AFTER partial settlement, Microsoft faces two-front court fight

Wednesday, November 7th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ Failing to settle its antitrust case with all sides, Microsoft Corp. is now in the precarious position of complying with already negotiated sanctions while risking additional future penalties the trial judge could impose as early as next year.

Some legal experts wonder whether Microsoft Chairman Bill Gates jumped this week from a frying pan of secret negotiations into a potential fire in federal court. Instead of a unified battle against the Justice Department and 18 states, Microsoft's lawyers must now wage fights simultaneously on disparate fronts: convincing the judge in one set of hearings that its concessions are tough enough even as some states press in other hearings for much harsher sanctions.

Nine states, including New York and Wisconsin, announced a settlement Tuesday with Microsoft and the Justice Department after the company agreed to new provisions aimed at ensuring that competitors can build software products that work seamlessly with the monopoly Windows operating system.

As many as nine other states said they will press forward in the antitrust case and begin collecting evidence soon to decide the most appropriate penalties for Microsoft. A federal judge already has determined the software maker is guilty of illegally using its influence in the technology industry to undermine rivals.

Officials in some of those nine states hinted they may eventually settle their complaints, perhaps within the week. ``A number of states said they will take a look at this over the next few days,'' said Iowa's attorney general, Tom Miller, who was responsible for preserving the states' coalition. Miller, one of Microsoft's most consistent critics, said even he could not rule out a settlement.

But others took firm stands opposing settlement, including California and Massachusetts, signaling a raucous courtroom fight early next year. West Virginia's attorney general, Darrell McGraw Jr., called Microsoft an ``illegal, unlawful actor who has damaged the economy by its misconduct ... and by some curious twist of fate has taken the driver's seat in a process where the settlement legitimizes many facets of the company's misconduct.''

California Attorney General Bill Lockyer, who also has emerged among Microsoft's tougher critics, said remaining states will push for tougher sanctions than those contained in this week's deal. ``This agreement does absolutely nothing to punish Microsoft for the bad behavior that every judge has agreed they committed,'' Lockyer said.

Microsoft recognized its strategic risks and asked U.S. District Judge Colleen Kollar-Kotelly on Tuesday to delay any court proceedings until she decides whether the settlement is in the best interest of consumers. ``Sound public policy demands that this court decide whether the proposed final judgment is in the public interest before permitting the states' private litigation to proceed,'' the company said in court papers.

But Kollar-Kotelly refused Microsoft's request and set an aggressive schedule to move forward on both issues. That dual process also raises the probability that former government partners may end up fighting each other, with the sides that settled with Microsoft opposing the arguments by some states that the deal was too lenient.

``The hearings are going to be very interesting,'' said Donald Falk, an antitrust lawyer in California who has represented some Microsoft rivals. ``Nobody's ever been here before, nobody knows how this will come out.''

Microsoft won some encouragement from an unexpected new ally. The head of the Justice Department's antitrust division, Charles James, predicted that Microsoft ultimately will face no tougher sanctions than those it already negotiated with Justice and the nine states.

James defended the agreement as ``good for consumers, and we think it's good for the technology economy.'' He also noted that, even as California and others urge the judge to impose harsher penalties, those states ``will get the benefit of our settlement.''