Microsoft Faces Redoubled Penalty Proposals from States

Taking a much tougher approach than the Bush Administration in trying to remedy Microsoft Corp.s anti-competitive conduct, nine states and the District of Columbia this afternoon filed a set of stringent proposals in federal court to force the software giant to unbundle its operating system and middleware.

The over-riding objection to the settlement that the Department of Justice and nine other states agreed to last month is that Microsoft was left with too much leeway for pressuring OEMs to sell its middleware and for shutting out rival software developers.

"I have a legal duty to make sure that any remedy stops the unlawful conduct," said Mark Shurtleft, attorney general of Utah, in a press conference this afternoon. "Ours provides for no loopholes, no carve-outs, and no lip service."

The states remedy would require Microsoft to: sell an unbundled version of Windows in which middleware and operating system code de-mingled; provide disclosure of software interfaces before Beta releases to give competitors a chance to bring rival software – which must be compatible – to market at the same time; disclose technical information to allow rival handheld devices and servers to work with Windows; include Java as a programming language; and make Office and other Windows applications compatible with other software platforms.

The proposal also includes the appointment of a Special Master to encourage Microsoft to comply and "hefty consequences" for non-compliance.

The nine states filing are Iowa, California, Massachusetts, Florida, Connecticut, Utah, Kansas, West Virginia and Minnesota.

Calling the states "holdout states," Microsoft in a press release said the proposed remedies "are extreme and not commensurate with what is left of the case." The Redmond, Wash. company said it is "committed to complying fully with the [Department of Justices] proposed decree" and that it remains hopeful it "can resolve any outstanding issues as quickly as possible in the interest of consumers and the industry."

Microsoft will file its own proposals in the ongoing litigation Dec. 12.