Has Judge Jackson Made Up His Mind?

All the courtroom signs point to a ruling against Microsoft

For Microsoft Corp.'s lawyers, it's a familiar pattern: They ask U.S. District Judge Thomas Penfield Jackson for extra time to prepare their defense against the Justice Dept.'s landmark antitrust suit. Denied. They try to prevent Justice from expanding the case from a narrow surgical strike into a broad pattern-and-practice action. Denied. They beg the judge to stop the trustbusters from showing embarrassing video excerpts of CEO William H. Gates III evading deposition questions. Denied.

Eight weeks into the antitrust trial of the century, and evidence that Judge Jackson doesn't like Microsoft's case continues to mount. He has rejected almost all the company's important procedural motions. He snaps at its lawyers for dragging out their cross-examinations. He shakes his head when Bill Gates squirms and equivocates on videotape and recently complained that Gates "has not been particularly responsive to" questioning.

BIGGER PROBLEM. Based on these signals and on the Judge's written rulings, observers increasingly believe Jackson will hand Microsoft a defeat. The burly, silver-haired, 61-year-old judge "has tipped his hand," says William E. Kovacic, visiting professor of antitrust at George Washington University law school. "The government is going to win at the trial level. It is not clear by how much, but I think this judge is going to find a violation and impose some kind of remedy."

If Kovacic and other antitrust experts are right, that could be a bigger problem for Microsoft than it might at first seem. True, the company would have the right to take any adverse decision to the District of Columbia Circuit Court of Appeals, which in the summer handed the software maker a key victory when it overturned the judge's 1997 injunction against it. But Jackson can still cause plenty of trouble (table). If the conservative Reagan appointee rules that Microsoft is guilty of predatory practices, it would create a public-relations nightmare--and could result in immediate restrictions on the company's business practices. And while there's no way for Jackson to bulletproof his decision against an appeals panel that is ideologically hostile to antitrust enforcement, he has the ability to frame his ruling in ways that make it hard to reverse.

Of course, the case is a long way from over. Microsoft hasn't presented its lineup of witnesses, and it's possible they'll be able to torpedo Justice's key claims. Moreover, reading judicial tea leaves isn't an exact science. "Sometimes, judges make you think you've got them on your side when you haven't," cautions New York antitrust litigator Stephen Axinn. But at this point, it's hard to believe Microsoft can escape without some punishment.

The company has clashed with the court from the very beginning (Microsoft, Jackson, and the Justice Dept. all declined to comment for this story.) Shortly after Justice sued the company in October, 1997, for violating the terms of its 1995 consent decree, Microsoft tried to block the judge from appointing Harvard Law School professor Lawrence Lessig as a trial consultant. Then, in January, Jackson threatened to hold the company in contempt. After he ordered Microsoft to separate its browser from its Windows operating system, company lawyers insisted this was technologically impossible--a task Jackson accomplished himself, in court, with a few clicks of his mouse.

Since then, the relationship between Jackson and Microsoft's trial team has improved somewhat. But although the judge is now friendlier to Microsoft's lawyers, he doesn't appear to be any more sympathetic to their case. When Jackson asked Apple Computer Inc. Vice-President Avadis Tevanian a series of questions on Nov. 5 about whether integrating an Internet browser into an operating system provided technological benefits, he asked the questions "in a way that Justice could have scripted," says Kovacic. Jackson's legal reasoning also often echoes the government's. His December, 1997, preliminary injunction ruling "seemed to be a reading of everything in the government's favor," says Ernest Gellhorn, an antitrust professor at George Mason University.

Some antitrust experts believe Jackson should do more to hide his feelings about Microsoft. By definition, judges should never display any partiality, says Hillard M. Sterling, a Chicago antitrust litigator. "Very little is gained by open displays of skepticism. Judge Jackson's demeanor borders on the unprofessional," Sterling says. Others criticize Jackson for appearing at times to fall asleep during the proceedings and for displaying a surprising lack of business knowledge. When Microsoft cross-examined Netscape Communications Corp. CEO James L. Barksdale about statements the company made to stock analysts, the judge interrupted the proceedings to say he was confused. "The problem is I don't know what an analyst is or does," he said.

Despite these gripes, many lawyers give Jackson credit for pushing the trial along so swiftly. Hoping to prevent a repeat of the decade-long IBM antitrust debacle, Jackson has run the fastest monopolization trial in history. That's likely to encourage trustbusters--who have been so terrified by "the legacy of the IBM case" that they have failed "to bring even good cases"--to be more aggressive in the future, says New York University antitrust professor Eleanor Fox.

Although Microsoft often complains that it isn't getting enough time to defend itself, the quick pace could end up working in its favor. How? If it loses in Jackson's court, company lawyers will be able to argue that the decision should be reversed on the grounds that the accelerated schedule deprived them of enough time to respond to allegations.

What's more, Microsoft's attorneys would be sure to raise a slew of legal, economic, and factual objections to an adverse opinion. Among other things, they're likely to argue that integration is good for consumers, that the cost of computing is declining, and that the law bars judges from second-guessing high-tech product design decisions. Already, Microsoft has shown its willingness to anger Jackson, if need be, to introduce these points into the trial record.

"ALREADY LOST." In fact, some observers take this indifference to Jackson's ire as a sign that the company has written off the trial judge and started focusing on the higher courts. Most litigants generally avoid alienating the trial judge who first hears a case and are careful not to slow down the proceeding by entering every shred of evidence that supports their position--even if it might improve the chances of a successful appeal.

Not Microsoft. Early on the third day of the company's cross-examination of government economist Frederick R. Warren-Boulton, for example, Jackson became impatient with the snail's pace of the questioning--and later barked at lawyer Michael Lacovara to speed it up. But the defense prolonged the process for another day and a half. "Microsoft has already lost this judge. It's playing to the higher courts," says Sterling.

But if Jackson rules against Microsoft, he can do so in ways that would make it harder for the appeals court to overturn his ruling. First, he can base his decision on the credibility of witnesses, taking into account factors such as their facial expressions and tone of voice. Because appellate judges are not in the courtroom, they are only allowed to reverse Jackson on these grounds if his determinations are "clearly erroneous"--a daunting legal standard.

Second, Jackson can push "this case into the mold of other decisions where the Supreme Court has found against monopolists," says Axinn. This would make it harder for the appeals court to reverse him than if Jackson found against Microsoft on the basis of innovative, untested legal theories of his own.

That may come as a surprise to many of Microsoft's investors. In recent weeks, the company has been assuring them that it will be able to circumvent any adverse ruling when it takes the case to the friendly D.C. Court of Appeals--a PR campaign that has helped drive its share price up 27% since the trial began, to 131 3/16 on Dec. 8. But if the company loses in Jackson's courtroom, it could sting a lot more than the company lets on.

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