Jackson's Folly Isn't So Bad

By Aaron Pressman

Issue Date: Jun 29 2001

Despite what you've heard, ethical lapses by the Microsoft judge did not undermine the antitrust case against the software giant.

------------------------------------------------------------------------

ANALYSIS Microsoft and its supporters appeared elated Thursday when an appeals court threw out U.S. District Court Judge Thomas Penfield Jackson's order to split the company in two. And they were equally thrilled that the appeals court removed Jackson from future proceedings after finding that the judge had made repeated ethical violations for speaking with reporters while the case was pending.

But all the hoopla and celebrations emanating from Redmond should not obscure one critical fact: If Jackson had locked himself in a reporter-proof booth from the start of the trial until this week, the appeals court's rulings on the merits of the case would have been the same.

Each major ruling by the appeals court was backed by extensive citations to previous cases and the voluminous record Jackson and the two sides developed during the trial. It was only in throwing out the breakup order that the appeals court cited Jackson's misconduct, but even for that move, it offered three other independent justifications.

The court upheld almost all of Jackson's findings that Microsoft had illegally stifled companies that were competing with Redmond's Windows operating system. In that area there was no mention of the judge's lapses. Then the court threw out Jackson's ruling that Microsoft had tried to monopolize the market for Web browsers, again based on the facts – or lack thereof – found in the record.

And on the all-important tying claim – whether Microsoft bolted its Web browser to Windows in order to stifle competition – the appeals court rejected the legal standard that Jackson chose but sent the matter back to a lower court for a rehearing, again without reference to Jackson's ethics.

Of course, a three-judge panel of the very same appeals court had muddled the tying issue back in 1998, when it ruled that an earlier Microsoft integration was allowable if any "plausible" consumer benefit could be shown. By that measure, frequently cited by Microsoft attorneys, the company had a free hand to add virtually anything into Windows.

Jackson rejected that logic, noting that such an "undemanding test" would "immunize any product design [or at least software product design] from antitrust scrutiny." He proceeded to evaluate the browser integration under a standard long-used in antitrust cases – a standard that relied on the question of whether a monopolist gained market share in a new market through tying.

Some analysts thought the judge's criticism unwise, but the appeals court on Thursday largely agreed with Jackson's logic, even as it determined that a more balanced evaluation is required.

"To the extent that the [1998] decision completely disclaimed judicial capacity to evaluate 'high-tech product design,' it cannot be said to conform to prevailing antitrust doctrine," the court said, rejecting its previous decision.

The appeals court did not give Microsoft a free pass on tying, but rather asked a new district judge to determine whether the company's anti-competitive action was outweighed by benefits to consumers.

Finally, in considering the breakup ordered by Jackson, the appeals court did cite Jackson's comments to reporters as one reason for throwing out the remedy. But the court also found that the remedy would have to be reassessed for three other reasons, including the fact that it had thrown out some of the charges against Microsoft.

"Quite apart from its procedural difficulties, we vacate the district court's final judgment in its entirety for the additional, independent reason that we have modified the underlying bases of liability," the appeals court wrote.

It's also important to realize that the appeals court wasn't charging Jackson with actually being biased against Microsoft. Rather, it said the comparisons that the judge made – between Bill Gates and Napoleon, for example, and between the company and a gang of drug traffickers – created an appearance of bias.

After poring over the trial record for months, the appeals court upheld all of the hundreds of factual findings made by Jackson. "We have reviewed the record with painstaking care and have discerned no evidence of actual bias," the court wrote.

In the end, the only real impact of Jackson's interviews with journalists was his removal from future case proceedings. And to those who, last May 24, saw the judge summarily cut off Microsoft's lawyers and deny the need for hearing any evidence on the remedy, it's clear that removal might be just what Jackson desired.

After months of delay and prevarication by Microsoft witnesses and attorneys, Jackson's patience had waned. He brought down his gavel. "The matter is submitted," he said. Thursday's appeals court ruling sends the case back down to district court, but not to Jackson. And it's unlikely he regrets that decision.

-30-