My thinking is `yes, they’re serious.’ “
