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Burden of Proof

Microsoft Ruling: Is the Case Over or Just Beginning?

Aired June 8, 2000 - 12:30 p.m. ET



BILL GATES, CHAIRMAN, MICROSOFT: There must have been some failure to have the judge understand the whole PC phenomenon, that we've gone from a computer industry that was very high-priced, low- volume oriented, to one in which the pace of innovation is incredible, and that no company has a guaranteed position.

JOEL KLEIN, ASSISTANT ATTORNEY GENERAL: The remedies that we would like to see implemented are straightforward remedies, things like Microsoft not being able to intimidate computer manufacturers who choose to select other people's products.


ROGER COSSACK, CO-HOST: Today on BURDEN OF PROOF: The Justice Department versus Microsoft. Has the fight just started or is it all over?

ANNOUNCER: This is BURDEN OF PROOF with Roger Cossack and Greta Van Susteren.

COSSACK: Hello and welcome to BURDEN OF PROOF. Greta is off today.

Yesterday, a federal judge ordered the breakup of Microsoft Corporation. It's the latest chapter in a legal feud between the software giant and the Justice Department. But more battles are on the horizon, and they could be argued before the United States Supreme Court.


KLEIN: During the time of the appeal, it's very important that further harm to the market, much of which has been thoroughly documented by the court, not take place.

Let me use that as just the opportunity to say that's all the more reason why we should have an expedited appeal to the Supreme Court. We should put those remedies in place, but it's very important to get a final ruling before the United States Supreme Court.

(END VIDEO CLIP) COSSACK: Joining us today here in Washington are Steve Sunshine, an antitrust attorney and former Justice Department official; Keith Perine, of "The Industry Standard"; and Rick Rule, legal consultant for Microsoft.

In the back, Ashley Jones (ph), Manning McPhillips (ph), and Burt Reeves (ph).

And also joining us here in Washington is CNNfn correspondent Steve Young.

Well, Steve, you have been following this case from the beginning until yesterday. Tell us about the ruling, and what has Judge Thomas Penfield Jackson ordered, we know he has ordered the breakup, but several other things as well.

STEVE YOUNG, CNN CORRESPONDENT: That's right. Really, the only cliffhanger remaining was whether it would be a two- or a three-part break up, he had expressed interest in court in a possible three-part. He went, though, with the government's plan pretty much unamended. Company number-one, or let's say the Microsoft Company will be the operating system; company number-two, or the new company, will be applications, Internet and everything else.

The break-up, though, does not go into effect until the appeal is heard by some court, which one is still unclear. There are so-called "conduct" remedies, and they are to go into effect immediately, or actually in 90 days, and they cover a whole range of things, largely Microsoft's relationship with PC-makers. It is supposed to treat the top 20 equally in terms of pricing. At trial, there was testimony that it used the price of Window as a sort of weapon. In fact, the judge's ruling says they will have to publish those prices on a Web site.

Also, it effects its relationship with software makers, the company maintains that it has always given all the inner secret stuff to competitors as quickly as it has to its own developers, but the government doesn't believe that, and there will be some overview of that.

And then, interestingly, it is going to will probably affect all of us as well because the judgment, Roger, says that Microsoft will have to start selling two versions of Windows, one without the browser, which presumably -- not presumably, will have to cost less. How much less is unclear, how much shelf space these two different versions will get in retail stores is still unclear as well.

COSSACK: Steve, it was a rather harshly written opinion. Judge Thomas Penfield Jackson wrote things about Microsoft that they were "untrustworthy," "disingenuous." Surprising?

YOUNG: For those of us who sat through the trial, probably not surprising, although what was surprising was one comment from the judge in the "Washington Post," he gave two interviews, with the "Post" and the "Wall Street Journal." He indicated that he apparently was not much affected by a fouled-up videotape demonstration in court that all us reporters wrote much about, but that he was impressed by the cumulative evidence that the company just simply was not credible. And they got off to a bad start, in his view, as expressed in this interview. And just, there was a continuing grinding sense he got from the, in his view, lack of credibility of Microsoft witnesses that the company just could not be trusted.

COSSACK: Steve, did you ever have this feeling during the trial, and watching Judge Thomas Penfield Jackson, that in fact there came a time when he began to, if you will, disapprove of Bill Gates and Bill Gates' motives in a personal way?

YOUNG: I don't know about personal way, but there was certainly moments in court when he rolled his eyes, when expressed incredulity, when he smiled, shook his head. There was laughter in the courtroom sometimes at some of his reaction. I don't know how personal it was, but it was pretty clear that he was having a hard time believing what he was hearing from Microsoft witnesses.

COSSACK: All right. Let me go down now to start with you, Rick, you are a consultant for Microsoft.

Let me first ask you that I suppose the big question for those of us who are not involved in this case, what does this mean to me? what does this mean to a PC computer user?

