Key Figure in Microsoft Case Quits Justice

A key figure in the continuing antitrust investigation of Microsoft Corp., Stephen C. Sunshine, the deputy assistant attorney general for merger enforcement, has resigned from the Justice Department.

This week, U.S. District Judge Thomas Penfield Jackson signed a consent decree in which Microsoft said it would change some of its practices to settle allegations of antitrust - although the Justice Department said it would continue investigating the Microsoft Network online service. In essence, the decree settles the long-standing dispute over the Redmond, Wash.-based company's business practices in licensing its operating systems to computer manufacturers.

Jackson's signature does not represent a clear-cut victory for Microsoft. The Justice Department and others have raised the question that bundling access to the network inside Windows 95 software, due for release today, would give Microsoft an unfair advantage over other online services. Observers also have said the resolution to the old allegations sets the stage for a battle over whether the settlement covers Windows NT, Microsoft's high-end, 32-bit operating system

Sunshine's departure coincides with the department's decision to delay filing suit against Microsoft for its Windows 95 product. In a one-paragraph press release, the Justice Department on Aug. 8 said it wouldn't reach a decision on filing a suit until after the much-publicized launch of the new operating system. That same day, the Justice Department issued a two-page release discussing the hiring of a new deputy assistant attorney general, Lawrence R. Fullerton, to replace Sunshine. Sunshine's departure was not mentioned until the final sentence of the document. "We usually don't issue press releases announcing that someone has departed," said John Russell, a Justice Department spokesman. "But we do announce when new people come on board."

Russell declined to comment as to why Sunshine left, saying merely that he had returned to private practice at the firm of Sherman &amp Sterling, Washington, D.C. Sunshine would not return repeated calls to his law firm.

But a former aide to Sunshine told Washington Technology that "the decision to leave the Justice Department was mutual. Steve was told it was time to go." Earlier this month, several computer industry executives wrote letters to the department forecasting that a delay in the release of Windows 95 "would imperil the industry."

"Any interference in the shipment of Windows 95 will not only adversely impact business in the United States, but also will have a worldwide adverse impact," said Michael Cowpland, chief executive of Corel Corp., a graphics software company based in Ottawa, Ontario.

"We're completely dependent on the financial commitment we've made to this release," added Fiona Rochester, a spokeswoman for Corel. The company has invested heavily in tailoring a new version of its leading product, Corel Draw, to work with Windows 95.

Microsoft, in a prepared statement, said it was "pleased" the government had removed the uncertainty about whether it would have to delay the launch of the new operating system.

The company added that it "continues to move full speed ahead with preparation for the Aug. 24 launch, and that Windows 95 with the Microsoft Network access feature will be widely available as planned." The future of many companies, in fact, rests on the launch of Windows 95. A recent survey showed that the computer industry will spend more than $250 million on advertising to support Windows 95 in the final four months of the year. Microsoft itself will spend $310 million on TV and print ads, through agencies such as Wieden &amp Kennedy. "This is going to be a major advance in the personal computer industry," said Gordon Eubanks, president of Symantec Corp. "It would seem illogical to believe that only one company can benefit from a change in a major operating system."

There are 200 million PCs in operation across the globe today, but only 40 percent have the processing power needed to run Windows 95. Analysts are forecasting that Microsoft will sell more than 20 million copies of the software this year, mostly due to purchases of new PCs which have the operating system already installed on the hard drive. Upgrades are expected to take off later this year or early next year. Assistant Attorney General Anne K. Bingaman did not mention Microsoft in her comments introducing Fullerton to the world. "We are extremely lucky to have Larry in this position during the current merger wave. He brings a wealth of antitrust experience to this critically important position," she said.

At a minimum, it will take months for Fullerton to get up to speed on the investigation, and determine a new course of action, the former Sunshine aide said. The Justice Department is weighing whether to file antitrust charges against Microsoft due to the supposedly unfair advantage it has by being able to bundle its Microsoft Network product with Windows 95. Fullerton has plenty of credentials, in addition to his experience with the GOP. Prior to joining the Department of Justice, he was a partner in the D.C. office of Powell, Goldstein, Frazer and Murphy, where he practiced before the Justice Department and Federal Trade Commission. He received a J.D. and M.A. degree from the University of Virginia in 1978, and his B.A. from Princeton in 1974. He has also been a lecturer at Cornell University, Princeton and U.Va.