U.S.

The New Odd Couple

By CBSNews.com staff CBSNews.com staff

February 20, 2002 / 11:02 AM EST / CBS

Like anxious teens before the prom, some of America's technological titans are trying to win a date to an obscure court hearing for one last chance to rail against bitter rival Microsoft Corp.

The object of their wooing is the judge considering whether to approve the software company's proposed antitrust settlement with the government.

Kodak, AOL Time Warner, and SBC Communications are some of the companies lobbying for a chance to convince U.S. District Judge Colleen Kollar-Kotelly the deal is bad for Americans and the industry.

Acting on their own and through trade groups, they contend they are the ones who know how Microsoft really works.

ProComp's "member companies have knowledge of the software industry and its dynamics, have worked and competed with Microsoft ... and know firsthand how Microsoft can exploit loopholes in such agreements," ProComp lawyers wrote in their request to Kollar-Kotelly.

But Microsoft has an ally against its corporate competitors: the Justice Department.

Since last year's announcement of a settlement, Microsoft and the government have worked side-by-side to schedule an early, quick hearing and keep other companies out of the mix. When SBC pushed to get into the hearing last week, Justice and Microsoft pushed back this week.

"Asserting no claim or defense of its own, SBC simply seeks to promote its own view of the public interest," Justice lawyers wrote in their filing to the judge on Tuesday. "But the United States, and not private parties, represents the public interest in government antitrust cases."

One antitrust lawyer said Justice is jumping the gun.

Dana Hayter of the law firm Howard Rice in San Francisco said the government's statement assumes the conclusion of the hearing will be in its favor.

The Tunney Act, enacted in 1974, creates a gantlet of tests to make sure any government settlement is good for the economy. They include a formal hearing, as well as an open comment period so that anyone, from senators to concerned citizens, can put their thoughts on the record.

SBC, which provides telephone and Internet service in California, Nevada and several other states, finds a more sympathetic ear from the nine states still suing Microsoft. They have called an SBC executive, as well as executives from AOL, Gateway and Palm, to testify in their hearing to seek stronger penalties against Microsoft.

The government's settlement hearing will take place March 6. Kollar-Kotelly will also have 30,000 public comments, mostly against the settlement, to aid her deliberations.

The settlement would prevent Microsoft from retaliating against partners for using non-Microsoft products; require the company to disclose some of its software blueprints so software developers can make compatible products; and make it easier for consumers to remove extra Windows features.

In a separate development, the nine states still suing Microsoft say that Microsoft's new contracts with computer manufactrers after the settlement are tougher than previous versions - putting into doubt whether the settlement will constrain Microsoft's business practices at all.

In a legal brief filed with Kollar-Kotelly, the states cited the comments of a Microsoft executive to bolster their argument that the settlement is weak and has not diminished the software giant's ability to abuse its monopoly in personal computer operating systems.

Based on the Feb. 8 deposition of Microsoft senior vice president Richard Fade, the non-settling states charge the company has taken advantage of the terms of the proposed antitrust settlement "to adopt significantly more onerous licensing terms and to impose them on the (computer manufacturers)."

The states said Microsoft had forced computer manufacturers to agree to sign a provision that would go further in preventing them from enforcing the patents on their own hardware against Microsoft.

The states said that the top 20 PC manufacturers were all unhappy with the new terms.

Microsoft spokesman Jim Desler accused the states of distorting Fade's deposition and said the idea that Microsoft was improperly benefiting from the new licensing terms was "simply inaccurate."

"It's fairly predictable that the states would distort information gathered in the deposition process in their effort to undermine the settlement reached by Microsoft, the Department of Justice and a bipartisan group of states," Desler said.

Microsoft said the new contracts were expected by manufacturers, and came as a result of a "one-size-fits-all" licensing plan that was required by the settlement. Previously, Microsoft negotiated licenses with each manufacturer individually.

The company produced quotes from smaller computer makers like eMachines and MicronPC supporting the standard license agreement.

An appeals court in June agreed with a lower court that Microsoft had illegally maintained its monopoly in personal computer operating systems, but rejected splitting the company in two to prevent future violations.