No Settlement Expected Before Microsoft Trial Resumes in May

Federal and state officials confronting Microsoft Corp. in a landmark antitrust case are pessimistic that any settlement can be reached before the trial resumes in May, charging that the company’s recent hints at a softer stance are part of a public-relations strategy.

No new talks have been scheduled since Microsoft indicated to the government last week that it was willing to discuss taking action that would allow independent software developers to compete more effectively with its programmers.

And government lawyers say they are unimpressed by hints this week by Microsoft President Steve Ballmer that the software giant might take the radical step of making public the programming code for Windows 2000, a soon-to-be-released operating system that is not part of the current dispute.

In recent days, state and Justice Department lawyers have huddled with key advisors, including Georgetown University Law Center professor Steven C. Salop, to bolster their arguments that broad changes must be made in Microsoft’s organization and licensing.

“We haven’t seen anything so far that would make us want to settle,” said a government official involved in the case.

Even Microsoft’s business rivals, including Sun Microsystems Inc. and America Online Inc., which recently acquired Netscape Communications Corp., haven’t felt the need to respond to the Redmond, Wash.-based company’s offers.

“There were no proposals for structural changes, nothing on bundling,” a source said. “It was sort of hard to imagine anyone getting excited about it.”

Iowa Atty. Gen. Tom Miller, who is leading the states’ effort, declined to comment, as did a Justice Department spokeswoman.

Microsoft spokesman Jim Cullinan also refused to comment directly. “We think these things have to be done confidentially,” he said.

The stalemate between Microsoft and the government has deepened despite a lengthy trial recess and efforts by presiding U.S. District Judge Thomas Penfield Jackson to move the sides toward compromise.

Last week, Jackson said he would make his final ruling a two-step process. First he would determine the facts of the case brought against Microsoft by the Justice Department, 19 states and the District of Columbia. Then he would rule on questions of law.

A final ruling would come weeks--if not months--after the findings of facts, giving the parties additional opportunity to negotiate.

Experts called Jackson’s strategy a last-ditch effort to head off what could be years of litigation. The trial, which started Oct. 19, is expected to resume about May 11.

“Certainly, announced finding of fact would likely facilitate efforts to settle,” said Tim O’Rourke, a Washington antitrust attorney. “Nothing so much concentrates the mind as the prospects of one’s own imminent hanging.”

Nevertheless, O’Rourke and other experts called Microsoft’s highly public overtures at settlement unusual and said they could backfire.

Indeed, a source close to the Justice Department said Joel Klein, head of the agency’s antitrust division, expressed dismay last month about being among the last to learn that Microsoft wanted to start settlement talks.

“It’s an odd strategy and potentially counterproductive to be airing all of this stuff in public without having discussed it with the government,” O’Rourke said. “It’s my experience that the DOJ likes to understand a party’s position before reading about it in the papers. I’m confident that if [Microsoft General Counsel William] Neukom called Joel Klein and said he’d like to talk, there would be a meeting.”

In the last month, the company has publicly softened its position since Chairman Bill Gates vowed not to accept any settlement that would prevent the company from including new features in Windows.

Besides giving independent developers faster access to Windows code, the company is said to be willing to give PC manufacturers more flexibility to determine what their customers see on their screens.

The government, meanwhile, is seeking to prevent Microsoft from making deals for PC makers and Internet firms to exclusively distribute its products. The U.S. claims such agreements frustrate the ability of rivals--such as Netscape--to distribute their own products.

It also wants Microsoft to publicly disclose the price it charges computer manufacturers to license Windows software. Numerous sources have said the states are seeking compulsory licensing of Windows and have proposed that a special master be appointed to screen bidders and oversee the auctioning of Microsoft’s flagship product.

More recently, sources close to the states say some members have backed away from that idea and others outlined in a state attorneys general position paper disclosed by the Seattle Times last month.

Times staff writer Leslie Helm contributed to this report.