Microsoft is guilty of violating the Sherman Anti-Trust Act, Judge Thomas Penfield Jackson ruled a day after talks between the government and the software emperors broke down in a bid to find a compromise.
The so-called remedy phase of the case could take several months to resolve yet, but already there are those speculating on just what penalties might be imposed, even if Microsoft decides to appeal it all the way to the Supreme Court. And two adult industry associates - one involved in content protection software, the other a First Amendment and intellectual property attorney - say Microsoft's apparent conduct has placed intellectual property at various risks.
"It's really unfortunate," said Mark Iskoff, CEO of BayTSP, when he learned of the ruling. "(Bill) Gates had a killer business model, and was just very successful doing it. And it's going to affect quite a few industries."
"Gates has, in effect, censored brilliant entrepreneurs from coming up with a better operating system," said attorney Greg Piccionelli. "And by attempting to control the Internet through Explorer's dominance, he even effectuates, to some degree, a true censorship."
"We're discovering these days that intellectual property is going to be the key to what rules companies in the future," Iskoff said. "It doesn't matter what you do, but how much intellectual property you own. (Microsoft) built the intellectual property machine, the ultimate machine, and now they could be split into multiples.
"The thing that's bad for America is," he continued, "America's always had the opportunity to build top notch intellectual property. This (ruling) is going to slow down our ability to keep up and allow other people to come up with it."
Piccionelli says Microsoft, while not the devil on earth many perceive it to be, has nevertheless committed an error of what he calls "classic you're only human" kind.
"I would say (to Microsoft), thank you , you're paid handsomely, but you can't ride it forever," he said. "You have enabled the genius of a hundred million small entrepreneurs to come to the market because you took computers out of the mainframe owners' hands and let them be used by the guy on the street. But the guy on the street might come up with a better operating system (than Windows), and you're trying to stop him."
Piccionelli, too, said the long-term ramifications of the Jackson ruling depend on what the remedy phase of the case produces.
"One potential remedy is the possible giving away of the Windows system, which would open up a whole lot of different possibilities, depending on what are the strings attached," he said. "If that is the remedy that the court fashions. For example, if one has the ability to improve on the Windows system, then it opens up windows of opportunity for others. What could happen is, if you end up removing the stranglehold on personal computer operations that is the current (Microsoft) state of affairs, you might end up with something that looks a whole lot like Windows but may in fact operate differently, and maybe a much improved Windows system itself."
Last November, Jackson issued findings of fact saying Microsoft was a monopoly in personal computer operating systems and abused its monopoly power, using it to try to smash competitors, especially Netscape, and block innovation it perceived as a threat. Jackson's ruling then found Microsoft's making Internet Explorer part of its operating system was done solely to keep Netscape Navigator from turning a profit.
Negotiations between the government and Microsoft looked at least promising enough last week that Jackson delayed ruling on findings of law until this week, but a breakdown in talks over the weekend of April 1-2 compelled Jackson to hand down his April 3 ruling. The talks broke down when Chicago federal judge Richard Posner said differences between Microsoft and the government were "too deep-seated to be bridged."
Potential remedies could include breaking up the software empire, which is expected to be the government's wish. Microsoft has said any breakup would kill innovation and wound the technology industry, the major power behind the current American economic expansion.
The case began two years ago, when the Justice Department and 19 state attorneys general sued Microsoft for antitrust violations in its rivalry with Netscape. The suit accused Microsoft of collusion and strong-arming rivals and customers alike. Microsoft has argued that was anything but true.
"The biggest threat is from the [competitor] you can't see," Microsoft economic expert, Richard Schmalensee of the Massachusetts Institute of Technology, told MSNBC when the verdict came in.
