Reaching an end to their lengthy legal battle, the Justice Department and Microsoft Corp. asked a judge Friday to approve a settlement of antitrust charges that would set new rules for the nation's hard-hit technology industry.

U.S. District Judge Colleen Kollar-Kotelly agreed to review the settlement and gave the 18 states and District of Columbia until Tuesday to determine whether they would back the pact.

"I will applaud the effort to come to an agreement ... in this time of rapid national change," the judge said, alluding to her earlier plea for rival sides to settle their case in the aftermath of the terrorist attacks.

The settlement would allow computer manufacturers to work with other software developers and place their products on Microsoft's Windows system, and prevent the software giant from punishing anyone who makes or uses competing products, the department said.

It would also require the software giant, credited with helping drive the technology revolution of the last decade, to provide software developers the necessary interfaces to inter-operate with Windows as well as offer uniform licensing terms to key computer makers.

States Need Until Tuesday

Attorney General John Aschcroft and Microsoft founder Bill Gates hailed the settlement, saying it would help the sagging economy.

"This settlement is the right result for consumers and businesses, the right result for government and the right result for the economy," said Ashcroft, adding that the new restrictions would help independent software makers be competitive with Microsoft.

Gates said, "The settlement goes further than we might have wanted," but it "is the right thing to do."

"The settlement will help strengthen our economy during this difficult time and ensure that our industry can continue delivering innovations to the marketplace," he said.

Brendan Sullivan, a lawyer representing the 18 states that joined the Justice Department in suing Microsoft for antitrust violations, said his clients needed until Tuesday to review the terms and "be sure that this is a good agreement that is enforceable."

According to a source familiar with the settlement talks, the deal could come under criticism from the states for not doing enough to stop Microsoft from bundling new software applications into Windows and failing to force the company to disclose enough of the operating system's inner workings.

But antitrust experts said the states are under pressure to go along with the Justice Department deal. The states would be unlikely to get a tougher remedy on their own, they said.

Settlement Seen Favorable to Microsoft

Alan Loewenstein, a portfolio co-manager at John Hancock Technology Fund, which owns shares in Microsoft, said the proposed settlement looked very favorable to the company.

"It's the best thing for the company. They didn't split the company up. They didn't say you have to unbundle things," said Loewenstein.

Phil Beck, a private lawyer representing the Justice Department, outlined a three-month process for reviewing the deal and winning final approval from the court. There would be 60 days for the public to weigh in with comments.

Beck said the government was confident "that at the end of this period the court will rule the settlement is in the public interest."

The restrictions on the company would be in effect for five years and may be extended for an additional two years if the judge finds that Microsoft engaged in multiple violations of the agreement.

Computer makers and consumers would be allowed to substitute competing software on the Windows system, according to the settlement.

The software maker would be banned from signing exclusive agreements that require exclusive support or development of Microsoft software. This will allow rival manufacturers to work with Microsoft and at the same time support and develop rival products.

The pact would require Microsoft to have a panel of three independent, on-site, full-time computer experts to help enforce the settlement.

Reuters and the Associated Press contributed to this report.