Deadline Deal

An 11th-hour deal gives states attorneys general until Tuesday morning to evaluate the Microsoft-DOJ settlement agreement announced last Friday.

WASHINGTON--The judge in the Microsoft Corp. antitrust case pushed back a key deadline late last week to give state attorneys general more time to mull a settlement agreement announced between the software maker and the Department of Justice Friday morning. The delay came one day after proposed terms of the deal were leaked to the press, sparking criticism of the proposal, especially among representatives of the 18 states involved in the case, some of which saw the terms as far too lenient.

U.S. District Judge Colleen Kollar-Kotelly, who had set a Nov. 2 deadline for the parties to settle, said in court here last week that the states would have until Tuesday morning to agree to the proposed settlement. The decision capped a day of anxious speculation and negotiation during which the states, racing to analyze the settlement terms, negotiated intensely among themselves to reach consensus, according to a source with one state attorney generals office.

Washington attorney Brendan Sullivan, who is leading the combined legal efforts of the states in the Microsoft case, requested the additional time, he said, to make sure "were not trading litigation today for a decade of litigation over enforceability."

The proposal under review calls for Microsoft to agree to five years of monitoring by the federal government but includes no strong enforcement mechanisms, according to sources familiar with the case. It does call for the appointment of a full-time, on-site federal inspector at Microsoft to review records, computer systems and source code to ensure compliance. The settlement also does not require the company to change the design of Windows software and allows it to continue bundling its own products into its operating systems, a significant victory for Microsoft, in Redmond, Wash.

In addition, Microsoft would be compelled to allow OEMs to more freely install competing software along with Windows and would be required to make some source code available to competitors. While the deal does call for Microsoft to provide developers with middleware interfaces and to license intellectual property to ensure interoperability with its products, critics charge the settlement gives the software maker too much discretion over what technology is disclosed. Microsoft would also be bound to uniform licensing agreements for all "key" computer manufacturers for five years and be barred from entering into exclusive agreements.

The settlement terms, however, fall far short of the structural changes and market-opening measures sought by several states and proposed at earlier stages in the litigation.

"The last time I saw a public policy issue as important and difficult as Microsoft decided under impossible time constraints and without a chance for adequate public review was when California passed its electricity deregulation bill," said California Attorney General Bill Lockyer in a statement. "Im not about to stand by and see that happen again."

Other attorneys general struck a more conciliatory tone at the hearing but still indicated theyd take advantage of the judges extension to ensure their concerns were met.

"I think the [proposed settlement] represents some progress," said Iowa Attorney General Tom Miller. "There are going to be things we like and things we dont like. This is somewhere in a gray area."

Alluding to the changed climate in Washington since the terrorist attacks of Sept. 11, Connecticut Attorney General Richard Blumenthal said he was "personally committed to pushing toward a settlement in the national interest."

Judge Kollar-Kotelly indicated that if the states could not agree to support the current deal, the federal matter could be settled, and the states could then pursue legal action in a new suit.

"The states have the capacity to pursue this on their own if necessary," said New York Attorney General Eliot Spitzer, "[but] those of us in New York believe good things happen in extra innings."

"Were hopeful [the states] will sign on," said Microsoft Chairman and Chief Software Architect Bill Gates in a press briefing Friday morning.

For some Microsoft users, the settlement negotiations offered little prospect for enhanced competition in the operating system sector. "I dont think a settlement will make any difference," said Craig Schultz, a systems engineer in Vancouver, British Columbia. "Obviously, we cannot really trust Microsoft. If you dont break them up, youre just wasting everyones time and money."

Additional reporting by Peter Galli