Microsoft and the Justice Department told the new judge in their antitrust case Thursday they are discussing a settlement but neither side wants the court to appoint a mediator to oversee the talks. 

The two sides filed a joint status report — their first substantive discussion with the new judge in the case, U.S. District Judge Colleen Kollar-Kotelly. 

The two sides ``will continue to seek settlement of this matter through private discussions, which are ongoing and should continue simultaneously with proceedings addressed to remedy,'' the joint report said. 

The prior judge in the case, Thomas Penfield Jackson, forced the government and Microsoft into four-month settlement talks and eventually named an appeals judge to act as a mediator. Those talks collapsed, and both sides made clear they would prefer to avoid a mediator now. 

``The parties believe that further alternative dispute resolution procedures would be unproductive at this time,'' they wrote. 

Kollar-Kotelly was appointed to the case after a unanimous appeals court threw out Jackson's order to break the company in two. The same appeals court upheld many of Jackson's other findings, however, including that Microsoft operated an illegal monopoly that hurt competition. 

Jackson was removed from the case after attacking Microsoft and its executives in interviews with reporters. 

While government prosecutors and Microsoft lawyers have met, lawyers close to the talks have said there has been no significant progress. 

Earlier this month, the government abandoned efforts to split the company in two. Instead, it wants restrictions on Microsoft's business practices that would restore competition to the marketplace and penalize Microsoft for previous violations. 

The parties were ordered to send a joint proposal for how the new penalty hearings should continue. Kollar-Kotelly will decide on a schedule Sept. 28. 

Thursday's filing and the scheduling hearing had been postponed due to last week's terrorist attacks. 

The Justice Department want both sides to offer their proposed penalties by Nov. 9 at the latest, and have a hearing in early February. 

The hearing will resemble a trial, including witnesses and evidence. 

Microsoft didn't offer a specific schedule, but said it wants the government to define the scope of the penalties. It thinks the scope should be narrower under the appeals court ruling than in Jackson's order, which was far more negative. 

``We are working to resolve this case short of further litigation, at the same time we think that an appropriate remedy can be formulated quickly given the court of appeals' guidance,'' Microsoft spokesman Vivek Varma said. 

Justice Department spokeswoman Gina Talamona declined to comment. 

Meanwhile, Microsoft is still appealing the case to the Supreme Court. The justices are expected to decide in October whether to take the case. 

Microsoft's new operating system, Windows XP, is scheduled to be sold to consumers within weeks. Both the Justice Department and state prosecutors have expressed concerns with the product, and said they may want restrictions on its sale. 

Howard University law professor Andy Gavil said the differences in schedules indicate that Microsoft wants to keep prolonging the case, especially after the threat of a breakup has disappeared. 

``At this stage, I'm not sure where Microsoft's incentive is to settle the case,'' Gavil said. ``Every month that Windows XP is out there, (Microsoft has) an interest in continuing to sell it and not be constrained in any way.''