Now that the Court of Appeals has issued its ruling in the NOISe (Netscape/AOL, Oracle, IBM, and Sun) vs. Microsoft Corporation case (a.k.a., the United States Department of Justice [DOJ] vs. Microsoft), corporations are left to deal with the aftermath. How both sides handle the next six months may drastically affect your company’s ability to manage and upgrade its IT infrastructure. Let’s look at the decision in some detail and then see both how it could affect you and how you can prepare.

So what does the decision actually say?
First of all, let’s admit that this decision is like any other large document—the interpretations will continue ad infinitum until clarified by other courts or until they are simply allowed to die off because of a settlement. Both sides agree on one point, however: They both claim to have won and, in doing so, to have helped consumers. Having said that, here’s my take on the decision: I believe that the Court of Appeals’ decision reversed most of the harmful portions of the District Court’s conclusions of law against Microsoft. The Appeals Court affirmed a software developer’s right to add new features to its products. The Appeals Court also confirmed that the facts simply don’t justify the District Court’s order to break up Microsoft. And by drastically altering the lower court’s ruling of Microsoft’s liability, the Appeals Court signaled that it’s unlikely that any future breakup of Microsoft would stand on an appeal based on the evidence remaining.

Whether Microsoft wants to admit it publicly or not, the Appeals Court and the District Court agreed on one major point: Microsoft is a monopoly in the desktop operating systems market. But the point that many legal wannabes have missed is that simply holding a monopoly isn’t illegal. (Monopolies happen for many reasons. In Microsoft’s case, it’s a combination of business acumen on their part and a litany of stupid moves on the parts of their competitors over the last 15 years.) To be in violation of the law, the company must act in overt ways to maintain its monopoly at the expense of consumers. Where the District Court concluded that the integration of the browser into the operating system was a violation of Section 2 of the Sherman Act, the Court of Appeals disagreed. The Appeals Court’s decision does come down hard on Microsoft’s exclusionary conduct (i.e., the contract provisions with PC manufacturers for licensing Windows and with ISPs in their distribution of Internet Explorer), but Microsoft stopped those practices years ago, and the Court admits that no remedy exists that can effectively “turn back the clock.”

The Appeals Court also ruled that integrating new features into a software platform could not be found unlawful “per se,” but instead must be evaluated under the “rules of reason.” The Appeals Court sent the tying claim back to the lower court for further examination. The DOJ will use this opportunity to present new “evidence” of tying based on innovations in upcoming Microsoft products and systems, specifically Windows XP, Office XP, and HailStorm.

How will both sides respond, and how will it affect you?
Although most consumers and businesses would agree that a settlement is the best thing for the industry, this case has never been about what’s best for those constituents. It’s been about state attorneys general and congressmen collecting money from NOISe that, while it could have been spent on product development or innovation, has instead has been spent on lawyers. (One can only wonder what the industry would look like today if Sun had chosen to sell a $100 X86 version of Solaris instead of selling it for $750, or if Oracle had reduced the prices on their database products to make them affordable for small and medium businesses without being pressured to do so by Microsoft, or if Netscape had stayed the course and continued offering their browser for free instead of baiting and switching corporations by starting as a free product and then forcing users to pay for upgraded versions, or if IBM hadn’t insisted on making OS/2 work on its proprietary 286-based PS/2 machines instead of opting for a svelte 386-based design. But I digress.)

I believe that the DOJ/NOISe will attempt to make a case for delaying Windows XP and/or forcing Microsoft to remove some features (via an injunction). What are they most upset about? First, they don’t like the fact that Windows Media Player 8 (WMP8) will be included as part of Windows XP Home and Professional and that the upgraded version in this release will not be available to the general public. Of course, they don’t realize the insanity of this argument. By not allowing corporations to standardize on WMP8 across their company without upgrading everyone to Windows XP, Microsoft actually opens the door for competitors like RealNetworks to move in and establish themselves as the media distribution standard for all platforms (thus greatly advancing a NOISy cause). And the importance of the media player is directly related to the adoption of the distribution server. Real has done such a fantastic job of gaining adoption of its servers that Microsoft will have a hard time making its WMP8 version the de facto standard anytime soon. I think it will be hard to argue that Microsoft’s continued attempts to improve their media technology don’t help consumers by driving down the cost and increasing the quality of competitive offerings.

The second leg of the attack will focus on Passport integration specifically and the HailStorm initiative generally. The argument will go as follows: Microsoft’s inclusion of Passport as a core authentication mechanism within Windows XP hurts consumers by limiting choice. Choice of what? The simple fact is that consumers are concerned about their ability to use the Internet safely and securely. In order for the Internet to continue to grow, it’s essential that these safety and security concerns be mitigated. Hundreds of companies and thousands of employees are depending on the growth of the Internet for their livelihood. So what’s the NOISe about? Each of the coalition’s members has their own methodology for sharing and storing authentication information. And there will certainly be more than one mechanism. The winner here will be determined by who wins the battle at the server. If application developers endorse external authentication mechanisms other than Passport on their servers, then those authentication systems will be adopted by consumers. Given the concern that many consumers have about any single company (especially Microsoft) managing and owning their profiles in a central data center, it’s likely that we’ll be supporting multiple authentication mechanisms well into the future.

How will Microsoft respond? Like they always have. They’ll continue to add innovative features to their products and give consumers the integration that they need to use the platform more efficiently. Unless and until the NOISe from the government and its cronies gets too loud that the courts force them to change—consumers be damned!

Will Microsoft save the world? Or just conquer it?

What will Microsoft contribute to our technological future this year? Has the business giant been treated fairly by the Department of Justice? Share your opinions by sending an e-mail or, better still, by posting a comment below.