Microsoft Argues for Dismissal

WASHINGTON -- Microsoft Corp. on Wednesday asked the court hearing its antitrust trial to reject a government plan to divide the software giant in two, proposing restrictions on its business practices instead.

District Court Judge Thomas Penfield Jackson had ordered Microsoft to submit its own plan after ruling April 3 that the company broke U.S. antitrust law by abusing its monopoly in operating systems for personal computers.

Microsoft asked for a summary judgment disposing of the government's breakup proposal. If the judge insisted on considering the breakup plan, then further hearings should be held starting in December, it said.

The trial had failed to find that there would be greater competition for operating systems if Microsoft had acted differently, said the company.

"The government's request to split Microsoft into two companies should be rejected as a matter of law," Microsoft said in a submission to the judge.

But the government said Microsoft's proposed remedy was so weak and filled with loopholes it would not have prevented the legal violations found by the judge, while its own plan would lower prices and foster innovation.

The U.S. Justice Department and 17 states called April 28 for Microsoft to be split into a personal computer operating systems business and a separate applications software firm that would retain such assets as the Microsoft Office software suite and the Internet Explorer browser.

But Microsoft said the problems found by Jackson could be addressed by restrictions on its business conduct lasting just four years. The company offered to give computer makers more leeway to change the appearance of its Windows operating system, including permission to hide the icon for Microsoft's Internet Explorer browser.

Microsoft would also refrain from canceling Windows license agreements with computer makers who shipped products with non-Microsoft software, such as browsers that could serve as a platform for running other programs.

Nor would Microsoft trade valuable space on the Windows "desktop" based on a firm's agreement to limit distribution of non-Microsoft platform software.

Microsoft also said that when providing technical information about Windows to other software firms, it would not condition access on their agreement to limit distribution of software for use on non-Microsoft platforms.

The Justice Department called Microsoft's proposals "ineffective and filled with holes" and Iowa Attorney General Tom Miller, who heads the states' effort, said it "would not have prevented the serious violations of law found by Judge Jackson." Another government lawyer said it was merely an attempt to stall the implementation of the proposed split.

The Justice Department said the Microsoft proposal would not have stopped Microsoft from dividing markets, retaliating against PC makers and software developers that support other technologies, or tying its products to Windows - all violations found by the judge.

Government lawyers have said their remedies are forward looking and designed to prevent future violations.

Connecticut Attorney General Richard Blumenthal said Microsoft was "in denial. It denies doing anything wrong and is offering nothing new."

The landmark case stems from an antitrust complaint filed by the government in May 1998, charging Microsoft with illegally using its monopoly power to destroy Netscape, a Web browser with operating-system aspirations.

The trial began in October 1998 and may still have months to run even before the appeals process begins.

Jackson's current timetable calls for a government response May 17, followed by a hearing May 24, but Microsoft said it would need more time because the government has introduced new material supporting its argument for a breakup of the firm.

"We are working to try to resolve this case as quickly as possible in a fair and reasonable manner," said Microsoft chairman Bill Gates.

"We believe there is no basis in this case for the government's unprecedented breakup proposal, and we are hopeful that the court will dismiss this excessive demand immediately so that the case can move forward much more rapidly," Gates said in a statement.