Tuesday September 26 11:08 AM ET

Supreme Court Sends Microsoft Case to Lower Court

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By David Lawsky

WASHINGTON (Reuters) - The U.S. Supreme Court sided with Microsoft Corp. on Tuesday, agreeing with the giant software company that its appeal of antitrust violations should first be heard by a lower appellate court.

Microsoft, appealing an order that it be broken up for violating antitrust law, had asked the Supreme Court to let the case be heard first by the sympathetic Court of Appeals. But the Justice Department argued for a speedy decision directly from the high court, which has never ruled on the case.

Significantly, the appeals court that will hear the case ruled for Microsoft on a related matter in 1998.

Among the Supreme Court's nine members only Justice Stephen Breyer dissented, saying the case ``significantly affects an important sector of the economy -- a sector characterized by rapid technological change. Speed may help create a legal certainty.''

The ruling sent Microsoft's shares soaring $3-1/2 to $64-3/4 with about 31 million shares traded by mid-morning.

Microsoft Chief Executive Officer Steve Ballmer appeared on television within minutes of the announcement to express his delight about the court's action.

``We're glad to have a chance to present that (our position) to the appellate court,'' Ballmer said, adding he was ``glad it's determined'' which court will hear the matter.

He called the high court's action ``just another procedural step in the process.''

Justice Department spokeswoman Gina Talamona said: ``We look forward to presenting our case to the Court of Appeals as expeditiously as possible.''

Chief Justice William Rehnquist declined to recuse himself from the case, even though Microsoft has hired Rehnquist's son to represent it in a private antitrust case.

``I do not believe that a well-informed individual would conclude that an appearance of impropriety exists,'' Rehnquist said.

In June, U.S. District Court Judge Thomas Penfield Jackson found Microsoft used its monopoly power in personal computer operating systems to compete illegally. He said the software giant should be split in two to prevent future violations.

The order takes effect only after all appeals are exhausted.

In the ordinary course of events, cases are heard by an appeals court and then either side may ask for the Supreme Court to hear the case.

But Judge Jackson, acting at the request of the Justice Department, certified the case directly to the Supreme Court under a law allowing major antitrust cases to bypass lower appeals courts.

The government, in invoking the law for only the third time in 26 years, said the case had ``immense importance to our national economy'' and argued: ``If this case does not qualify for direct review under the Expediting Act, it is difficult to imagine what future case would.''

Microsoft argued that the appeal would entail ``a morass of procedural and substantive issues that can be resolved only through a painstaking review of a lengthy and technologically complex trial record''.

The Justice Department said that route would add a year or more to the appeals process in a sector that changes rapidly.

The two sides have disagreed over what matters needed to be discussed. Microsoft has said its appeal raises 19 issues that the high court would have to resolve, but the Justice Department said the issues could be narrowed to five.

The appeals court has shown it is eager to take the case, announcing on June 13 it would have its full bench consider the matter rather than the usual three-judge panel.

-- (hmm@hmm.hmm), September 26, 2000