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Appeals Court Overturns Microsoft Breakup
WASHINGTON, June 28 (News Agencies) - An appeals court Thursday tossed out last year's order in the Microsoft antitrust case breaking up the software giant and sent the matter back for review by a new judge, saying the case was "tainted" by the trial judge's conduct.
The unanimous decision by the U.S. Court of Appeals dealt a stunning setback for the U.S. government, joined by 19 states, which sought to break up the software giant, contending it had used its monopoly power to squeeze out competitors.
The appellate court upheld in part the lower court finding that Microsoft acted as an illegal monopoly, but said the "remedy" imposed by U.S. District Judge Thomas Penfield Jackson - the breakup of the firm into two separate groups - should be vacated.
The appellate judges accepted in part Jackson's conclusion "that Microsoft violated ... the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market," but disagreed with his conclusion that it illegally tried to monopolize the Internet browser market.
The ruling also sent back for further review Jackson's finding that Microsoft violated the law "by unlawfully tying its browser to its operating system."
The Justice Department said it was "pleased" that the decision affirmed the illegal conduct of the software giant, and was studying its options on dealing with the reversal.
"We are pleased that the Court of Appeals found that Microsoft engaged in illegal conduct to maintain its [computer] operating system monopoly," the Justice Department said in a statement.
"We are reviewing the court's opinion and considering our options."
The appeals court, in overturning the breakup order, cited three reasons:
- Jackson failed to hold an evidentiary hearing on the impact of a breakup or other remedy, despite a plea from Microsoft.
- The lower court "did not provide adequate reasons" for its breakup order.
- Because the appeals court "drastically" limited Microsoft's liability, it said the lower court must re-examine a "specific remedy for the limited ground of liability which we have upheld."
In a stinging rebuke for the trial judge, the appeals court said the case was marred by the judge's misconduct.
It said the matter was overturned in part because "the trial judge engaged in impermissible ex-parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality."
It said it found "no evidence of actual bias," but concluded, "that the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process."
The opinion said, "We are therefore constrained to vacate the Final Judgment on remedies, remand the case for reconsideration of the remedial order, and require that the case be assigned to a different trial judge on remand."
The appeals judges said Jackson's comments violated the precepts of the judicial code of ethics.
"All indications are that the District Judge violated each of these ethical precepts by talking about the case with reporters," the opinion said. "The violations were deliberate, repeated, egregious, and flagrant."
The appeals court said that "it would be extraordinary to disqualify a judge" based on his comments about a case.
But it added, "In this case, however, we believe the line has been crossed. The public comments were not only improper, but also would lead a reasonable, informed observer to question the District Judge's impartiality. Public confidence in the integrity and impartiality of the judiciary is seriously jeopardized when judges secretly share their thoughts about the merits of pending cases with the press."
The appeals court, whose seven judges heard the case, noted the practical difficulties of imposing a remedy in the fast-moving computer industry, with Microsoft's alleged illegal activities dating back some six years.
"Six years seems like an eternity in the computer industry," the judges noted. "By the time a court can assess liability, firms, products and the marketplace are likely to have changed dramatically."
Any remedies imposed by the court "may be unavailing.... because innovation to a large degree has already rendered the anticompetitive conduct obsolete [although by no means harmless]."
For that reason, the judges said Jackson should have conducted an evidentiary hearing to determine the impact of a breakup or other remedies.
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