The filings derive from a case brought against Microsoft by nine state attorneys general who are opposed to the terms of an antitrust settlement the company reached last year with the Department of Justice. The states are seeking stiffer sanctions than those called for in the DOJ's consent decree. That settlement primarily forbids Microsoft from taking punitive action against computer makers that bundle software from Microsoft rivals on their PCs.
Some analysts believe Microsoft's development efforts may have been slowed by a case that has dragged on for more than four years. "There's no question that this has caused a certain amount of distraction at the executive level," says Jonathan Guerkink, a Wells Fargo Securities analyst.
In a 500-plus-page filing, Microsoft impugned the impartiality of state witnesses, questioned the legal basis for the case, and argued, as it has previously, that sanctions proposed by the nonconsenting states would hurt not only the company but the technology industry in general.
Not to be outdone, the states--including California, Connecticut, and Iowa, as well as the District of Columbia--argue that the consent decree has done little to prevent Microsoft from behaving as a ruthless monopolist that has tried to squash competing technologies such as Java and Netscape Navigator.
The filings follow weeks of acrimonious testimony before District Judge Colleen Kollar-Kotelly. To approve the initial consent decree, Kollar-Kotelly must find that it is in the public interest.
In its filing, Microsoft claimed that most of the states' witnesses had either direct or indirect ties to its competitors. Included in what Microsoft called the "13 self-interested representatives of Microsoft's competitors" that the states "paraded before the court" were executives from two of its fiercest competitors--Sun Microsystems and AOL Time Warner.
In an indication of where technology's next big turf war will be fought, Microsoft noted that the testimony of Sun's chief strategy officer, Jonathan Schwartz, "was almost exclusively devoted to Web services." Schwartz, Microsoft said, attacked its Passport Web-services authentication service, which competes with Sun's Liberty Alliance Project. As for AOL, Microsoft noted that it, too, is developing a competitive authentication service--Magic Carpet--and claimed that during negotiations AOL refused to make Magic Carpet interoperable with Passport.
Microsoft also states that splitting its Windows operating system into discrete modules, as the states would like, would harm hardware and software vendors, as well as consumers. "Vendors would have to focus on a 'Compaq version' of Windows or a 'Dell version.'" That, Microsoft says, would mean consumers "would inevitably pay higher prices for lower-quality products."
In their own filing, the states argue that the consent decree, reached in November, does little to stop Microsoft's monopolistic behavior and that stiffer sanctions are required. Among other things, the states argue that Microsoft should not be allowed to prohibit PC makers from removing certain desktop icons from Windows before sale, that Microsoft allow PC original equipment manufacturers to promote products made by Microsoft rivals through the Windows Active Desktop, and that Microsoft offer a version of Windows from which its Internet Explorer is unbundled. According to the states' filing, one of Microsoft's objectives "is to prevent nascent platform threats from ripening or facilitating the growth of real alternatives to Windows."