Rivals of Software Giant Slam Proposal

The Justice Department’s proposed settlement with Microsoft Corp. is even weaker than many of the company’s competitors feared, in some ways giving the software giant more power through court-approved loopholes than it had before the government sued, they say.

Industry executives still were analyzing the 21-page document Friday and trying to rally state attorneys general, who gave the draft lukewarm support and plan to review it through the weekend.

Some of the strongest condemnation came from Sun Microsystems Inc., the big computer maker and developer of the programming language Java, which poses a threat to Microsoft because it does not require Windows to operate.

“One has to question the priorities of the antitrust division of the Department of Justice,” said Sun General Counsel Mike Morris. “They are walking away from a case they had already won.”

Other technology executives spoke only on condition that their companies not be identified, citing Microsoft’s past retaliation and the agreement itself, which they said will allow more heavy-handed tactics.

The Justice Department had said it would seek a deal patterned on U.S. District Judge Thomas Penfield Jackson’s interim remedies, which never were implemented.

But industry executives said the proposal unveiled Friday falls far short of those restrictions, especially in the fine print.

“There’s enough wiggle room for Microsoft to do pretty much everything it’s doing now and more,” said Giga Information Group analyst Rob Enderle.

Under Jackson’s plan, for example, Microsoft would have had to give computer companies 30 days’ warning before yanking their license to sell Windows-based machines. The companies, which would go out of business without that license, could have used that time to go to court and seek a temporary reprieve.

Under the new plan, Microsoft could terminate a license immediately if it had first sent two warning letters with 30-day response times over any issue. Such letters could be sent out at any time, giving Microsoft the equivalent of an armed nuclear weapon, the executives said.

“I’d rather have nothing than this,” said one executive who deals with Microsoft.

Microsoft also will have much more authority over what the initial screens of computers display. The agreement says that it protects computer makers’ right to use their choice of “middleware,” such as PC-based video players, that sit on top of the operating system and are in turn used to run smaller pieces of software, such as videos.

But it defines protected middleware in strange ways. To qualify for protection, some middleware firms must be shipping at least 1 million units annually in the U.S.

“If there’s an emerging and noncompeting technology that we haven’t imagined yet, Microsoft is free to squelch it,” one top executive said. “Microsoft can say ‘you can’t put this type of software on desktop.’ ”

And several executives said they were stunned to learn that if they do develop something new, they are compelled to license it back to Microsoft.

“That’s just egregious,” one computer industry lawyer said.

A Microsoft spokesman didn’t return a call seeking response to the criticism.

Independent antitrust experts said the agreement had some useful checks on Microsoft.

“The people who are saying this agreement is nothing are overdoing it,” said Andrew Gavil, an antitrust law professor at Howard University. “There are some provisions here that will improve competition.”

But Gavil said it’s uncertain whether any middleware could now grow to provide competition to Windows, as the Java language and the Netscape browser once did.

Others pointed to loopholes in the requirements that Microsoft disclose technical information about how some types of programs work with Windows.

Those disclosures are a big issue because even though Microsoft controls more than 90% of the market for operating systems, it competes fiercely in the market for other types of software.

Knowing exactly how to integrate the smaller programs with Windows gives it an unfair advantage.

Under Jackson’s remedies, Microsoft would have had to open up all its interfaces at the same time that it told its own developers about them.

In the new settlement proposal, Microsoft wouldn’t have to disclose parts of the interfaces that could “compromise the security” of a series of services, such as “authentication systems”--which could include the Passport electronic commerce tool.