Acton Commentary

The Final Chapter or the End of the Beginning?


On Friday November 1, 2002, Judge Colleen Kollar-Kotelly approved most of the provisions of an anti-trust settlement between Microsoft and the Justice department. This settlement, hopefully, begins the final chapter in the costly and drawn out legal offensive waged against one of America’s most innovative companies. While this settlement is certainly a step in the right direction, the resolution of some serious issues remains ambiguous.

The most significant and often overlooked issue at stake throughout this entire legal action has been whether or not a company has the right to protect the products of its investment and innovation. In my estimation, the long-term damage done to intellectual property protections by this costly legal action has yet to be assessed. My concern is that this wide-ranging legal offense brought against Microsoft by its competitors has introduced a dangerous ambiguity into the field of intellectual property protections. This ambiguity could have the potential effect of stifling the entrepreneurial spirit by discouraging research and development into new technologies that are beneficial to human flourishing.

In the case of the Microsoft settlement, the company will have to share a certain amount of its proprietary code with competitors. This sharing, according to the terms of the settlement, is greatly limited relative to what was originally ordered in the now successfully appealed decision of Judge Thomas Jackson. Judge Kollar-Kotelly’s ruling takes significant steps to restore to Microsoft the full possession of its proprietary technology. A simple fact remains—technological innovation depends on the ability of an investor to recover the high costs of research and development. While the Judge’s decision is not perfect, it seems to restore much of Microsoft’s ability to protect the products of its ingenuity.

From the beginning, the Justice Department conceded that Microsoft had attained its significant market share legitimately by offering products desired by and affordable to consumers. With this realization, it is important to note that the demands of justice dictate that every person receives what he is due as a result of his investment and labor. The demands of justice apply equally to the business world and to corporate entities. The fact that Microsoft is a successful business does not mean that the dictates of justice are suspended or nullified. This settlement goes far in correcting the injustices done to Microsoft and the diminution of intellectual property protections represented by this lawsuit.

The settlement, however, is not a complete victory for businesses and consumers who rely on a solidly founded rule of law governing intellectual property protections. These protections are vital to the creation of an environment where the finest products of human ingenuity can be developed and delivered. Despite this settlement, Microsoft still has significant foes that wish to prolong other legal actions against the company. There are still a few prominent Attorneys General are still looking to get into the company’s pocketbook and the European Union has recently begun to scrutinize Microsoft’s business practices. As a result, it is unclear as to what the next move of Microsoft’s foes will be. Given the litigious environment we are currently in and the willingness of Microsoft’s competitors to litigate their way into greater market share, I hesitate to call this settlement a definitive end to the assault on Microsoft’s defense of its intellectual property. It is unclear whether this settlement constitutes the final chapter or the end of the beginning in this famous case of anti-trust litigation.