Did states 'deep six' MS-DoJ talks?

Who's to blame for the collapse of the four-month old settlement talks? All fingers are pointing to 19 attorneys general who may have wanted nothing less than a break up.

That's the implication on the part of Microsoft, in explaining why U.S. Court of Appeals Judge Richard Posner on Saturday called off his four-month attempt to mediate among the parties embroiled in the federal antitrust case involving the Redmond, Washington, software giant.

Posner's acknowledgement that he was unable to broker a settlement involving Microsoft, the U.S. Department of Justice and 19 state attorneys general, sets the stage for a ruling this week on whether the firm broke the nation's antitrust laws.

During a press conference Microsoft called late Saturday, Bill Neukom, Senior Vice President Law & Corporate Affairs, told press and financial analysts that Judge Posner's statement "speaks for itself," in terms of why talks collapsed. "He [Posner] mentioned the skill and flexibility of the Department of Justice and Microsoft. But it was a process involving more than those two parties," Neukom said.

When asked, point-blank, if he blamed the states for the failure of the settlement talks, Chairman and Chief Software Architect Bill Gates told reporters that such a claim would be "going a tiny bit too far." But Gates did nothing to dissuade conference call participants of the notion that conflicting DoJ-state settlement proposals -- with the states allegedly seeking harsher remedies than the government -- were part of the reason Posner was unable to mediate a successful settlement.

In his statement released Saturday, Posner expressed frustration that the talks had failed. He also lashed out at those responsible for leaks regarding the content of the settlement talks, and rebuked the press for implying that "there were no serious negotiations over possible terms of settlement until two weeks ago." On the contrary, Posner said, there were nearly 20 successive drafts of a proposed consent decree.

Posner said his four months of efforts had "proved fruitless" because differences between the two sides "were too deep-seated to be bridged."

In a written statement, Gates said that Microsoft had gone "the extra mile" in an attempt to settle the case. He said that Microsoft's executive team and its lawyers had spent in excess of 3,000 hours on settlement. Justice Department antitrust chief Joel Klein thanked Posner for his efforts and said any remedy must address "competitive problems presented by Microsoft's abuse of its monopoly position."

The spotlight now shifts to the courtroom of Judge Thomas Penfield Jackson. The judge is expected later this week to issue his conclusions of law in the case, a preparatory step to delivering penalties against Microsoft if the company is found in violation of antitrust laws.

It is widely expected Jackson will rule against Microsoft, as Jackson noted in his initial findings of fact last fall that Microsoft had leveraged its monopoly position over the Windows operating system to harm competitors and consumers.

Once Jackson issues his conclusions, the government is expected to detail the relief measures it believes are appropriate to the case. It is not clear if the states will submit additional or different relief proposals to Jackson. Jackson's final order will include the relief proposals he deems acceptable. Microsoft has said it plans to appeal this order "some months downstream from now," if Jackson's conclusions are not to the company's liking.

Klein said that if Jackson finds the company violated the law, "we will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice.''

Penalties could range from a breakup of Microsoft -- separating the company's operating system and applications businesses -- to restrictions on how the company deals with customers and competitors.

Reports abounded last week over the alleged content of Microsoft's most recent settlement concessions. According to a number of news reports , Microsoft had proposed it would be willing to publish its Windows programming interfaces, open access to its source code to PC makers, level the Windows license pricing field, among other terms.

Sunday's New York Times listed what it claimed were the major points in the proposed settlement agreement put forward by the DoJ. These included: uniform Windows pricing; prohibitions against product tying (although no concessions on integration of Internet Explorer with Windows); prohibitions against all exclusive contracts; opening of the Windows application programming interfaces; more liberal OEM source code licensing terms; and prohibitions against Microsoft raising the price of older versions of Windows for at least three years, thus refraining from forcing automatic migrations to the latest versions of its products.

According to a number of published reports, the states wanted stronger concessions than these. Earlier in the negotiation process, some states were said to be unwilling to accept any concessions short of breaking up the company into a number of "Baby Bills."

Reuters contributed to this report.

In the movie Ferris Bueller's Day Off, a young man repeatedly escapes scot-free from one illicit prank after another. Meet Bill "Ferris" Gates -- go to AnchorDesk UK for the news comment.

Mary Jo Foley reckons software companies slinging the 'open source' phrase don't all mean the same thing. Go to AnchorDesk UK to read the news comment.


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