Judgment Day For Microsoft

A federal judge's long-awaited decision Friday in the Microsoft Corp. antitrust case could give new choices to computer users — or plunge the giant software maker into a lengthy period of creative hibernation.

Those are the opposite scenarios portrayed by Microsoft's rivals and company chairman Bill Gates.

U.S. District Judge Colleen Kollar-Kotelly said she will announce after the financial markets close whether she accepts or rejects a landmark antitrust settlement reached by Microsoft, the federal government and nine states. At the same time, she may say whether she endorses the harsher penalties pursued by nine other states who did not sign onto the deal.

The judge can approve the settlement completely, which is doubtful, says CBSNews.com Legal Analyst Andrew Cohen. She can reject it completely, which also is doubtful. She can accept it with certain conditions or she can essentially craft a remedy based upon the evidence she's heard. And it is hard to imagine any scenario that won't be vigorously appealed by the side that feels it has been jilted and it's even possible that all sides would appeal one part of this ruling.

The complicated case that has already lasted four years.

"It might not be resolved for another two years," University of Baltimore law professor Robert Lande said. "No one should count their winnings yet."

Microsoft was found to have violated antitrust laws, illegally maintaining its monopoly over computer software operating systems by strong-arming competitors. But an appeals court threw out a previous order that would break the company in two, leaving Kollar-Kotelly to decide how Microsoft should be punished.

The settlement would prevent Microsoft from participating in exclusive deals that could hurt competitors; require uniform contract terms for computer manufacturers; allow manufacturers and customers to remove icons for some Microsoft features; and require that the company release some technical data so software developers can write programs for Windows that work as well as Microsoft products do.

Justice prosecutors and Microsoft say the deal will immediately benefit consumers. Microsoft has already started complying with the deal by distributing technical data and releasing an update to Windows XP that permits the removal of Microsoft icons.

Some Microsoft competitors, such as Sun Microsystems, have told the Justice Department that Microsoft's compliance measures aren't adequate. Lawyers for the government and the settling states are investigating those complaints.

The nine states still suing Microsoft, led by Iowa, California and Connecticut, spent two months trying to convince Kollar-Kotelly that those penalties aren't enough to give Microsoft's rivals a fair chance to compete with the software giant, whose Windows operating system and productivity software run on over 90 percent of home and business computers.

Those states want Microsoft to divulge more technical information, give computer manufacturers more freedom in how they package Windows in their systems and allow users to completely remove some Microsoft features from Windows rather than just hide access to them.

Gates said during three days of testimony in the antitrust case that the added penalties would unfairly confiscate Microsoft's intellectual property, cause mass layoffs and force the company's research and development efforts "into a 10-year period of hibernation."

The judge was announcing her decision just days before national elections. In three of the nine states that agreed to settle the case along with the Justice Department — Illinois, Michigan and Wisconsin — those attorneys general are running for governor this year, and two more active in the case are running for governor next year, in Kentucky and Louisiana.

In Connecticut, where Richard Blumenthal is one of the most aggressive attorneys general advocating harsher penalties against Microsoft, his re-election opponent accused him Thursday of being "obsessive" in his pursuit of the software maker. Martha Dean, a Republican, praised Microsoft as a successful business and said penalties against it could hurt the state's pension fund and citizens' retirement investments.

Under federal antitrust rules, Kollar-Kotelly does not have authority to change the terms of the settlement. She can approve the deal or reject it, although she can offer suggestions to lawyers to change the proposal in ways that would win her ultimate approval.

There are two things that ought to be worry Microsoft right now, says Cohen. First, the judge seemed awfully skeptical of Microsoft's position throughout this phase of the trial. And, second, there has always been something odd about a settlement that only affected some jurisdictions and not others when it was initially announced.

Lande predicted that the five-month delay between the hearings and the ruling could be good news for the suing states.

"If all she was going to do was rubber-stamp the settlement between the Department of Justice and Microsoft and say that the states get nothing, she could have done that in two or three months," Lande said. "I think it means the states are going to get something."

Since the federal and state cases are so intertwined and complicated, no one knows just what that something will be. Lande said Kollar-Kotelly's hardest job was to make sure that the settlement order and any added penalties don't send Microsoft mixed signals — particularly since Microsoft already has indicated that it plans to appeal to the Supreme Court if necessary.

"She wants to be really sure that there's no inconsistencies," Lande said. "Microsoft is going to appeal anyway, but one of the things they would say is that she's being inconsistent."