BBC News | BUSINESS | Microsoft appeals against split

One of world's most famous business logos has become central to an appeal case called by Microsoft in an effort to save itself from being split up.

Government lawyers, attempting to persuade appeal judges to uphold a fierce ruling against Microsoft, have said the software giant's refusal to allow its Internet Explorer icon to be dropped is evidence of anti-competitive business tactics.

The lawyers were speaking on the opening day of a two-day hearing called by Microsoft in an effort to overturn a ruling by a federal judge, who in June found the firm guilty of abusing monopoly powers, and ordered the company be to split into two.

The ruling followed concerns that, by packaging its Internet Explorer browser with its Windows personal computer operating system, Microsoft had unfairly baulked web-only rivals such as Netscape from the market.

'Stifled competition'

Jeffrey Minear, acting for the government and 19 US states, said: "Microsoft's conduct was not simply a series of isolated, unrelated events, but rather a co-ordinated course of anti-competitive conduct.

"And that conduct was directed at maintaining its monopoly power."

But while the government had no objection to Microsoft offering Internet Explorer as part of the Windows package, it had "a problem" with the firm's refusal to allow equipment makers to remove the browser logo, even when Netscape products were installed.

Richard Urowsky, defending Microsoft, said that the firm's licencing agreements had not limited Netscape's ability to gain market share.

Netscape had managed to increase its users from 15 million to 33 million between 1996 and 1998, he said.

"Nothing Microsoft did foreclosed Netscape from any portion of the marketplace," he added.

"Microsoft has some market power and some, some discretion in pricing but that is not equivalent to monopoly power."

'Paranoid monopolist'

The statements came as a seven-strong panel at the US District Court for Appeals for the District of Colombia peppered lawyers with pointed questions about Microsoft's business practice.

Judge Thomas Penfield Jackson: accused of bias
Judge David Tatel told Microsoft's legal team he "did not see" how Microsoft could get a reversal.

Harry Edwards, the court's chief judge, said the government viewed Microsoft as a "paranoid monopolist, someone who gets up in the middle of the night and shoots at any movement".

The court will make its judgement following a further session on Tuesday, which will include a debate on whether federal judge Thomas Penfield Jackson, who last June ordered the Microsoft break up, was biased against the firm.

Since the case, Judge Jackson has compared Microsoft founder Bill Gates to Napoleon, the former French dictator, and military genius.

Microsoft's prospects

Many lawyers have predicted that Microsoft will achieve at least partial victory in its appeal.

The break-up judgement was so draconian, excessive and rushed that reversal seems assured

Robert McTamaney, antitrust lawyer
"The break-up judgement was so draconian, excessive and rushed that reversal seems assured," said Robert McTamaney, an antitrust specialist with New York law firm Carter, Ledyard & Milburn.

"The remedy is way too severe given the facts of the case," said Nicholas Economides, a New York University professor of economics and an antitrust expert.

But the firm is nonetheless expected to be targeted for some business conduct restrictions.

These could centre on its relationship with major customers, said Ernest Gellhorn, professor of law at George Mason University.

"Microsoft must be willing to allow its customers to put a different icon on the screen," he said

Professor Economides said: "The most likely outcome is that [the appeal court] will find Microsoft liable on some points and then send it back to the district court to discuss a remedy in much greater detail."

Earlier case

The hearing is not the first Microsoft has bought before the US District Court for Appeals for the District of Colombia in an effort to overturn a ruling by Judge Jackson.

A three-judge panel in 1998 overturned an injunction which forbade Microsoft from requiring PC makers to include its internet-browser software with every PC using the Windows operating system.

On Wall Street, analysts were confident on Monday that Microsoft would win considerable reversal in the appeal case.

"We continue to believe that Microsoft will prevail, totally or substantially, on appeal and do not think the company will be broken up," said Christopher Mortenson of Deutsche Banc Alex Brown.

Microsoft shares closed $2.75 higher at $59.50 on Monday.