In a partial victory for Microsoft Corporation, the Court of Appeals for the District of Columbia has unanimously reversed Judge Thomas Penfield Jackson’s breakup of Microsoft under U.S. antitrust laws. Although the Appeals Court upheld the conclusion that Microsoft engaged in anticompetitive practices and violated antitrust law, the court also concluded that during the penalty phase of the trial, Judge Jackson engaged in "serious judicial misconduct" in his statements outside of court and to the media, and that those comments would "give a reasonable, informed observer cause to question his impartiality" regarding the penalties he imposed on Microsoft. The Appeals Court could find no instances of actual bias in Judge Jackson’s decision, but in their view the appearance of bias was more than enough to vacate the ruling.
Although the Appeals Court decision reverses the order to break up Microsoft, it does not mean the software giant is out of the woods. The Appeals Court has ordered a different judge to decide how Microsoft should be punished for violations of antitrust law; it’s safe to assume whatever penalties that judge imposes will also be appealed by Microsoft, and that the case will end up before the Supreme Court unless the government and Microsoft reach a settlement first. (The Bush administration is generally seen as more likely to settle with Microsoft rather than to pursue the case aggressively.) The proposed breakup of Microsoft into two separate companies – one focusing on operating systems, one on everything else – is endorsed by the Justice Department and seventeen of the nineteen states which brought the suit. The full text of the Appeals Court decision is available from the Court’s Web site; you can also check TidBITS’s coverage of Microsoft antitrust issues.