Microsoft Judge Favors Three-Way Split

U.S. District Court Judge Thomas Penfield Jackson dropped a bombshell in the ongoing Microsoft antitrust case Wednesday when he revealed that he is leaning toward splitting Microsoft Corp. into three parts, rather than the two proposed by the U.S. Department of Justice (DOJ).

The three-way split had been suggested to the court in an amicus brief (friend-of-the-court filing) submitted by the Computer and Communications Industry Association (CCIA) and the Software and Information Industry Association (SIIA).

“Rather than reorganizing Microsoft into only a Windows company and a single applications company, the court should supplement plaintiffs’ proposed final judgment by separating the Internet Explorer product and personnel into a third, independent company,” the brief said.

Judge Jackson indicated that it would be wiser to split Microsoft into identical companies that would compete against one another and foster healthy competition in the marketplace, rather than to split the software giant along product lines.

“The effect of a bisection [as proposed by the government] will in effect create two separate monopolies,” Jackson said.

Arguing that the company should be carved up along product lines, DOJ attorney Kevin O’Connor said that “there is an incentive to move [Microsoft] Office to other platforms, since the operating systems company will be looking to companies other than the Office company for its own applications. They would be competing against each other.”

The DOJ was given until Friday to file a revised breakup proposal.

Microsoft Asks for Slow Going

Microsoft was dealt a double blow early in Wednesday’s proceedings — first, when Jackson refused to honor Microsoft’s request for a dismissal of the government’s proposal, and second, when the court stated that the company would not be granted additional time to consider the proposal.

In response to Microsoft attorney John Warden’s initial argument that the only two items on the agenda should be Microsoft’s motion to strike down the government’s plan and a discussion of a timetable for the case, Jackson said, “I intend to proceed to the merits of the remedy.”

However, the judge did express reservations about breaking up the company before the appeals process has run its course. Appeals in the case are expected to take up to two years. The U.S. code, however, requires a final judgment before the first appeal can be made.

Microsoft’s Rebuttal

According to observers, the possibility of a three-way split caught Microsoft completely off guard.

Warden suggested that Microsoft would need months of research and preparation time if the court were to seriously consider a three-way split. The Microsoft counsel reminded the court of a 1968 breakup of United Shoe Corp., which he said resulted in the collapse of the American shoe industry.

“I submit this remedy is so extreme it will go a very long way to ensure that Microsoft is the one company that won’t win” in the software industry, Warden said.

A final judgment could come within 60 days. The DOJ is expected to request that temporary restrictions be placed on the company during the appeals process.