Justice Department attorneys urge judge to accept Microsoft settlement

Associated Press

WASHINGTON — The Justice Department sought Thursday to convince the judge in the Microsoft Corp. antitrust case that its landmark settlement with the software giant will help consumers and rein in the company’s illegal business behavior.

In a 68-page court filing, Justice lawyers defended the settlement they negotiated between Microsoft and nine states. Critics, including Microsoft rivals and some independent antitrust experts, have said the agreement is inadequate. They have charged that the company will be able to bypass many of the sanctions because of vague language.

But in the filing, government lawyers assured the judge that the settlement "will eliminate Microsoft’s illegal practices, prevent recurrence of the same or similar practices and restore the competitive threat" by rival companies to the dominant Windows operating system.

The government also sought to clarify a part of the settlement that allows Microsoft to keep secret information that might broadly violate the security of its anti-piracy technology, which prevents the illegal copying of music or movies. It is considered especially important and lucrative as entertainment increasingly is delivered in digital formats.

The government told the judge that Microsoft must disclose to competitors all the capabilities of its anti-piracy music technology under the latest version of Windows, called XP. The government said those mandatory disclosures will "makes these features available to competing software and hardware developers."

The government said it will require Microsoft to live up to its promises through "strong enforcement provisions" and can seek criminal penalties and civil fines if the company violates the deal.

Microsoft chairman Bill Gates defended the settlement as tough but one that "we’re really pleased to have." Nine other states, led by California, Iowa and Connecticut, rejected it and will ask U.S. District Judge Colleen Kollar-Kotelly to impose tougher penalties during hearings next year.

"Despite the restrictions and the things in this settlement, having the uncertainty removed and the resource-drain removed we think is very positive, not only for Microsoft but for the industry," Gates said in an interview Thursday with The Associated Press. "We’re hopeful to get it put behind us."

The judge, who must approve the settlement, tentatively set a hearing for February to review the deal. She has not signaled publicly how she might rule, but has pressed the sides strongly to negotiate an end to the case.

Microsoft and the Justice Department have suffered during such reviews before. Another judge, Stanley Sporkin, now retired, scrapped a proposed settlement between Gates and the government in a closely related case in February 1995, when Sporkin determined the decree was not in the public interest.

The department promised in its 1995 settlement that it would "end Microsoft’s unlawful practices that restrain trade and perpetuate its monopoly power." Yet, as Sporkin rejected it, he said "simply telling a defendant to go forth and sin no more does little or nothing to address the unfair advantage it has already gained."

A U.S. appeals court in spring 1995 overturned Sporkin’s decision, saying he relied on inappropriate evidence, and removed Sporkin from the case.

Another federal judge, Thomas Penfield Jackson, approved that settlement in August 1995. But Jackson himself was removed from the case this year by the same appeals court for "flagrant" ethical violations after he secretly granted interviews to reporters during the trial.

Gates expressed hope again Thursday that more states will agree to join the settlement. "We really don’t know exactly what will happen with the states. We hope they come in, and we’re just moving forward," he said.

Microsoft also asked the judge on Thursday to formally recognize Charles Rule, the former top antitrust official during the Reagan administration, as one of its new lawyers. Microsoft hired Rule in the earliest days of the trial as an adviser, and he was pivotal in negotiating the latest settlement with the government.

Rule for years has been personally acquainted with Charles James, the new antitrust chief in the Bush administration.

The settlement requires Microsoft to disclose technical details to help rivals make their products work more closely with its monopoly Windows operating system and to give an oversight panel full access to its books and plans for five years. It also bans exclusive contracts with computer makers that put rival software vendors at a disadvantage.