Half the States Agree to Revised Settlement With Microsoft

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Half of the 18 states that sued Microsoft Tuesday agreed to settle the landmark legal battle, but the rest of the parties will continue with the antitrust case.

The agreement places the nine states and the Justice Department in position to settle the landmark monopoly case, while U.S. District Judge Colleen Kollar-Kotelly now has to decide how to resolve the antitrust charges against the software giant.

Kollar-Kotelly on Tuesday left open both possibilities, setting two tracks in the case. She scheduled hearings to consider the settlement and set a schedule for the antitrust lawsuit to proceed.

The judge also ended her order requiring the parties to meet nonstop with a court-appointed a mediator.

"I put to test their fortitude and they persevered," she said, giving no hints how she would rule on the settlement.

Before the hearing, New York Attorney General Eliot Spitzer announced his state would be joined by Illinois, North Carolina, Kentucky, Michigan, Ohio, Wisconsin, Louisiana and Maryland in approving a revised settlement they negotiated through the night with Microsoft.

"We have gotten a remedy proportionate to the findings affirmed the D.C. Circuit," Spitzer said, referring to the federal appeals court ruling this summer that concluded Microsoft was an illegal monopoly but should not be broken into two companies.

The deal to settle the 4-year-old antitrust charges was reached between the Justice Department and Microsoft, but the states asked they be given until Tuesday to evaluate the terms.

Officials familiar with the talks said six other states want more time to consider settlement and remain open to the deal. California, Massachusetts and Minnesota are prepared to continue with the antitrust litigation against the software giant, the officials said.

Spitzer said the revised settlement was sufficient for his state after Microsoft made some additional concessions. As for the holdout states, "if they can get more I will be thrilled," he said.

The still undecided states include Connecticut and Iowa, two states whose attorneys general have been at the center of the landmark case. Both declined comment Tuesday.

Microsoft made clear it was done negotiating. "Microsoft believes the settlement process has come to an end," attorney John Warden told the judge. "The issues in this case have been beaten to death, and they have been beaten to death by people who are worn out."

But Warden said the company would welcome any of the undecided states to sign onto the deal. "It is, of course, open for signature by any of the other states," he said of the revised agreement.

The concessions forced by the states would broaden the disclosures Microsoft must make to rivals about the operation of its powerful server software.

By adding the phrase "or the Internet" to one section, lawyers for the states explicitly required Microsoft to reveal technical details about servers other than just those used for office networks. That slight change could broaden the settlement to cover Microsoft's future business strategies of providing Internet services.

The states also negotiated to establish a separate oversight committee, so the states can ensure compliance.

Philip Beck, a Justice lawyer, described the new provisions as "clarifications, not substantial changes" and suggested the federal government wouldn't object.

The settlement already negotiated between Microsoft and the Justice Department requires the company to provide technical details to help rivals make products compatible with its monopoly Windows operating system and to give an oversight panel full access to its books and plans for five years.

It also bans exclusive contracts with computer makers that put rival software vendors at a disadvantage.

But critics portray the 21-page agreement as rife with loopholes, such as one clause that permits Microsoft to ask consumers whether they want to restore after 14 days any changes made to Windows by computer makers.

It also allows Microsoft to maintain the secrecy of any technical details of its anti-piracy, security, anti-virus or encryption technology. In the changes negotiated by states, the government also sought to narrow cases in which Microsoft could shield that information.

Reuters and the Associated Press contributed to this report.