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Appeals Court Declines To Revisit Microsoft Finding

Microsoft Corp. was handed a defeat by the U.S. Court of Appeals for the District of Columbia Thursday when the appeals court declined a request by the software maker to reconsider its decision that the company acted illegally in "commingling" the Windows operating system with its Internet Explorer browser.

The court's decision means the case will be kicked back to a lower court to revisit the remedy phase. In June, the appeals court overturned the lower court's decision to break up the company after finding that Judge Thomas Penfield Jackson had acted improperly during the case. Judge Jackson will no longer oversee the case.

"We requested the courts take a look at one piece of its earlier ruling," said Microsoft spokesman Jim Dessler. "We belive that the original district court's ruling on this matter was clearly erroneous and we maintain that in our petition."

However, Dessler said the appeals court's ruling was not unexpected.

"This is just another step in the legal process," he said. "[In June] the court issued a very complex, lengthy ruling and as we move forward in the legal process we simply said there's one issue that we feel needs further review and clarification."

Microsoft has several options at this point. It can appeal the case to the U.S. Supreme Court, return to the district court to revisit the remedy phase, or settle the case.

Dessler said the company is still weighing those options.

"We are open to the settlement process and we continue to review our options with regard to Supreme Court review," he said.

Edward C. LaRose, chair of the Antitrust & Trade Regulation Practice Group at Tampa-based law firm Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis, said he thinks it is unlikely either side will seek to bring the case before the Supreme Court at this point.

"I don't know if either side would petition the Supreme Court," he said. "If either did, my guess is that the Supreme Court would not take it at this point."

He explained that the Supreme Court would be more likely to allow the issue to return to the District Court and play out there.

As for remedies, LaRose said the court is most likely to pursue a remedy strategy that regulates Microsoft's conduct, rather than breaking up the company.

"The rumblings that have been heard is that some of the states may still want to try for a break up," he said. "I have always thought that is not a realistic result. It would not surprise me if the court looks at more conduct-based remedies. Breaking up a company is a very, very draconian remedy and I think that courts would probably look to see if there is a remedy short of that."

Since the appeals court's June ruling, Microsoft has lifted some of the restrictions it places on computer manufacturers that license its operating system, and settled with the State of New Mexico, one of the 19 states that initiated the antitrust case together with the Department of Justice.

Still, despite the fact that it is unlikely the court will choose to again pursue a break up of the company as a remedy, Microsoft is beginning to feel the heat in an area that surely feels a lot more immediate. Sen. Charles E. Schumer (D-NY), a member of the Senate Judiciary Committee, has requested hearings on alleged anti-competitive aspects of the company's soon-to-be-release Windows XP operating system, and a number of privacy groups have requested that the Federal Trade Commission (FTC) issue an injunction to prevent release of the operating system until alleged unfair and deceptive practices concerning Microsoft's Passport authentication system -- tied to the operating system in a number of ways -- have been resolved.