Microsoft, government face settlement deadline

Microsoft Corp. and its antitrust foes in the state and federal governments reached an incremental deadline Friday in their efforts to settle the landmark legal bout outside of a U.S. courtroom.

District Court Judge Colleen Kollar-Kotelly ordered Microsoft into intense settlement talks with the U.S. Department of Justice (DOJ) and the 18 state attorneys general last month. At the time, she set a deadline of Oct. 12 to work out an agreement on their own or bring in a mediator to help pilot the software maker and the government to a settlement in the next three weeks. With the first deadline now here, most legal and industry experts say there is little chance that the two sides will reach a consensus to end the 5-year-old legal battle.

"I would be really surprised if they announced a settlement," said Dana Hayter, an attorney with Fenwick & West, and former antitrust lawyer with the DOJ in San Francisco.

Jim Desler, a Microsoft legal spokesman, would not comment Thursday on whether any progress in the ongoing settlement talks would be announced. He also declined to comment on the status or content of any talks currently under way.

Microsoft and the government plaintiffs will meet today in a scheduled conference with Kollar-Kotelly to update the court on the settlement efforts. The two sides are also expected to offer names of potential mediators to take over the discussions, or the court will appoint one.

Ernest Gellhorn, an antitrust professor at George Mason University Law School, who closely follows the case, agreed that there is little chance for the case to end out of court. "It could happen, but it would be a surprise," he said.

Besides offering little signs that the software maker and the government are coming to terms, Gellhorn noted that the two sides have already tried a similar settlement effort with no luck. In April 2000, before District Court Judge Thomas Penfield Jackson delivered his original ruling that Microsoft had illegally used its monopoly of the operating system to hurt competitors in other markets, the case had been sent into negotiations under the watch of 7th Circuit Court of Appeals Chief Judge Richard Posner, a legal expert lauded by his peers.

"To say he's extremely well regarded is an understatement," Hayter noted of Posner.

But despite Posner's long and heralded career teaching and practicing antitrust law, Posner ended nearly five months of closed-door discussion without a settlement. "He brought it very close to a conclusion," Gellhorn said. "I would say he went as far as humanly possible."

In his final statement as mediator, Posner wrote that his efforts "proved fruitless" because "it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged."

As the case now is expected to proceed into new talks, it is again not expected that a settlement could bear fruit. In what Gellhorn called "reading the tea leaves," he suspects that Posner brought Microsoft and the DOJ to a potential settlement, but the federal government backed off when the then 19 state attorneys general would not agree to the set terms.

A similar rift could occur in the current negotiations. Already the state attorneys general from California and New York have said they could proceed with their own legal fight against Microsoft if they were not happy with the federal government's remedies. That statement came following the DOJ's decision to not pursue a break-up of Microsoft, one of the original remedies imposed on Microsoft that was overturned in June by the Court of Appeals for the District of Columbia. The Association for Competitive Technology (ACT), an industry trade group that has strong ties to Microsoft, said Tuesday that it has crafted a letter that it will give to state attorneys general next week at a meeting of the top state prosecutors. ACT said it is hoping to convince some of those that have signaled they would not go along with a DOJ settlement to reconsider, according to ACT spokesman Mark Blafkin.

Microsoft has exhausted most of its remaining avenues to appeal the landmark antitrust case. The U.S. Supreme Court Tuesday announced that it had rejected Microsoft's request for a review, offering no accompanying opinion.

If a settlement is still incomplete by the November deadline, Kollar-Kotelly has ordered the case back to trial where she will craft a remedy to impose on the software maker. If the case does proceed through Kollar-Kotelly's courtroom, Microsoft could then again try for an appeal.

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