Non-Settling States Tweak Microsoft Sanctions Plan

Nine states still pursuing the Microsoft Corp. (MSFT) antitrust case Monday modified their proposal for harsher penalties against the company to answer criticism it would create confusion in the computer industry.

The states, including California, Connecticut and Iowa, said the changes would make it clear that Microsoft would not be required to sell several different versions of its Windows operating system.

Instead, the company would have to sell just one "modular" Windows version from which software features such as Internet browsers, media players and instant messengers, could be removed, said Connecticut Attorney General Richard Blumenthal.

"The modified measures should deflate Microsoft's overblown rhetoric and apocalyptic predictions about the proposed remedies," Blumenthal said.

The states' modifications come just four days after Microsoft and the U.S. Justice Department made "refinements" to their proposed settlement of the case, hoping to mollify critics who said the deal contained loopholes that could be exploited by the company.

The software giant reached the deal with the Justice Department in November after an appeals appeals court in June upheld a lower court conclusion that Microsoft had used illegal tactics to maintain its Windows monopoly.

While nine of the 18 states in the lawsuit are still pursuing the case, another nine states have agreed to sign on to the proposed settlement which would, among other things, give computer makers more freedom to feature rival software on the machines they sell.

A hearing on the proposed settlement is scheduled to begin Wednesday. Further proceedings are due to start next week on the non-settling states' demands for stricter sanctions against Microsoft for violating U.S. antitrust laws.

Microsoft and its allies in the computer industry have said the states' proposed remedies are radical and could cause havoc in the industry and hurt consumers.

Blumenthal said the changes, filed with U.S. District Judge Colleen Kollar-Kotelly, would also clarify another provision in their plan that requires Microsoft to disclose the inner workings of Windows.

Disclosure of of the computer code was aimed at ensuring non-Microsoft software could operate with Windows, not at allowing other companies to "clone" the operating system, Blumenthal said.

The changes also would make it clear that uniform licensing requirements that the states are proposing to impose on Microsoft would apply only to companies that sell software -- not to Microsoft's corporate customers.

Microsoft could not be immediately be reached for comment but it's allies in the computer industry were not impressed with the states' amended proposal.

"Once again they've missed the point and, by focusing on Microsoft, they have ignored the collateral damage to the rest of the industry that their proposal will engender," said Jonathan Zuck, head of a pro-Microsoft trade group called the Association for Competitive Technology.

Kollar-Kotelly will hold a hearing starting March 6 on whether the proposed settlement is in the public interest. Separate hearings on the demands for tougher sanctions will begin March 11 and will likely run for 6-8 weeks.