RICK RULE, LEGAL CONSULTANT FOR MICROSOFT: Well, hopefully, nothing because there is another at least one round of appeals I think Microsoft with good reason feels pretty confident that this decision will be overturned, this remedy will never go into effect.

But let's assume that somehow it did go into effect. It almost certainly would raise the costs of software, not just that made by Microsoft, but that made by the million -- the tens of thousands of people who rely on Microsoft's platform. It probably would raise the price of software to consumers, it almost certainly would retard innovation because a number of products that Microsoft has in the pipeline, in some cases, can't even come out because of certain of the restrictions in the decree.

So, I think, certainly, in the near term, it is going to be reduced innovation, higher prices, more confusion, it is going to be a bad thing, certainly in the near term, perhaps in the long-term, for consumers, if anything like this order ever gets imposed.

COSSACK: Steve, one of the, you know, the benefits and the burdens of a Microsoft was, yes, they controlled the market, but they kept the price relatively reasonable. I know Judge Thomas Penfield Jackson felt that they overcharged, but nevertheless, they made it accessible. Isn't that a good point that Rick makes is, you take away their dominance, all of a sudden these prices are going to start going up?

STEVE SUNSHINE, FMR. JUSTICE DEPT. LAWYER: No, I don't think it is a good point at all. I mean, I Rick laid out the Microsoft view, and that's clearly what they are going to argue. I mean, it is the same thing with AT&T and the breakup of the phone company is, for a company that is out there to make a profit, do we trust this company over the long run to have stewardship over the market.

If you believe the government's right, you know, the basic principle here is that free market ought to decide, OK. We don't trust Microsoft to do this over the long-term. You know, maybe prices are lower than they would have ever been, maybe they are higher, maybe, you know, there's more innovation, maybe there's less innovation, but it shouldn't be Microsoft that decides, it should be the marketplace.

COSSACK: Keith, the man in the middle, if you will, between these two positions, what is your position in terms of -- or your view, in terms of what this means for the consumer, me?

KEITH PERINE, "THE INDUSTRY STANDARD": Well, I'm right in the middle, not just physically, but mentally on this one. On the one hand, you could argue that Microsoft's dominance and its single standard has led to easing convenience for consumers, as Rick does. On the other hand, as Steve argues, and the government has argued in the case, and Jackson has ruled, many of Microsoft's actions were taken to the detriment of consumers, and enacted to stop software makers, computer makers from introducing innovations in their products that could to help consumers.

COSSACK: And as the man in the middle, both physically and between these two, which one do you think is the most believable position?

PERINE: Well, as, like Steve Young, I'm one of those who sat through the whole trial and saw all the evidence, I hate to editorialize, but for me, the more believable position is the government's assertions, and Jackson's findings in the case.

COSSACK: All right, let's take a break. Steve Young, thanks for joining us today. Up next, Bill Gates, as a witness, good or not so good? Stay with us.


A 23-year-old Kentucky woman will spend one day in jail for stealing nearly $5,100 from the bank where she worked as a teller.



COSSACK: Good news for our Internet-savvy viewers: you can now watch BURDEN OF PROOF live on the World Wide Web. Just log-on to We now provide a live video feed, Monday through Friday, at 12:30 p.m. Eastern time. And if you miss that live show, the program is available on the site at any time via video-on-demand. You can also interact with our show, and even join our chat room.


JANET RENO, U.S. ATTORNEY GENERAL: You look at the history of this country, you look at the efforts to promote competition, you remember what we are dealing with. The people of this country and their ability to get quality products at a price they can afford, that's what it's all about, and I think we can achieve it.


COSSACK: Yesterday, a federal judge ordered the breakup of software giant Microsoft. During the trial, Bill Gates testified via videotape about his company's structure and marketing strategies.

Well, Keith, I have a theory, and one of my theories is, as an ex-trial attorney in federal court, is that you don't want to get -- you don't want to anger a federal district court judge. And I -- you sat through the trial. I have this sense that Gates' testimony on videotape somehow annoyed him, and this became a battle between Gates and the judge.

Your comments.

PERINE: Well, as your Steve Young put it earlier, I don't think it was anything personal from Jackson's point of view toward Gates. But I think his videotape testimony that was showed in court, juxtaposed with e-mail messages to and from him, and other company memoranda, showed a clear difference between what he told government lawyers in his deposition, and what he told Microsoft employees on various issues and his attitudes on various issues. And as Steve mentioned before, I think a lot of courtroom observers and the judge himself were incredulous at different points in that videotape deposition.

