What does Microsoft's legal loss mean for Linux?

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April 6, 2000
Web posted at: 10:36 a.m. EDT (1436 GMT)

by Joe Barr

(IDG) -- Judge Thomas Penfield Jackson found against Microsoft Monday afternoon in three of the four charges brought by the Department of Justice and 19 state attorneys general. Jackson ruled that Microsoft violated Section 1 of the Sherman Antitrust Act by illegally tying its browser to the Windows operating system. He also found that Microsoft violated Section 2 of the Sherman Act by illegally maintaining its monopoly power through "exclusionary, anticompetitive, and predatory" means, and by illegally attempting to obtain a monopoly in the browser market by anticompetitive means. Jackson found for Microsoft in the plaintiffs' fourth claim, that Microsoft also violated Section 1 by using illegal and exclusionary contracts. Exactly what it all means for Linux isn't nearly as clear cut.

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Judge Jackson had planned to release the findings last week, but delayed in the slim hope that a settlement might still be reached. But when the mediator he had appointed to conduct settlement talks, the highly respected federal judge Richard Posner, announced over the weekend that the two sides were too far apart to continue, Jackson acted swiftly, announcing yesterday morning that he would release his findings after the markets closed at 5 p.m.

News of the impending verdict and collapsed settlement talks sent Microsoft share prices plummeting yesterday at the rate of one million dollars per second of the trading day. The tech-heavy Nasdaq dropped nearly 350 points for the day, the largest single-day decline in its history. Both Microsoft and the Nasdaq continued to lose ground today.

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To buttress his findings, Jackson carefully and deliberately established that a relevant market exists, that Microsoft does indeed hold a monopoly in that market, and finally that Microsoft engaged in "exclusionary, anticompetitive, and predatory acts" to maintain it.

Citing Microsoft's conduct in relation to Netscape and Java, Jackson wrote: "Microsoft strove over a period of approximately four years to prevent middleware technologies from fostering the development of enough full-featured, cross-platform applications to erode the applications barrier."

After detailing the evidence of Microsoft's efforts during the browser wars and the Java wars, Jackson stepped back from the details to surmise, "Microsoft's anticompetitive actions trammeled the competitive process through which the computer software industry generally stimulates innovation and conduces to the optimum benefit of consumers."

Jackson validated the heart and soul of the federal case, the claim that Microsoft illegally tied its browser to the Windows operating system. In his conclusions, he carefully wound his way through the evidence presented at trial, an apparently contradictory appeals court ruling, and finally a US Supreme Court finding on the issue of tying the browser and OS together.

"The Court is confident that its conclusion, limited by the unique circumstances of this case, is consistent with the Supreme Court's teaching to date," Jackson wrote.

On the claim that Microsoft illegally used exclusionary contracts, Jackson found for Microsoft. Although Microsoft routinely entered into exclusionary contracts, the judge concluded that it did not do so illegally under the terms of the Sherman Act.

The third phase of the trial, which could last as long as a year, will determine remedies for Microsoft's misconduct. Whether those remedies will be structural, with Microsoft broken up into separate firms along the lines of Ma Bell, or behavioral, leaving Microsoft in one piece but regulated by the government in what it can and cannot do, is very much up in the air.

Microsoft has already promised that it will appeal at the appropriate time. In all likelihood, the matter will finally be resolved before the US Supreme Court.

What it all means to Linux

For the short term, this won't affect Linux a whole lot. Red Hat, VA Linux, Corel, and Caldera stocks were all up at the close of trading yesterday, but lost ground, along with the Nasdaq as a whole, today. The market is an excitable, sometimes hysterical place. IPO prices for Red Hat and VA Linux, and the stocks' subsequent return to more realistic levels, illustrate that very clearly.

The Conclusions of Law are another click of a gear, another step towards the day when the operating system marketplace will be more competitive and innovative than ever before. When that day comes, it will be good not just for Linux but for OS/2, BeOS, BSD, and all the other alternative operating systems. Eventually you will be able to walk into a computer retail outlet and find, as a matter of routine, hardware from major OEMs with operating systems other than Windows preloaded.

If more OEMs are willing to take a chance on Linux, perhaps more developers will join the free and open source software crowd, and we'll get even more of the applications that we've been waiting for. But the change will be incremental, moving one step at a time.

Eventually, the day will come when the software industry will enjoy increased innovation as the stifling affects of Microsoft's predatory business practices are removed. Consumers will benefit from new competition in a market that has been mostly devoid of it since the IBM PC was first offered back in the early 1980s. We will all see lower prices and better products as a result.

Regardless of the eventual outcome or the length of the legal process, Linux has proven that it can gain market share in the server space faster than Microsoft, even with Microsoft's unregulated monopoly in place.

Can Linux do the same in the desktop space? I don't believe that it can, at least not until the market is truly open to competition. But Linux can and will continue to expand in server the market, with or without justice being done in a timely manner in the Microsoft case. Linux has been doing the impossible for a while, and carving out a bigger and bigger slice of the pie for itself based on its growing utility and popularity. When the day comes that the playing field is level, Linux will be there waiting, stronger than ever.

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Microsoft Legal Channel - Coverage, timelines, commentary of the trial
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Microsoft Linux: Forecast or fantasy?
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Device drivers for Linux
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Why use Linux?
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A dose of open source realism
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Lite Linux for the curious
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The essential guide to open source
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Linux Weekly News
Full text of judge's findings of law
Bill Gates and Steve Ballmer Statements on Conclusions of Law

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