U.S., Microsoft Say Settlement Is Best Deal

The former adversaries in the nearly four-year-old case are seeking to persuade U.S. District Judge Colleen Kollar-Kotelly that their settlement is in the public interest despite objections from nine states seeking harsher sanctions for violations of antitrust law.

The settlement terms "go beyond those that we would likely have obtained had we litigated," says Justice Department attorney Philip Beck.

Microsoft lawyer John Warden says the company is confident it could have limited the scope of sanctions if the lawsuit were to go forward, but settled "to achieve certainty about the rules going forward."

Kollar-Kotelly did not give any indication of whether she is inclined to accept, reject or modify the settlement, but questioned some of its features in the hearing, which is continuing.

She also pressed Microsoft to say if it agreed with the Justice Department's interpretation of the settlement, perhaps anticipating a dispute like that over a 1995 agreement that led ultimately to the present case.

MEETING OF THE MINDS

Warden, after conferring with other Microsoft lawyers present in the court, said: "We have a meeting of the minds, that we certainly agree with the scope and operation of the [settlement."

Under the settlement proposal reached in November, computer makers would get more freedom to feature rival software on the machines they sell. It also would require Microsoft to share some of the inner workings of its Windows operating system with rival software makers.

Nine of the 18 states in the lawsuit agreed to sign on to the settlement. But another nine--California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia--are still pursuing the case, saying the settlement is too weak.

Kollar-Kotelly's endorsement of the settlement is required under a 1974 federal law called the Tunney Act that governs federal antitrust settlements.

Separate hearings on the calls for harsher remedies are due to start next Monday, although Microsoft has asked for a two-week delay to study some refinement of the demands that include selling a version of Windows that can be stripped of features like the Internet browser.

Stricter Sanctions

Beck told the judge the appeals court ruling is not broad enough to allow the government to impose stricter remedies against Microsoft, as some of Microsoft's competitors and consumer groups have urged.

Specifically, Beck says the Justice Department could not have demanded any sanctions designed to take away Microsoft's Windows monopoly unless it could prove that competitors, like Netscape with its Web browser, would have succeeded but for Microsoft's behavior.

"If we had not settled we would have tried," he says. "[But it would have been an uphill battle that likely would have been resolved against us."

But Kollar-Kotelly balked at that argument, saying the appeals court had set that mainly as the standard for breaking up the company. The appeals court in June ruled against breaking up the software giant.

The judge also wondered if the settlement's definition of "middleware" was broad enough and wanted more details of a three-member panel that would oversee the settlement.

Middleware software, such as an Internet browser, sits between the computer users and the operating system and could be a threat to Microsoft's Windows.

"I do want to know whether you are taking a different approach [from the appeals court and if [so, I want to know why," Kollar-Kotelly says.

Judges typically give deference to the Justice Department in antitrust settlements but the Microsoft settlement confronts Kollar-Kotelly with an unprecedented situation, according to legal experts.

That's because the courts have already ruled against Microsoft. All previous settlements under the Tunney Act, in contrast, have involved cases that never got to trial or a verdict.

Copyright 2002 Reuters Limited. All rights reserved.

Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters.

Reuters shall be not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.