I'm not sure whether you follow the news, but Microsoft received some extremely positive signs last week when a 2-day hearing before the US Court of Appeals revealed that the court is leaning toward rescinding Judge Thomas Penfield Jackson's breakup of the company. We can debate the merits of the Microsoft antitrust case for the rest of our lives—I believe opinions were split about 50/50 the last time the subject came up in Windows 2000 Magazine UPDATE—but what's important to remember is that the trial's outcome will eventually have an enormous impact on all of us. This week, I discuss how I think the appeal will turn out and why it matters.

Looking back through the mists of time, I recall my original prediction about the trial's outcome, in which I unboldly declared that Microsoft would lose the trial but turn the decision around on appeal. And although that appears to be happening, it's a simplistic view of the situation. One of the more interesting behind-the-scenes revelations that Ken Auletta discusses in "World War 3.0: Microsoft and Its Enemies" is that Microsoft was quite willing to detach Internet Explorer (IE) from Windows Millennium Edition (Windows Me) and subsequent versions of Windows to win a settlement. In fact, the company had agreed to do just that—until the 19 states, which felt that they didn't have enough say in the settlement talks, eventually undermined the deal. Now, more than a year later, it looks as if we might revisit this possibility.

When Department of Justice (DOJ) and Microsoft lawyers went before the panel of Appeals Court justices last week, a few things became clear: The appellate justices don't believe that IE and Windows are integrated, they believe that Microsoft has an OS monopoly, they feel that Judge Jackson was biased against Microsoft, and they plan to strike down the ruling to break up the company if any one of Jackson's Findings of Fact is found fallacious. When you put the pieces together, it's highly likely that the Appeals Court will find that Microsoft did indeed "integrate" IE into Windows solely to harm a competitor (Netscape) but that this act doesn't—in and of itself—constitute reason enough to break up the company along the lines Judge Jackson dictated. His plan would, in the words of the Appeals Court, simply create two monopolies.

Given this situation, the punishment will probably be as follows: Microsoft will have to stop integrating IE into Windows and offer it either separately or as an optional OS component. Although a ruling might well contain more than that, I expect that Microsoft will otherwise be able to conduct business as the company sees fit. Perhaps the justices will rule that the company should be required to sign some sort of consent decree that limits its ability to illegally leverage its OS and applications-suite monopolies. But the key point is that Microsoft will have to "de-integrate" IE from Windows, which the justices correctly see as a fairly simple and painless procedure.

The thing is, this ruling can't solve the original problem: IE is now a necessary component of just about every Microsoft product on the planet, including its server applications. Most customers, on both the server and the desktop, would simply "choose" to install IE anyway, either because they prefer it as a Web browser or because SQL Server 2000, IIS, or some other essential server simply requires it. We're so far gone in this integration game that it's too late. Individuals actually do prefer IE (it's a great browser) and server applications often require it. The (expected) punishment is toothless.

But why does the appeal's outcome matter to you, me, and anyone else who uses Windows? Since the ruling against it, Microsoft has curbed its questionable business practices and the industry has, to a large extent, moved into a new era in which small companies need no longer fear the predatory company from Redmond. Microsoft partners have struck new deals with Microsoft competitors, and PC makers have made strong moves to Linux, an OS that competes with Windows. However, if Microsoft is essentially slapped on the wrist, as it was in 1995, we could be back to the same old industry, in which everyone is too afraid of Microsoft to innovate, strike strategic partnerships, and move the industry forward.

If the Court of Appeals at least curbs Microsoft's behavior, on the other hand, the current, calmer situation could move forward. What's interesting is that Microsoft has created its first truly great version of Windows—Windows XP—almost exclusively during a time in which it was fettered by the court ruling. If you use Microsoft technology, you've got to ask yourself: What's better for users—a Microsoft that's free to do business as it has in the past or a company cowed by the heavy weight of the government? However you feel about Microsoft personally, a little soul searching about the issue might turn up some surprising answers. Here's hoping that the appellate court does the right thing—whatever that might be.