Programming Windows: Five Words Apart (Premium)

On April 4, 2000, U.S. District Court Judge Thomas Penfield Jackson issued his Conclusions of Law in U.S. v. Microsoft, asserting that the software giant had violated the country’s antitrust laws through systemic acts of predatory and anticompetitive behavior that harmed competitors, partners, and consumers. The ruling came just two days after four months of tense settlement talks had finally collapsed.

It was so close.

The attempted settlement was mediated by Richard Posner, the Chief Judge of the Seventh District Court of Appeals, and a widely-regarded expert in U.S. antitrust law. Jackson had issued an especially brutal Findings of Fact document ahead of his ruling specifically so that Microsoft would be incented to settle the case. The Findings of Fact made it very clear that Jackson was about to come down hard on the firm.

Posner was a voluntary mediator and, as such, he had no power to OK a settlement. Instead, he was instructed to see if he could get the two sides---Microsoft on one, the U.S. Department of Justice and 19 U.S. states on the other---to agree, and then present that agreement to Jackson. He was given two months to reach a settlement and, if he failed, Judge Jackson would issue his own ruling---the Conclusions of Law---and then his own remedies, which included a possible breakup of Microsoft.

Posner was a great choice for this task, and in an ironic twist, he was well-respected by Microsoft and its lawyers. This was by design: Jackson hoped that throwing Microsoft this bone after its terrible performance in court would guide it towards doing the right thing. As for the DOJ, it, too, wanted a settlement since it would provide immediate relief from Microsoft’s illegal business practices; if Microsoft were simply found guilty of violating U.S. antitrust law, it would appeal, delaying this relief by years. And there was always the possibility that an appeals court, or even the U.S. Supreme Court, would strike down some parts of Jackson’s ruling, lessening its impact on Microsoft and the industry.

After an initial group meeting, Posner proceeded to meet with both sides separately and confidentially. He would make no settlement suggestions of his own. Instead, he would provide feedback to the two sides’ own suggested remedies before presenting them to the opponents.

Posner told Microsoft that it had lost the court case and that there was no reason to believe that the Court of Appeals would be interested in investigating Microsoft’s so-called facts on its own. But Posner also reminded the other side that the Court of Appeals had already ruled against them on the product bundling issue that was so central to the case. And that the higher court had previously supported product bundling when it benefitted consumers, as Microsoft had argued when it bundled Internet Explorer with Windows.

Not surprisingly, Microsoft was open to a settlement, but Bill Gates told Posner that he would not accept the struc...