RealTime IT News

Microsoft Loses Landmark Ruling

As expected, the gavel fell on Microsoft Corp. Wednesday afternoon when Judge Thomas Penfield Jackson, of the United States District Court for the District of Columbia, handed down his final judgment in which he sided with the Department of Justice's plan to split the company in two.

Judge Jackson swept aside the company's complaints that it needed more time to argue against the government's plan.

"Microsoft claims, in effect, to have been surprised by the "draconian" and "unprecedented" remedy the plaintiffs recommend," Judge Jackson wrote in his Memorandum and Order. "Microsoft's profession of surprise is not credible. From the inception of this case Microsoft knew, from well-established Supreme Court precedents dating from the beginning of the last century, that a mandated divestiture was a possibility, if not a probability, in the event of an adverse result at trial."

"Its failure to anticipate and to prepare to meet such an eventuality gives no reason to afford it an opportunity to do so now," he said.

Jackson's ruling, as anticipated, calls for Microsoft to be divided into an two companies: one which would focus on operating systems and the other applications, such as Microsoft Office. Further, he ruled Microsoft must transfer the assets of one of the companies to a separate entity, including "all personnel, systems, and other tangible and intangible assets, including intellectual property, used to develop, produce, distribute, market, promote, sell, license and support the products and services of the separated business and such other assets as are necessary to operate the separated business as an independent and economically viable entity."

He also ruled that any intellectual property that is used in products developed, distributed or sold by the applications business and the operating systems business as of April 27, will revert to the applications unit. The operating systems company will be granted a "perpetual, royalty-free license to license and distribute" that intellectual property -- excepting intellectual property related to the Internet browser -- in its products.

The ruling also bans the two companies from:

  • Merging or entering into joint ventures with each other
  • Entering into an agreement with one another to develop, sell, license or distribute the others products or services
  • Providing APIs, technical information or communications information to each other that is not also simultaneously made available to ISVs, IHVs and OEMs
  • Providing each other with any product or service on terms more favorable than those available to a similarly situated third party.

Room was also made for a compliance committee made up of Microsoft's board of directors and at least three members who are not and never have been Microsoft employees. The ruling also establishes a chief compliance officer reporting directly to the committee and Microsoft's chief executive officer.

The judge gave Microsoft four months to submit a proposed plan of divestiture to the Court and the government. He required that the plan provide for completion of the divestiture within 12 months of the plan's approval and resolution of any appeals Microsoft may file. He gave the government 60 days from the submission of the plan to submit objections. Microsoft would then have 30 days to submit a response to the government's objections.

Judge Jackson also ordered that until the plan is implemented, Microsoft must preserve both businesses as "ongoing, economically viable businesses, with management, sales, products, and operations of each business held as separate." He did except accounting, management and information services. The judge also required that Microsoft use "all reasonable efforts" to maintain and increase sales and revenues of both compa