Microsoft break-up over-turned by US appeals court

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A United States appeals court today reversed the ruling which would have forced the break-up of Bill Gates's Microsoft empire.

The court ordered that a new judge should officiate in the landmark case, saying that US District Judge Thomas Penfield Jackson improperly conducted himself in the case, leaving himself open to the appearance he was biased against Microsoft

"We vacate the judgment on remedies, 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," the court said.

The appeals court decision affects only Judge Jackson's decision on the breakup – not his conclusion that the company violated antitrust laws.

In Redmond, Washington, Microsoft officials refrained from immediate comment until they could read the ruling.

The U.S. Court of Appeals for the District of Columbia decision is the most significant antitrust ruling since the court–ordered breakup of the AT and T telephone monopoly almost two decades ago.

The decision, which faces a likely Supreme Court challenge, may embolden several new initiatives that Microsoft has under way to merge its popular software products.

Microsoft had banked the future of the company on a strategy of extending the dominance of its Windows operating system to the Internet with new software that integrates with the core operating system.

In reversing the breakup, the appeals court removed the penalty recommended by the Justice Department and 17 of the 19 states that sued Microsoft under antitrust laws.

Justice Department lawyers and 19 states brought the antitrust case, arguing that Microsoft used anti–competitive practices in bundling its Internet Explorer browser with Windows. As a result, Netscape's competing browser was pushed out of the marketplace, they said. Also, they said Microsoft bullied computer makers into ceding control of the computer's desktop.

Microsoft argued that consumers appreciate having the browser and operating system in one package, and simply acted in its own interests in a competitive market. They say that the last several years of personal computer innovation is a testament to their practices.

Both Microsoft and government lawyers were grilled by appeals judges during the first day of the February appeals hearings, as the techno–savvy judges asked pointed questions about whether the software company used anticompetitive practices to quash the "nascent seedlings of competition."

But on the second and final day, the mood turned sharply in Microsoft's favor as the judges were outraged at Jackson's statements to reporters before and after his order.

In interviews with newspapers, magazines and book authors, Jackson was quoted as comparing chairman Bill Gates to Napoleon and the company to a drug–dealing street gang, among other comments.

Jackson granted some of the interviews on an embargoed basis before the antitrust trial ended last year with the expectation they would be published afterward – a fact singled out by some appeals judges.

The appeals court explained why it allowed Jackson's ruling that Microsoft violated antitrust law to stand while reversing his penalty.

"The most serious judicial misconduct occurred near or during the remedial stage. It is therefore commensurate that our remedy focus on that stage of the case," the appeals judges said.

The judge's actions "would give a reasonable, informed observer cause to question his impartiality in ordering the company split in two," the appeals court said.