Microsoft Corp's Thursday release of Windows XP, its new operating system, doesn't mean the product will escape court-ordered changes as part of an antitrust case against the top software maker, legal experts said.
"XP is not out of the woods by any means yet," said Robert Litan, a former US Department of Justice antitrust enforcer who directs legal studies at the Brookings Institution.
PHOTO: REUTERS
Rivals such as AOL Time Warner Inc object to XP's added software and Internet features, saying they curb competition.
Microsoft investors have expressed optimism that XP was introduced without legal interference, arguing that once the product is in stores and on personal computers it will be hard to alter.
Legal experts caution that the court can -- and probably will -- still order changes, such as requiring Microsoft to offer Windows XP without some of the new features or deleting shortcuts to some programs from the main Windows screen.
"Microsoft can't protect itself from any remedy simply by sneaking a product out there before the court has a chance to issue an injunction," said Herbert Hovenkamp, an antitrust law professor at the University of Iowa who advises the states on the Microsoft case. Redmond, Washington-based Microsoft officially released the product on Thursday.
Windows XP adds a program for instant messaging that competes with AOL Time Warner. The new software has an improved program for playing Web audio and video, meant to challenge RealNetworks Inc, and photo-editing software that may take business from Eastman Kodak Co. The new operating system also rolls in new programs for making Internet phone calls and video-conferencing.
A federal appeals court in June found Microsoft illegally defended its operating-system monopoly by combining the Internet Explorer Web browser into Windows 95 and 98. US District Judge Colleen Kollar-Kotelly, who is presiding over the case, may order changes to XP, or they could become part of any settlement between the company and the government.
State attorneys general have indicated they will seek changes to Windows XP.
The 18 states that sued Microsoft hired Washington lawyer Brendan Sullivan Jr. as their lead trial counsel this week. By doing so, the states served notice to Microsoft and the Justice Department they will insist on strict enough remedies to prevent the software giant from perpetuating its monopoly, experts said.
The states are signaling that "they will be in a position to strike out on their own" if the Justice Department under new Republican leadership takes a more lenient approach, said Mark Schecter, a Washington antitrust lawyer.
Eric Green, a Boston University law professor who specializes in dispute resolution, is overseeing mediation in the case. Kollar-Kotelly gave Microsoft and the government until Nov. 2 to reach an accord with Green's help. If that fails, she will hold hearings starting March 11 on the penalties to impose on Microsoft.
Several legal experts say XP's new features may further entrench Microsoft's software monopoly in a way that's similar to what the addition of Web-browser Internet Explorer accomplished in Windows 95 and 98.
"It conceptually encroaches on a number of areas that, like Internet Explorer, were developed by other companies," said Andrew Gavil, an antitrust professor at Howard University's School of Law. "The court of appeals decision stands for the proposition that Microsoft can't integrate new programs if by doing so it is further entrenching its operating-system monopoly."
Microsoft's Jim Allchin, who heads the Windows group, said the programs were added because consumers want them.
"As long as we just focus on consumers I think we've done the right thing," he said in an interview.
Now that the program has gone on sale, Microsoft could make changes to XP using the Windows Update Web site, designed to deliver users program upgrades. Microsoft plans to use this system to distribute bug fixes and software that lets Windows work with additional hardware like printers and scanners that weren't included in the original program. Allchin suggested changes to the program may hurt the US economy.
"We need some successes like Windows XP," he said. "The country needs this right now."
Experts say the government will, at minimum, seek to compel Microsoft to offer PC makers versions of XP without the new bundled programs and features, and prohibit the company from discriminating against PC makers that choose to include competing programs.
The government may seek to lift Microsoft's restrictions on links computer makers can include on Windows desktops, Hovenkamp said. Microsoft also may be forced to give other software makers the programming code needed to let their products run on Windows.
Experts say the government is considering a more severe step, compelling Microsoft to license its Windows code to other companies, which could develop and sell competing versions.
Further, the company could be targeted for liability suits stemming from any anti-competitive impact of the product. Such suits could come from rivals, computer makers and, where the law permits, consumers who received the product with PCs, said Ernest Gellhorn, an antitrust expert at George Mason University's law school. Consumers would need to prove they were harmed financially for such a suit to succeed.
Gellhorn says Microsoft is in a better position after the product's release.
"At least they have their product out there," he said.
"The suits would take years, so that's money they may have to pay down the line, while XP represents money they are getting now."
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