When the Microsoft trial halted in February, talk of settlement was on everyone's lips. Both sides agreed to meet the following month, and even usually reticent US District Judge Thomas Penfield Jackson pointedly suggested that the teams of lawyers put the free time to good use.
The result: zilch. Talks broke down almost before they started, with the Justice Department and Microsoft remaining at a permanent impasse. Bill Gates appears as unwilling as ever to surrender control of Fortress Windows, and government attorneys are equally unwilling to lift the siege.
When the trial resumes on Tuesday, both sides are expected to begin calling the first of three witnesses each for rebuttal arguments.
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It seems the phalanx of attorneys used the trial's hiatus to question their opponents' witnesses and probe for admissions that might be useful in future legal arguments. The most recent deposition came on Friday, when Justice Department lawyers quizzed Microsoft witness Gordon Eubanks, the CEO of Oblix, a corporate automation start-up.
What government attorneys are interested in is what Eubanks did in his former job as head of Symantec, a position he left last month.
Symantec makes popular Windows utility software such as Norton Utilities and anti-virus products, and Microsoft hopes Eubanks will convince the court that the Redmond, Washington, firm's Windows franchise is under constant assault from new technologies.
During the deposition held in San Jose, Calif., Eubanks said that Gates called him about four weeks ago to ask him if he'd be willing to testify. "Gates said that Microsoft wanted someone with lengthy experience in the software industry to testify and talk about the industry, the technology, and future trends in the technology -- to put the case into proper context," Mark Murray, a Microsoft spokesman, said early Saturday morning.
Microsoft also plans to grill David Colburn, a senior vice president at America Online, about his company's purchase of Netscape Communications. To allow themselves greater flexibility in questioning, Microsoft attorney John Warden plans to ask the judge to declare Colburn a "hostile witness."
The reason for calling Colburn as a witness goes back to the raison d'etre of the original lawsuit. When the Justice Department and 20 states filed suit a year ago, they insisted that only government intervention could pry Microsoft's tentacles away from its commanding share of the PC operating system market.
But AOL's purchase of Netscape and its subsequent alliance with Sun Microsystems have offered Microsoft a novel argument. Now the company can plausibly say, "Look, there's another 800-pound gorilla in this business -- and it's out to get us."
During one deposition, Microsoft attorney John Warden even suggested that AOL and Justice worked in concert to conceal the pending merger in a ploy to hamstring Microsoft's defense. AOL's Steve Case angrily denied the assertion.
Microsoft's third witness will be Richard Schmalensee, dean of the Sloan School of Management at the Massachusetts Institute of Technology. Schmalensee testified earlier in the trial on behalf of the company, arguing that Microsoft's commanding share of the PC operating system market does not a monopoly make. His claim: To have a monopoly, a company has to be able to raise prices with impunity. He believes there are "at least three constraints" that bar Microsoft from doing that: existing competitors such as Apple Computer and Linux, piracy, and the long-term threat of a new platform such as Java.
He was Microsoft's first witness. The company wants to call him back to shore up some of its arguments that were left faltering during cross-examination of subsequent witnesses.
For its part, the government has spent just as much time preparing to rebut Microsoft's sequence of witnesses, which began in January during the second phase of the trial. One who will be taking the stand for the Justice Department is Garry North, a former strategist in IBM's personal computer division.
The plan is to tear apart the structure of economic evidence and factual data built by Microsoft's attorneys this spring. Government lawyers think that North can help them in this task by arguing that Microsoft has a monopoly because there is no commercially viable alternative to Windows. The strategist also will claim that Microsoft charged IBM higher prices for Windows after a falling-out.
While the lawyers wrangled, advocacy groups have been busy trying to tilt the debate in their favor. Ralph Nader hosted a conference last month dedicated to debating what remedies Judge Jackson should impose on Microsoft. Most of the speakers, many of them anti-Microsoft partisans, agreed that something should be done -- but they couldn't agree on what.
Free-market groups also weighed in. Thomas Sowell, an economist at the Hoover Institution in Stanford, California, published a column in Forbes magazine this month which tried to debunk the claim that Microsoft has violated both the Sherman Act and rules against predatory pricing.
"Even as a theory, predatory pricing has been dealt a blow by the fact that the supposedly intended victim, Netscape, is being purchased by America Online. Why would anyone pay billions for a doomed enterprise, helpless before the 'power' of Microsoft?" he wrote.
Meanwhile, high-profile attorney David Boies, who has been representing the government, hasn't been idle. The US$600-an-hour lawyer has been involved in a lawsuit organized by other well-known plaintiffs' attorneys to file civil rights suits seeking $1 billion in damages from vitamin manufacturers. He also agreed to represent New York real estate baron Howard Milstein in a dispute over the ownership of the Washington Redskins football team.
And what of Joel Klein, the assistant attorney general for antitrust? During a speech last week, he kept mostly mum about Microsoft. Klein's talk to an audience of antitrust lawyers revealed little about his highest-profile case. But he did reassure them on one point: "Those of you who practice antitrust law are in for a bright and exciting future."
