Appeals Court Reverses MS Breakup

UPDATED The Court of Appeals for the District of Columbia today reversed the decision by U.S. District Judge Thomas Penfield Jackson ordering Microsoft to be broken into two separate companies. A panel of seven justices unanimously ruled that while the software giant did violate the Sherman Act, a breakup of the company was too extreme a remedy. Microsoft was initially told to immediately split its operating system and application software into two companies, in hopes to increase competition. The case will be sent back to the lower court and tried by a different judge.

Jackson will be removed from the case due to actions which the court says "seriously tainted the proceedings." The justices cited the trial judge's interviews with the media, and refusal to hold a evidentiary hearing to discuss the breakup remedy. The Washington Post reports that a new judge will be assigned through a random lottery.

The panel decreed, "Although we find no evidence of actual bias, we hold that the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process."

This ruling was not a complete victory for Microsoft however, as the Court of Appeals sided with Jackson's evaluation that company violated anti-trust regulations of the Sherman Act. The court agreed that Microsoft broke the law in its dealings with Apple Computer, and by signing exclusive contracts with Internet service providers to distribute only its browser.

The Department of Justice quickly responded to the decision, stating "We are pleased that the Court of Appeals found that Microsoft had engaged in illegal conduct to maintain its operating system monopoly. We are reviewing the court's opinion and considering our options."

Microsoft issued this response Thursday afternoon, writing "Microsoft is pleased that the U.S. Court of Appeals has overturned most of the lower court's findings against the company, drastically narrowing the case and removing the breakup cloud from the company." The statement went on to say, "While there are some aspects of this ruling on which we didn't prevail, we continue to believe that we face significant competition every day and we must continually improve our products in order to succeed."