The federal judge in the Microsoft Corp. antitrust case yesterday appointed a mediator to spur an out-of-court settlement between the government and the software giant, a bold and unusual move that could improve the chances of both sides resolving their high-stakes legal battle.

U.S. District Judge Thomas Penfield Jackson named Richard A. Posner, chief judge of the 7th U.S. Circuit Court of Appeals based in Chicago, to oversee "voluntary" talks between the parties. Posner, 60, is regarded as a conservative jurist and one of the founders of the "Chicago School," an influential group of professors and economists skeptical of government regulation of business.

Jackson, who ruled two weeks ago that Microsoft has used its monopoly power to stifle competition and harm consumers, has urged both sides repeatedly to settle their dispute before he decides whether the company's actions were illegal. Although the parties have had some preliminary settlement discussions over the past year--and have publicly stated their desire to reach an agreement--they have remained far apart on fundamental issues.

Jackson broached the idea of tapping Posner to mediate during a closed-door meeting with government and Microsoft lawyers on Thursday afternoon, according to sources familiar with the conversation. Both sides told Jackson yesterday morning that they would welcome Posner, the strongest sign to date that they are willing to search for middle ground.

Despite his conservative credentials, legal specialists believe Posner's appointment will not provide an automatic advantage to Microsoft in the negotiations.

"He's a conservative, but he's not a knee-jerk conservative," said Mark Patterson, a law professor at Fordham University. "Although he's not a fan of government enforcement, he has, at times, shown a fair amount of impatience with what are clear antitrust violations."

Jackson's scathing ruling two weeks ago stopped short of concluding whether Microsoft's aggressive business behavior violates the Sherman Antitrust Act. The judge has said he will address that issue in another decision that likely will be released early next year, assuming the parties do not reach a settlement. Given the tenor of the initial "findings of fact," though, legal specialists expect Jackson to rule that the company has broken the law and to slap it with stiff sanctions.

Legal experts say Posner could help bridge the current chasm between the government and Microsoft by outlining the risks each side would face when appeals court judges like himself review Jackson's final ruling.

"Posner will try to get both sides to back off their extreme views that make a solution infeasible," said William E. Kovacic, a George Washington University law professor. "He'll tell Microsoft they won't necessarily get the appeals court to reverse Judge Jackson, and he'll remind the government that the road beyond Judge Jackson could be a very bumpy one."

Kovacic and other law professors called Jackson's selection of an appeals judge as a mediator in such a high-profile antitrust case "unprecedented."

Posner's appointment was warmly welcomed by both the government and Microsoft.

"We look forward to meeting with him to discuss ways to address the serious competitive problems identified in the court's findings of fact," Justice Department spokeswoman Gina Talamona said. "The department has always been willing to seek a settlement that would promote competition, innovation and consumer choice."

Microsoft spokesman Mark Murray called Jackson's move "a very positive step toward resolving this case without the need for further litigation.

"We're looking forward to working with Judge Posner to try to reach a fair and reasonable solution that's good for consumers and good for the high-tech economy," Murray said.

A clerk in Posner's office said the judge would not comment on his appointment. An expert in antitrust law and a graduate of Harvard Law School, Posner taught at the University of Chicago before being appointed to the federal bench by President Ronald Reagan in 1981. He is a prolific author who has written 30 books, including one about President Clinton's impeachment trial--titled "An Affair of State"--that examined the relationship between sex and legal and moral theory.

In a one-page court order that was issued late yesterday afternoon, Jackson said Posner would act in a "private capacity" in facilitating the talks. Jackson left it up to Posner to schedule meetings with the parties.

Antitrust specialists said yesterday that they couldn't think of a better person to take on the Herculean task of hammering out an agreement.

"He's the ideal choice," said George S. Cary, a former Federal Trade Commission attorney. "He's going to be sophisticated on the issues and he'll approach this as an expert looking for the correct analytical solutions."

In his factual findings, Jackson ruled that Microsoft used its monopoly power with its Windows operating system for personal computers to squelch competition, bully rivals and hinder innovation. Government lawyers believe Microsoft should face strong sanctions, and although they have not decided on the specific "remedy" they want the judge to impose, they are considering options ranging from limits on the company's behavior to a corporate breakup.

Microsoft executives have said they would be willing to make some concessions to reach a settlement, but they have refused to accept stringent rules on their conduct. The firm, for instance, has insisted that it should have the sole right to decide which new features to add to Windows.

In mediating a settlement, some legal experts believe Posner might lean more toward structural changes at Microsoft that would require one-time government intervention instead of ongoing regulation of the firm's activities. "He doesn't like regulation," said Mark Schechter, a former federal antitrust attorney. "He'll look for something that's self-executing."

But Posner does not have a natural distaste for monopolies--a fact that could lean in Microsoft's favor.

In the abstract to his latest book, he wrote: "The evils of natural monopoly are exaggerated, the effectiveness of regulation in controlling them is highly questionable, and regulation costs a great deal."

In a separate court order issued yesterday, Jackson set a schedule for the filing of additional legal briefs, suggesting that any talks would not delay the proceedings.

The judge also invited Harvard Law professor Lawrence Lessig to write a "friend of the court" brief summarizing his views of the case. Jackson had appointed Lessig, who had worked as a law clerk for Posner, to be a "special master" to weed through complex factual issues in a previous legal fight between the government and Microsoft.

The company accused Lessig of being biased, citing an e-mail message he wrote saying that he "sold my soul" by installing Microsoft's Internet browsing software. Lessig's appointment eventually was rejected by an appeals court.

Microsoft's stock closed $1.06 1/4 higher, at $86, in daytime trading yesterday, and surged in after-hours trading as high as $90.87 1/2.

Staff researcher Richard Drezen contributed to this report.