COSSACK: Rick, a federal district court judges don't like to be put in positions where they believe the testimony is unbelievable, that's being put before them, whether it be Bill Gates or whether it be someone who is on trial for burglary or robbery. And they react in a bad way and I thought that the opinion, the way it was written yesterday, the way he talked about, you know, that they didn't get it, they were dishonest, they were disingenuous, unreliable; he kept saying Microsoft, but I had a sense that you could take the word Microsoft out and put the word Gates in there.

RULE: Well, to be honest with you, I think there's many things that are unusual about this situation. It is very unusual for a judge on the day he issues a decision like that before -- and basically still having to rule on certain issues, gives interviews as he did. It is unusual. I mean, one of the things that you cannot find in that memorandum and order is what impact his order, the Justice Department's proposed remedy, will have on the consumers, nothing in there. But, I think, a real key is: The judge talks about things that happened before the government ever filed this case, and another case, the consent decree case, back in the beginning of 1998, it's...

COSSACK: In a very critical way.

RULE: Well, he does. And he says that's the basis of his conclusion that Microsoft was untrustworthy and...

COSSACK: And won't follow the rules. RULE: Right.

Well, whatever you can say, a judge being upset about a company saying: Look, we don't think the judge has appropriately applied the law, we haven't done anything that violates the law, we are going to exercise our constitutional right to appeal; and that to be the basis, on the part of a judge, to enter a remedy that he says is radical, that's a very unusual, let's say, position for a judge to take.

COSSACK: Rick, Microsoft is a major corporation with, you know, millions of shareholders. But in fact, people think of Microsoft as Bill Gates, you know, that's who we think -- we think of Gates, we think of Microsoft. So when he wrote about Microsoft being untrustworthy, isn't he saying Gates is being untrustworthy?

RULE: Well, I -- again, I'll let the judge speak for himself. Knowing Bill Gates, knowing the company, I think that they are very far from untrustworthy. What they try to do is keep their eye on consumers. They want to make good software at low prices, sometimes that puts them at odds with competitors. Sometimes it means they want to beat competitors, and there are plenty of documents that say that.

But I don't think untrustworthy is a fair characterization of Microsoft. I think they've been pretty up front about what they're trying the do, that's make better software for consumers. It happens to make some competitors upset, that they've come in, and the government had a very skillful cross-examiner, David Boyd, there's no question about that, but I don't think it gets to the fundamental question of whether or not Microsoft can be trusted by consumers to make good products; and that's what they do.

COSSACK: Steve Sunshine, many people believe that Bill Gates, through his videotape testimony, just didn't do a very good job in -- certainly in convincing the judge, was caught in a lot of inconsistencies.

Do you think that was the major part of why this case was lost by Microsoft?

SUNSHINE: I think that that was one part of it. I mean, there's no doubt that Microsoft as a company lost the trial of a court judge at some point during the proceeding, and there could be a lot of reasons for it. I mean, clearly the Gates testimony was not well received by the judge. I mean, when you have the judge rolling his eyes at the testimony of the chief executive officer, that's not a good thing.

I think that there's also credibility instances with Microsoft's lawyers during the trial. The whole issue with the videotape, twice, through the accuracy and the reliability of the videotape. Federal court judges do not like that. It's clear the judge was lost during the course, whether it was Microsoft, whether it was Gates, whether they're one and the same in the judge's mind, I don't think, matters much.

It was clear at the end of the trial that the judge had decided that he could not trust Microsoft. He then boot-strapped that into his justification for why he picked a very draconian remedy. And it certainly is a relevant consideration about: Do I want to put a conduct remedy, a behavioral control remedy in place with people who I think are untrustworthy and haven't done it, and haven't applied by the rule of the law in the past. Now, whether that is sufficient grounds or not, the court of appeals and the Supreme Court will tell us. But that's what the judge was doing and I think it did come out of the whole pattern of conduct that the court saw before.

COSSACK: All right, let's take a break.

Up next, if this case is appealed, where will it be heard? at a U.S. District Court, or the Supreme Court of the United States? and it will be appealed.

Stay with us.


Q: Boulder Police Chief Mark Beckner has received a letter from an attorney for John and Patsy Ramsey saying they're willing to meet with investigators. When was the last time the Ramsey's were interviewed by the Boulder Police?

A: June, 1998.



COSSACK: Lawyers for Microsoft corporation are weighing their next legal move in light of yesterday's ruling by a federal judge to breakup the computer software giant. But when the appeal is filed, where will it be heard?

Rick, there's going to be an appeal in this case so we don't have to discuss whether or not one is going to be filed. But let me give you something that I was told once in law school. A professor told me, he said, Roger, you know, those who chase speedy justice sometimes catch it.

Now, both sides in this case have professed that they want speedy justice and a quick resolution. But is Microsoft really interested in going directly to the Supreme Court?

RULE: I think it's fair to say that Microsoft thinks this ought to proceed through the court of appeals. It used to be that government cases automatically went to the Supreme Court. Both the Supreme Court and Congress recognized that didn't make sense. It makes sense to take them through the court of appeals where huge records like this can be sifted through by the court of appeals judges.

