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Microsoft defends against antitrust sanctions, saying competitors are ganging up

Updated:
WASHINGTON (AP) _ Microsoft Corp., defending itself against nine states seeking tough antitrust penalties, contends competitors are ganging up on it.

The states asked U.S. District Judge Colleen Kollar-Kotelly on Monday to force Microsoft to create a stripped-down version of its flagship Windows software that could incorporate competitors' features. The states also want Microsoft to divulge the blueprints for its Internet Explorer browser.

Dan Webb, Microsoft's lead trial lawyer, said Microsoft's corporate rivals were heavily involved in drafting the states' proposed penalties.

``There's only one group of beneficiaries for this remedy and that is Microsoft's competitors,'' he said.

During Monday's hearing Microsoft made public a recent e-mail from Sun chief executive Scott McNealy to AOL Time Warner executives. McNealy wrote that Microsoft's upcoming .NET project would be dangerous to AOL's online service.

``Does AOL have a plan to counter .NET,'' Microsoft's suite of online applications, McNealy asked AOL. McNealy said Sun's Java programming language, designed to run on any computer operating system, would help Sun ``leapfrog'' Microsoft.

``AOL shoulda bought Sun first, (Time Warner) second,'' McNealy wrote.

Former Netscape head Jim Barksdale, one of the core Microsoft critics, is expected to take the stand Tuesday.

Microsoft has attempted to argue that the states may not make the penalties extend to new products like television set-top boxes and handheld devices that were not part of the original proceeding four years ago.

Kollar-Kotelly has not given a definitive ruling on those complaints or thrown out any testimony. But she did say there is a fine line between allegations of similar conduct, which are allowed, and new liabilities that are beyond the scope of the hearing.

``I think we have to show some care that we don't have a record that appears to be more about liability than remedies,'' Kollar-Kotelly said.

The federal government and several other states settled their claims with Microsoft last year.

The original judge in the antitrust case, Thomas Penfield Jackson, ordered Microsoft to be broken up into two companies after concluding Microsoft violated antitrust laws by illegally stifling its competitors.

A federal appeals court reversed that penalty and appointed Kollar-Kotelly to determine a new penalty.

The states on Monday cited internal Microsoft memos as evidence the software company had persisted in strong-arming competitors even as it was being found guilty of antitrust violations.

Dell Computer had plans to put Linux, a free operating system that competes with Windows, on some of its computers in 2000, the states' lawyers said. But Dell abandoned the plans under pressure from Microsoft, they said.

Steven Kuney, a lawyer for the states, cited an internal document that laid out talking points for a meeting between Microsoft chief executive Steve Ballmer and Dell executives.

Microsoft would give ``a reminder of the meat behind why it's smart to be partnered with,'' the document stated. ``It's untenable for our 'Premier Partner' on Windows 2000 to be doing aggressive market development for another operating system,'' the talking points said.

By June 2001, Dell laid off its head Linux employee and reassigned the rest of his team.

The states that rejected the government's settlement with Microsoft and have continued to pursue the antitrust case are Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia. The District of Columbia also rejected the settlement.

The proposed federal settlement would prevent Microsoft from retaliating against partners for using non-Microsoft products; require the company to disclose a limited number of its software blueprints so software developers can make compatible products; and make it easier for consumers to remove icons for extra Windows features.

The deal is not final until it is approved by Kollar-Kotelly, who is handling the settlement and the state trial as separate proceedings.

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