New Mexico settles with Microsoft

New Mexico said Thursday it has settled its antitrust claims against Microsoft, the first of 19 state attorneys general to bow out of the legal battle since Microsoft was deemed last year to be a predatory monopolist by a U.S. District Court.

New Mexico Attorney General Patricia Madrid said she had negotiated a deal with Microsoft to pull out of the lawsuit, which charged the software giant with illegally using its monopoly power in the PC operating systems market to harm competitors in other fields.

"It was a very simple settlement in which Microsoft agreed that New Mexico would get the benefit of anything negotiated with the Department of Justice and any remaining states," Madrid said in a telephone interview. "Microsoft also agreed to pay the attorneys fees and costs for the state." She estimated that cost to be about US$100,000.

New Mexico's action comes one day after Microsoft made a significant concession in the case, allowing PC manufacturers to remove Microsoft's Internet Explorer browser from Windows and include software from rival companies to show up on Windows PCs.

Madrid applauded the other state attorneys general who are still locked in battle with the Redmond, Washington, software maker, but said the cost of continued litigation was too much for New Mexico.

"In the future, if this case was to go into litigation on the issue of a breakup or structural remedies, I think the burden could become onerous on the state of New Mexico," said Madrid, who inherited the case from her predecessor. "It puts the states in a very good position for negotiating."

Microsoft spokesman Jim Desler said the company did not plan to release details of any settlements it reaches.

"We are pleased to have resolved this matter with the state of New Mexico and we thank Attorney General Patricia Madrid for her leadership in hammering out this settlement," Desler said.

A federal appeals court delivered a ruling late last month in the landmark antitrust case between Microsoft and the U.S. government, sending the case back to a lower court to be reviewed by a new judge, while upholding a lower court verdict that Microsoft acted illegally to maintain its monopoly.

Since then, Microsoft officials have alluded to their attempts to settle with its legal foes. Thursday, the company reiterated its interest in resolving the case out of court, noting that it is "committed to working with the federal government and the remaining state attorneys general to resolve the remaining issues in this case," Desler said.

One legal expert said the settlement is a significant win for Microsoft but doesn't portend a speedy conclusion to the case.

"I think that event is notable, but by itself it doesn't have a whole lot of impact on the case one way or the other," said Dana Hayter, an attorney at the law firm Fenwick & West LLP and a former member of the U.S. Department of Justice (DOJ) in San Francisco. "What really matters of course is what settlement is reached with -- or what remedies are granted to -- Iowa, Connecticut, California and the United states. They seem to be the folks with the most stake in the outcome."

Other observers speculated that the settlement with New Mexico could lead to similar agreements with the other parties involved in the case.

"I'd say that if one state settles, the likelihood of others being of a like mind is fairly significant," said Chris Le Tocq, an analyst with Guernsey Research.

New Mexico's decision to settle only highlights a deep divide between the states that have pursued Microsoft. Earlier Thursday, for example, Iowa Attorney General Tom Miller, who has headed the states' legal assault against Microsoft, said Microsoft's concession brings it no closer to a settlement.

"Over the years we have seen a pattern where a defendant does something wrong or illegal, achieves its objective, and then says it won't do the same thing again when it's really too late to make a difference," Miller said Wednesday in a statement. "That seems to be the situation here. Much of the Microsoft announcement deals with the browser -- but the browser war is over. Microsoft has won."

Miller added that Microsoft's announcement "falls far short of the remedies or relief we think are necessary." He reiterated criticism that Microsoft may be employing similar tactics with its Windows XP operating system.

(James Niccolai and Ashlee Vance of the IDG News Service San Francisco bureau contributed to this report.)

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