WASHINGTON (Reuters) - An appeals court questioned on Tuesday a government plan to split Microsoft Corp. in two and raised doubts about the credibility of the trial judge who ruled that the company violated antitrust laws.
For the second consecutive day, the appeals judges bombarded government attorneys with questions about whether the violations warranted breakup, whether dividing Microsoft would truly promote competition, and why there had been no full hearing on the split.
Several judges on the seven-member panel raised the possibility of throwing out one or two of the three major findings against Microsoft and upholding only the charge that the company illegally maintained its monopoly in personal computer operating systems.
That could mean sending the case back to the district court level to reevaluate the remedy part of the trial, said judge David Sentelle.
"Don't we have to re-litigate remedy if we strike down any of your case?" Sentelle asked Justice Department counsel David Frederick.
Edwards and other judges lashed out at trial judge Thomas Penfield Jackson for making out-of-court statements about the case in speeches and comments to journalists.
"It violates the whole code of office," said Edwards, chief judge for the U.S. Court of Appeals for the District of Columbia. "The system would be a sham if all judges went around doing this."
In a book published after the trial ended, a journalist says he interviewed Jackson twice during the trial. In those interviews, the judge compared Microsoft executives' to a street gang and criticized the appeals judges for overturning one of his earlier rulings.
Microsoft argued that the out-of-court comments show Jackson was biased and asked the appeals court to void all of his rulings. The U.S. Department of Justice and 19 states contend the statements shouldn't affect the trial because they were published after Jackson ruled on the case.
Judges Sentelle and Stephen Williams wondered aloud whether they should show deference to Jackson's findings of fact, given his remarks.
Stock of Microsoft fell 3/16 to $59-3/8 at the close of the Nasdaq market Tuesday in a down day for tech stocks generally. The stock had gained Monday, partly on the start of the appeals case, analysts said.
On June 7, Jackson ordered that the company be broken up to prevent future antitrust violations, and set other remedies, all of which he suspended pending appeal.
Jackson had found Microsoft holds monopoly power in the market for personal computer operating systems with its Windows product and illegally used that power, including integrating its Web browser into Windows and refusing to offer it separately.
Legal analysts say the appeals judges are unlikely to void all Jackson's rulings and start the trial over again. But Jackson's remarks could make it easier for them to strike down the break-up remedy and many of Jackson's other rulings.
"He doesn't get the benefit of the doubt, and Microsoft's [arguments] are elevated in importance," said William Kovacic, a George Washington University law professor attending the hearings.
Edwards raised other problems with Jackson's ruling during Tuesday's arguments. He said the trial court was "absolutely unclear" in reaching findings that Microsoft had acted illegally in trying to monopolize the market for Web browsers.
"(T)here are these sleights of hand about whether we're talking about a browser market or whether we're talking about what we were talking about yesterday, which is the platform market," said Edwards. "You can't have it both ways."
The government charges that Microsoft offered Netscape a deal in 1995 to divide the browser market. But the idea that Microsoft would be able to gain a monopoly over the browser market, Judge Tatel said, was "awfully speculative."
Microsoft has denied proposing to divide the browser market in a June 1995 meeting with Netscape Communications Corp., now owned by AOL Time Warner.
Richard Urowsky, arguing for Microsoft, said any attempt to manipulate the browser market would have failed as there were so many other browsers available to consumers at the time.
There had also been signals Monday that the appeals court was skeptical of Jackson's ruling. The appeals judges had reserved the toughest questions for the government's lawyers, quizzing them on whether destroying Microsoft's monopoly might simply result in another firm's dominating the market.
"I don't think we're going to see a breakup," Kovacic said Tuesday. "I sense a consensus among them that perhaps parts of the government's case are going to fall by the wayside."
There has been speculation that weakening of the case by the appeals court could lead to settlement talks between Microsoft and the new administration of President George W. Bush.
The landmark antitrust case, filed in May 1998 under the Clinton administration, is the biggest since the government took AT&T Corp. to court, resulting in the 1984 breakup of the company into regional telephone companies.
It is not clear how soon the appeals court will produce its opinion, with estimates ranging from a few weeks to several months.