Microsoft, government face settlement deadline

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By Matt Berger

(IDG) -- Microsoft 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 United States courtroom.

District Court Judge Colleen Kollar-Kotelly ordered Microsoft into intense settlement talks with the U.S. Department of Justice and the 18 state attorneys general last month. At the time, she set a deadline of October 12 to work out an agreement or bring in a mediator to help pilot the software maker and the government to a settlement in the next three weeks.

Now, most legal and industry experts say they see little chance that the two sides will reach a consensus to end the 5-year-old legal battle.

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

Jim Desler, a Microsoft legal spokesman, would not comment 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.

A spokesman for Microsoft said Friday that expert mediator Eric Green has been appointed to help with settlement talks in the software giant's antitrust battle. Green is affiliated with Boston University Law School and Resolution LLC.

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

Besides offering few 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 Justice Department 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 Justice Department'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, has said 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 Justice Department settlement to reconsider, according to ACT spokesman Mark Blafkin.

Microsoft has exhausted most of its remaining avenues to appeal the landmark antitrust case. The Supreme Court of the United States on October 9 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.