- The Washington Times - Friday, June 9, 2000

The head of the federal government's successful antitrust case against Microsoft Corp. said Thursday he is willing to discuss settling with the software giant to avoid a lengthy appeals process.

Meanwhile, the computer giant is seeking a stay both on splitting the company and on changes to its business practices. U.S. District Judge Thomas Penfield Jackson ordered Wednesday that Microsoft be divided in two as punishment for violating the Sherman Antitrust Act.

"I have said and believe that settlement is always the preferred course in this kind of litigation," Assistant Attorney General Joel I. Klein said.

"It's in the interest of the industry, it's in the interest of the company and it's in the national interest to have Microsoft address, in a meaningful way, the competitive issues … rather than to have a protracted legal proceeding," said Mr. Klein, head of the Justice Department's antitrust division.

Microsoft attorney William Neukom said during a conference call with reporters on Wednesday the company would consider participating in settlement talks.

"I don't think we ever have or ever would close the door to good-faith negotiations to resolve differences," he said.

Mr. Klein did not say whether he would accept a settlement that fell short of breaking up the company.

If the two sides agree on settlement talks, it would be the second time they sat down to discuss an out-of-court deal.

Justice has not made a formal proposal to Microsoft to renew settlement talks, Microsoft spokesman Jim Cullinan said.

Two weeks after ruling Microsoft was a monopoly, U.S. District Judge Thomas Penfield Jackson appointed Judge Richard Posner, head of the U.S. Court of Appeals in Chicago, to mediate an effort to settle the case.

But talks ended April 1 without an agreement.

Microsoft "has not indicated any positive sign of interest [in renewing settlement talks] since mediation ended," said Connecticut Attorney General Richard Blumenthal, who co-chaired the effort of states to negotiate a settlement.

Mr. Klein said Thursday new settlement talks must include discussion of preventing Microsoft from repeating the business practices that led Judge Jackson to find it guilty of violating the Sherman Antitrust Act.

But Microsoft won't participate in any settlement talks that include discussion of breaking up the Redmond, Wash.-based company.

"It's clear from their remedy proposal that that's exactly what they would be interested in talking about… . They're looking for punitive relief," Mr. Cullinan said.

Exactly what would be on the table for discussion is not clear, Mr. Blumenthal said, but states and the Justice Department would have more leverage than they had in prior talks because of the judge's final ruling Wednesday.

"Our position is stronger now than ever before, but whether it would influence negotiations or influence our position is purely speculative," he said.

The federal government and 19 states sued Microsoft in 1998, claiming it illegally tied its Internet browser to its Windows operating system, stifling competition.

"There are enormous dynamic changes that can and will take place in this market," Mr. Klein said.

"The extent of those changes and the pace of those changes will be directly affected by Microsoft's willingness to either live by the law or to continue to abuse its monopoly power to put a chokehold on distribution of products, to tie separate products together, to deny technical information to competitors, and so forth… . We would need a meaningful resolution of those issues," he said.

Mr. Cullinan said the company must defend its "freedom to innovate."

"If there can be a fair, reasonable [settlement] process, then we would be interested. But we won't agree to our own demise," he said.

Judge Jackson also outlined multiple remedies that will take effect in 90 days and remain in place three years.

Mr. Cullinan said Microsoft is unwilling to give up proprietary technical information, like its source code, that the judge said the company must provide to competitors.

Microsoft filed a motion Wednesday to stay those conduct remedies.

Microsoft also plans to appeal Judge Jackson's final ruling ordering the company to break in two one business to make and market the Windows operating system and one to make and market the company's software, including Microsoft Office, and other products from MSNBC to Hotmail.

"At this point, we're excited about going to appeals," Mr. Cullinan said.

Judge Jackson stayed his ruling to break Microsoft in two until the company completes the appeals process.

The Justice Department will apply for expedited review from the Supreme Court once Microsoft formally files for appeal. Both sides have 15 days from Wednesday to ask Judge Jackson to send the case directly to the Supreme Court.

But Microsoft officials believe they have a strong chance of overturning Judge Jackson's verdict through appeals and do not want to send the case to the top court.

The appeals court ruled in 1998 that Judge Jackson's injunction against Microsoft should not apply to Windows 98, allowing Microsoft to proceed with the introduction of the new product.

Microsoft's stock fell $1.69 to close Thursday at $68.81 on the Nasdaq Stock Market.

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