U.S. v. Microsoft Latest Story Trial Basics Case Timeline Key Players Trial Archive Documents

By Rajiv Chandrasekaran
Washington Post Staff Writer
Thursday, March 25, 1999; Page E1

Microsoft Corp. has presented the Justice Department and 19 state attorneys general with a proposal to settle their antitrust lawsuit against the company, but several government officials yesterday called the offer insufficient.

In the proposal, Microsoft said it would amend controversial provisions in its contracts with Internet companies that require those firms to distribute Microsoft products almost exclusively, sources familiar with the offer said. Microsoft also indicated that it would be willing to discuss giving personal computer makers additional flexibility to change parts of Microsoft's dominant Windows operating system, such as deleting from the electronic "desktop" the icon for the company's Internet browsing software, the sources said.

But the company said it would not be willing to discuss any restrictions on the types of technologies it could add to Windows, the sources said. In addition, they said, some of the proposed contractual changes with Internet access providers and PC manufacturers already have been made by Microsoft on an ad hoc basis over the past year.

"The proposal they made was very minimalist," said one government lawyer working on the case. "It takes stuff off the table at the outset. That's not very conducive to having a free and open discussion."

The government alleges that many of Microsoft's business practices, particularly the inclusion of its Internet browser in Windows, violate antitrust laws. Government lawyers believe they have made a strong case in court and appear to want Microsoft to agree to stiff sanctions that would force the company to change its behavior.

A Microsoft spokesman would not comment on the proposal yesterday. "We are sincere about pursuing a settlement, but that process can only succeed if all the parties proceed in a confidential manner," the spokesman said.

Earlier in the week, a company official said the software giant would be "willing to work with the government to address a wide range of their concerns so long as we can maintain our fundamental right to innovate and add new features to our products."

No face-to-face discussions between the two sides have been scheduled yet. Some government officials suggested that preliminary discussions could take place next week, when Microsoft's lawyers return to Washington for a scheduling conference with the federal judge conducting the trial. Other government lawyers, however, said the offer was too inadequate to produce any serious discussions. "They're not ready to settle," said one.

Several representatives of the 19 states, which are suing Microsoft along with the federal government, are planning to discuss the proposal today during a conference in Washington of the National Association of Attorneys General.

Speaking to reporters at the conference yesterday, California Attorney General Bill Lockyer called the proposal "far from what anyone in our group would expect to be adequate."

Microsoft Chairman Bill Gates, in an interview on NBC's "Today" show yesterday, argued that a settlement must allow his company to keep adding new features to Windows. "We'd love to have this thing settled," Gates said. "But the key principles haven't changed, and that's because what Microsoft is all about is building great software -- and that freedom to innovate is important to us and every other company."

The trial, which began in October, is in recess while both sides prepare rebuttal arguments. The judge, Thomas Penfield Jackson, urged both sides to conduct settlement discussion during the break.

Legal analysts said the prospect of a settlement is highly unlikely because both sides remain far apart on key issues, including whether Microsoft has an unfettered right to add whatever it wants to Windows.

Spokesmen for the Justice Department and Iowa Attorney General Tom Miller, who is coordinating the states' role in the suit, would not comment on the proposal yesterday.