There is a provision now when, at the discretion of the Supreme Court, it can take a case in the national interest. It's only been done twice, where both the defendant and the government agreed. The problem here is that it looks a little unusual that you've got a judge who basically -- explicitly has said, I disagree with the court of appeals, and the government looking for a way to avoid that court of appeals and get directly to the Supreme Court. Seems to me that it ought to be done quickly, but it ought to be done by the numbers. This is an important case. It's an appropriate case to go to the court of appeals, and I think that's where the appeal, in the first instance, will be.

COSSACK: And the difference may be a year because it may take, at the outset, a year to get through the court of appeals here in the D.C. Circuit, and then a year to get through the United States Supreme Court.

RULE: It very well might. On the other hand, basically having the government try to get the judge to certify the case to go to the Supreme Court, having the Supreme Court to decide, we're not going to take it, send it back to the court of appeals, actually could be the delaying tactic in this whole process, because I don't think, if you look at it, this is the kind of case that the Expediting Act was designed to send directly to the Supreme Court.

COSSACK: Steve Sunshine, I know that the government would like this case to go directly to the Supreme Court. Perhaps one could argue, because they don't think they have as strong a chance at the D.C. Circuit, which has already spoken on this issue, contrary to what the government's position is, and they say, look, why take a hit there? Let's go -- we're going to end up in the Supreme Court anyway, let's get directly there. Their argument?

SUNSHINE: Oh, I think that that's absolutely right. You know, you won't hear the Department of Justice saying that publicly, but it's going to be a wonderful opportunity for the Department of Justice to see if they can side-step what they think is going to be an unfavorable ruling in the appeals court, and so they will talk about speedy justice.

Now, interestingly, it puts Microsoft in the paradox in that the Justice Department will ask for it and they will ask Microsoft to join in it so that we can get this confusion in the marketplace cleared. And that's going to leave Microsoft in the position of saying, no, no, we'd like to go for the slower process, or to agree to join the Justice Department in the Supreme Court. We'll see what happens on that. We've heard what Microsoft's legal consultant says: He'd like to see an orderly process through the court of appeals. So I think you have both sides here jockeying for either to get to the court of appeals or to skip it, depending on their side.

COSSACK: But doesn't that argument -- I think Rick makes a particularly decent argument when he says, you know, that the D.C. Circuit Court could act as a filter, get rid of more of the extraneous arguments, get it down to however they decide on the important issues, and then send that up to the United States Supreme Court. Isn't that sort of what circuit courts should do?

SUNSHINE: Well, I think it's a clever argument, but I've also heard Rick argue that there's absolutely no evidence in the record that there's any harm, so there's nothing to sift through there.

COSSACK: Well, we're not going to hold that against him, you know.

RULE: But that's why the findings, in fact, have to be carefully scrutinized, because they're clearly erroneous. And so, you know, that's one of the things circuit courts have to do.

SUNSHINE: I think, you know, both courts, you know, will, I think, you know, have the capability to do what they need to do. They both have speedy dockets, they both have, you know, a lot of smart people working there. the Justice Department will ask for it and the Supreme Court will make that decision. The Supreme Court could very easily say, this is a case we'd like to see go to the court of appeals first and we'll hear it later.

COSSACK: All right, talking about decisions, Keith, Bill Gates may have to make one. Let's put ourselves ahead and say this actually goes through. Gates, at that time -- now we have two Microsofts -- is going to have to make a decision over which one he's going to works for, right?

PERINE: That's right. He'll have to make a decision, as will all the other employees as to which one to work for. And he alone will have to make a decision as to which company he owns stock in.

COSSACK: So what will happen somewhere down the line? Will he just then say, OK -- if this did happen, he would have to say, OK, good bye to one, hello to the other?

PERINE: Well, under the order, yes. Rick might have more insight into his current thinking on which one he would choose if any.

RULE: Well, the only thing that I think is worth pointing out: There's a third alternative, and I think a lot of people believe a lot of people at Microsoft, perhaps even including Bill Gates and Steve Ballmer, can choose, and that is to work for neither. They can take their money and go do something else. There's no -- and that's the problem. These are companies that are based on humans, on human beings, human capital. Those folks can always leave and go elsewhere. Their services are in high demand. And once you start tinkering with this, that's a very real option that people are probably going to take in large numbers.

COSSACK: All right, that's all the time we have for today. Thanks to our guests and thank you for watching.

Today on "TALKBACK LIVE," should herbal supplements be regulated by the FDA? That's at 3:00 p.m. Eastern.

And join us tomorrow for an interview from Texas death row: The case of Gary Graham on tomorrow's edition of BURDEN OF PROOF. We'll see you then.



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