Judge upholds Microsoft settlement

The long-running battle between Microsoft Corp. and the Justice Department appeared to reach finality today as a federal judge approved their antitrust settlement, rejecting harsher penalties sought by nine states.

U.S. District Judge Colleen Kollar-Kotelly said she was "satisfied that the parties have reached a settlement which comports with the public interest."

But she strongly warned Microsoft that it must faithfully comply with the deal, saying she would be watching its executives closely. Microsoft "has a tendency to minimize the effects of its illegal conduct," Kollar-Kotelly wrote.

It was not immediately clear whether the attorneys general for the nine dissenting states would appeal the ruling, which would end a mammoth 4 1/2-year legal struggle launched by the Clinton administration during rosier economic times.

Microsoft chairman Bill Gates called the settlement a "tough, but fair, compromise" that would help consumers and spur innovation. The company's stock rose $3.33 in after-hours trading.

Attorney General John Ashcroft, whose department crafted the deal, hailed the decision as "a major victory for consumers and businesses" and said his department was "strongly committed" to ensuring Microsoft abide by it.

A competitor whose Web browser competes with Microsoft's dominant Internet Explorer, said the ruling seals a toothless settlement.

"There were no real remedies, no actual punishment. I'm not too surprised," said Jon F. Von Petzchner of Opera Software.

The government and Microsoft said the settlement would benefit consumers and the Redmond, Wash. software giant has already started complying with the deal by distributing technical data and releasing an update to its newest operating system, Windows XP, that permits the removal of Microsoft icons.

Kollar-Kotelly's ruling requires Microsoft to disclose some sensitive technology to its rivals months earlier than the company and the Justice Department had proposed. The sanctions are to last for at least five years unless extended by the court, the judge said.

The ruling was almost a complete loss for the nine non-settling states, led by California, Iowa and Connecticut.

They wanted Microsoft to divulge more technical information, give computer manufacturers more freedom in how they package Windows in their systems and allow users to completely remove some Microsoft features from Windows rather than just hide access to them.

Some of the states' penalties also would have affected Microsoft's other products, such as its Office productivity package.

The judge said the dissenting states had opted for a kitchen-sink approach by asking for penalties that would address every rival's complaint. She said they neither justified their requests nor would they fix new illegal conduct.

"The issues in this case are significant, not only for Microsoft but for the industry and consumers," spokesman Vivek Varma said after the court released the decision. "We are committed to resolving these issues in a constructive way so that we can focus on long-term growth and innovation for consumers."

The judge said the proposed settlement by Microsoft and the Justice Department "adopts a clear and consistent philosophy such that the provisions form a tightly woven fabric."

The decision eliminates the establishment of a technical committee to assess Microsoft's compliance with the agreement. In its place, a corporate compliance committee -- consisting of Microsoft board members -- will make sure Microsoft lives up to the deal, the judge said.

She also gave herself more oversight power to oversee the agreement.

"The court considers it imperative, in this unusually complex case, for the court's retention of jurisdiction to be clearly articulated and broadly drawn," she wrote.

In June 2000, a different trial judge found that Microsoft had violated antitrust laws, illegally maintaining its monopoly over computer software operating systems by strong-arming competitors. But an appeals court threw out that judge's order that the company be split into two, leaving Kollar-Kotelly to decide how Microsoft should be punished.

The settlement prevents Microsoft from participating in exclusive deals that could hurt competitors; requires uniform contract terms for computer manufacturers; allows manufacturers and customers to remove icons for some Microsoft features; and requires that the company release some technical data so software developers can write programs for Windows that work as well as Microsoft products do.

Some Microsoft competitors, such as Sun Microsystems, protested to the Justice Department that Microsoft's compliance measures weren't adequate.

Microsoft chairman Bill Gates said during three days of testimony in the antitrust case that the added penalties would unfairly confiscate Microsoft's intellectual property, cause mass layoffs and force the company's research and development efforts "into a 10-year period of hibernation."

The judge announced her decision just days before national elections.

In three of the nine states that agreed to settle the case along with the Justice Department -- Illinois, Michigan and Wisconsin -- those attorneys general are running for governor this year, and two more active in the case are running for governor next year, in Kentucky and Louisiana.

Associated Press writer Lou Kesten contributed to this story.