Supreme Court won't stop government's Microsoft antitrust case; settlement talks continue

<br>WASHINGTON (AP) _ Microsoft Corp. lost a longshot appeal to the Supreme Court on Tuesday, and all sides said they will focus on settling the government's long-running antitrust case against the

Tuesday, October 9th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Microsoft Corp. lost a longshot appeal to the Supreme Court on Tuesday, and all sides said they will focus on settling the government's long-running antitrust case against the software company.

The court opted to stay out of the case for now, ending Microsoft's hopes for a fresh start as it tries to avoid penalties for anti-competitive behavior. That leaves the case in the hands of a federal judge who has told the company and the government to settle out of court.

``It's back to settlement,'' said Robert E. Litan, a former Justice Department antitrust chief. ``This was Microsoft's long ball that didn't get completed.''

Microsoft had asked the high court to hear its complaint that the original federal judge who handled the 78-day Microsoft antitrust trial was biased and all of his findings should be thrown out.

A federal appeals court upbraided U.S. District Judge Thomas Penfield Jackson earlier this year, threw out his order that Microsoft be broken into two companies and removed him from the case. But the appeals court agreed with Jackson that Microsoft had broken antitrust law, and should be punished.

The federal appeals court handed the case over to one of Jackson's colleagues, U.S. District Judge Colleen Kollar-Kotelly, to set that punishment. She may yet do so, but has made clear she wants the two sides to save her the trouble.

Last month, Kollar-Kotelly set a deadline of Friday to appoint a mediator if the two sides don't make progress.

Microsoft spokesman Jim Desler said the company is disappointed but not surprised by the high court's action.

``We'll continue to move forward with the case on the district court level, and we'll comply with the court order to work with the government to settle this case,'' he said.

The Justice Department released a brief statement: ``We're pleased with the court's decision. We'll continue our progress in the district court.''

The department and 18 states sued Microsoft in 1998, alleging the Windows software maker wielded its dominance in the market to stifle competition and harm consumers.

``We are not surprised the Supreme Court did not take up the matter, because the decision by the D.C. Court of Appeals was unanimous and very well-reasoned,'' said Iowa Attorney General Tom Miller, a leader of the state coalition.

The Supreme Court did not comment in rejecting Microsoft's appeal, and the court's action does not indicate how the justices view the merits of the Microsoft case. The court could referee part of the antitrust case if settlement talks fail.

The Supreme Court's action came a couple of weeks before the company plans to release the newest version of Windows, called Windows XP. Critics say the product raises the same antitrust issues Jackson found compelling in ruling against the company.

The Supreme Court had not been expected to take the case at this point, mostly because the matter is still in flux in lower courts. The high court typically likes to wait until it has a clear legal field before stepping into a case.

Still, so long as the possibility of winning a further delay existed, Microsoft had less incentive to bargain, Litan and other antitrust experts said.

Windows XP, and the extent to which the Justice Department may try to win changes to it, will probably be the centerpiece of the settlement talks, antitrust lawyers said.

In its Supreme Court appeal, Microsoft argued that Jackson's comments to reporters about the case were an ethical breach that tainted his rulings against the company.

Microsoft said Jackson should have been disqualified from the case when he gave his first interview. If that had happened, Jackson's entire final verdict would have been thrown out.

The federal appeals court dismissed that argument in June, and Microsoft appealed to the Supreme Court.

This is the second time the justices have turned away the antitrust case. After the company appealed Jackson's ruling last year, the court rejected the Justice Department's request to take over.

The case is Microsoft Corp. v. United States, 01-236.