Microsoft, government agree to important changes in proposed lawsuit settlement

Thursday, February 28th 2002, 12:00 am

By: News On 6

(WASHINGTON) - Microsoft Corp. and the Justice Department disclosed significant changes Thursday to the proposed settlement in their landmark antitrust case, partly to stem criticism from many legal and technology experts that the software giant was getting off too easy.

The company and the government outlined the changes in court papers filed in Washington with U.S. District Judge Colleen Kollar-Kotelly, who must decide in the coming months whether to approve the settlement. The Justice Department described the deal Thursday as ``a comprehensive remedy that puts into place meaningful, effective and enforceable restrictions on Microsoft.''

The most significant change deletes an entire provision of the settlement that some state attorneys general _ and some rival companies _ accused Microsoft of manipulating so the company could use valuable hardware technology patents from computer makers without paying them.

Microsoft, which had fought for the provision during the settlement talks, told the trial judge that it ``continues to believe that the provision was reasonable and justified,'' but that it agreed with the government's request to drop it ``in the interest of eliminating confusion.''

Nine states that rejected the settlement had accused Microsoft of using this provision to prohibit computer makers from enforcing their patents against the software giant. Officials cited the recent deposition of Richard Fade, a Microsoft executive, who told the states' lawyers that computer makers particularly objected to Microsoft's interpretation of the provision during recent contract talks.

Sony Corp., for example, had complained to the government that the provision ``would diminish Sony's ability to assert its patents ... and thereby may enable Microsoft to expand its power into new areas.''

Microsoft described those complaints as ``a great deal of misunderstanding and wild charges that Microsoft would use the right to misappropriate the intellectual property of others.''

A senior Justice official, speaking on condition of anonymity, acknowledged that changes to the provision had been sought by the non-settling states but said none of the changes announced Thursday were aimed at enticing more states to settle the lawsuit.

Microsoft's toughest critics said they were unimpressed with the changes.

``This agreement is like a car crash, that's how bad it is,'' said Ed Black, head of the Computer and Communications Industry Association, a trade group. ``They've fixed a flat tire, but the engine is still all over the highway.''

Other changes to the settlement include:

_Broadening some technical definitions to clarify Microsoft's responsibilities to ensure that rival software functions as well as its own with its dominant Windows operating system.

_Changing another key provision to expand the types of technical information Microsoft must disclose to rival companies about how software operates with business-level Windows ``server'' software. Microsoft said this change would ``make crystal clear what is now clear.''

Microsoft also argued that the trial judge's role in approving the proposed settlement is ``almost ministerial,'' and urged her to defer to the judgment of the Justice Department about whether the agreement ``is the most appropriate mechanism to resolve the competing interests at stake.'' To do otherwise, the company argued, would risk constitutional questions over the separation of powers between the executive and judicial branches of government.

The Justice Department also urged the judge to approve the settlement, but did not raise constitutional questions. Instead, the government said the judge ``should not lightly reject the government's predictions'' that the agreement would be effective.

Also Thursday, Microsoft defended its decision to disclose to the trial judge only its antitrust discussions with officials in the executive branch, but not with those in Congress. Records of such contacts are required under the 1974 Tunney Act, passed to guarantee that a company settling antitrust charges doesn't improperly lobby the government. Critics of Microsoft's disclosures _ including former Sen. John Tunney, D-Calif., who wrote the law _ accused the company of failing to disclose all its conversations with U.S. government officials.

Microsoft called those ``meritless complaints,'' and said Tunney's opinion, ``coming over 25 years after enactment of the statute, is irrelevant as a legal matter.''

The senior Justice official declined to say whether the government believes Microsoft was obligated to disclose its congressional discussions. ``It's their obligation, not ours,'' the official said.