Microsoft Rivals Remain Defiant

Microsoft Corp.'s competitors said they would seek tighter limits on the world's largest software company after a federal judge approved most of its antitrust settlement with the Justice Department.

U.S. District Judge Colleen Kollar-Kotelly approved the agreement Friday with only a few minor changes, which require acceptance by Microsoft and the government. She rejected arguments by nine states that tougher sanctions were essential to restore competition in the computer industry.

Appeals by the dissenting states were considered likely, although state officials said they were still studying their options.

"We've got plenty of fight," Iowa Attorney General Tom Miller said. "We haven't lost it at all. We need to talk to our colleagues, analyze it more and make a decision."

Sun Microsystems Inc., one of Microsoft's harshest critics, said the states should appeal.

AOL Time Warner general counsel Paul T. Cappuccio said the ruling made "a weak settlement stronger." He said Netscape, AOL Time Warner's Web browser subsidiary, would challenge Microsoft in a pending lawsuit "designed to promote competition and deter further anticompetitive behavior."

Microsoft nearly drove Netscape out of business in the late 1990s when it melded its own Explorer Web browser into the Windows operating system that controls more than 90 percent of all personal computers.

Sun attorney Michael Morris said Palo Alto-based Scompany also will continue to pursue its own lawsuit against Microsoft so the company "does not continue to use its monopoly position to become the gatekeeper of the Internet."

One executive whose company's 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 Tetzchner of Opera Software.

The settlement was expected to have little if any effect on the company's consumers and competitors.

"I don't think the case is having much of an effect these days," said David Smith, an analyst at Gartner Inc. "I don't see it as a big cloud over the industry right now."

Microsoft and Justice Department officials say the settlement will end practices that led to the long-running antitrust action. The court previously found the Redmond, Wash.-based company had illegally maintained its monopoly over computer operating systems by strong-arming competitors.

The settlement bars Microsoft from reaching exclusive deals that could hurt rivals. It orders Microsoft to allow PC vendors and consumers to make programs from Microsoft competitors the preferred option on their computers. And it requires Microsoft to release some technical details to make it easier for rivals' software to work well with Windows.

But Microsoft's rivals and critics said the agreement had many loopholes and that enforcement would be difficult.

University of Baltimore law professor Bob Lande characterized the settlement as "either a total victory for Microsoft or close to it."

"They ought to be celebrating in Redmond. The states just didn't convince the judge of the bulk of their issues," Lande said. "The judge didn't buy their story ... it's going to be really hard for the states to appeal this successfully."

There were no overwhelming shouts of joy or high-fives in the hallways at the sprawling Microsoft campus, but relief settled in as employees learned that the company's antitrust wrangling was coming to an end.

Chairman Bill Gates called the ruling "a good compromise and good settlement."

Attorney General John Ashcroft called the decision "a major victory for consumers and businesses."

CBSNews.com Legal Analyst Andrew Cohen says Microsoft and the feds have gotten over a tremendous hurdle and in that sense this is great legal news both. Now, if the nine dissenting states want to ultimately win they'll have to convince a federal appeals court not only that they are right but that the trial judge was wrong. Not impossible, but very difficult.

Cohen explains that in the end the judge found that the bargain between Microsoft and the federal government was not so one-sided that it couldn't be upheld; that the parties were free to make the deal they did and that the states that didn't like it didn't establish enough of a basis for tossing it aside. It's the sort of logic a judge also might use in a small-claims contract case.

Cohen says he wouldn't be surprised if the states that lost this round took the case up on appeal to the federal appeals court, the same court that ruled last year in no ambiguous terms that Microsoft had violated federal law. And there is always a chance that those judges will see the equities and remedies here in a very different light than Judge Kollar-Kotelly did.

The nine states and the District of Columbia had argued the settlement wouldn't adequately protect consumers or give other companies a fair chance to compete with Windows products, which are found on more than 90 percent of home and business computers.

California Attorney General Bill Lockyer said an appeal of Friday's decision was possible, but indicated he is inclined to enforce the provisions of the settlement.

"I would regard the outcome as neither total victory nor total defeat," Lockyer said.

Microsoft said it implemented many of the settlement-imposed changes with its latest Windows update this summer.

The company's so-called Service Pack, which also fixes several bugs, buries an option that allows users to opt for competitors' browser, music player or other "middleware."

But few consumers venture so deeply into Windows.

Even computer vendors such as Gateway, which could have switched to a non-Microsoft Web browser or music player before selling machines, haven't bothered to do so.

ProComp, an industry group funded by Microsoft competitors, said the company made switching unnecessarily difficult. Government prosecutors had no comment on whether the change is in line with the settlement.

In the same service pack, Microsoft also incorporated default support for Sun Microsystems Inc.'s Java software, which had been dumped after the companies disagreed on how much Microsoft could change it.

The addition came with a slap: Microsoft announced it would drop Java again in 2004. Users who want to run Java programs will have to download software to make them work.