Relationship Changes Between Microsoft and Rivals

With Microsoft's remedy hearings fast approaching, rivals of the company are positioning for court time in a bid to make their case that Microsoft is a predatory corporate monster that the proposed settlement's restrictions will fail to curb. This stance doesn't sit well with Microsoft or the DOJ, whose suddenly tenuous settlement could fall apart if Judge Colleen Kollar-Kotelly rules that the agreement isn't in the public interest. Indeed, public feedback about the proposed settlement proved disastrous for Microsoft and the DOJ; two-thirds of the responses were against the settlement. So Kollar-Kotelly scheduled a settlement hearing for the first week of March, when Microsoft and the DOJ will probably present subtle changes to the agreement to satisfy the many complaints and gain the judge's approval.

Microsoft's competitors don't want Kollar-Kotelly to sign off on the settlement, however, and companies such as AOL Time Warner, Kodak, and SBC Communications are lobbying the judge for court time during the settlement hearing, arguing that they have unique perspectives about Microsoft's business practices and deserve to be heard. Microsoft and the DOJ, however, argue that the federal government--not these corporations--speak for the American public and that the judge shouldn't let Microsoft's competitors influence her decision.

Meanwhile, the nine nonsettling states and the District of Columbia are continuing their legal assault on Microsoft. The states, which previously seemed to be overreaching with a wide range of tough sanctions against Microsoft, now appear to be in control of the remedy phase of Microsoft's court battle. Late last week, the states won the judge's approval to gain access to the Windows source code, a major blow to the software company, although Microsoft claimed that revealing the source code wasn't a problem. "We've also provided \[Windows source\] code to academic institutions as well as to large organizations, so this is not something we haven't done in the past," a Microsoft spokesperson said. Still, this week's decision represents the first time a court order has forced Microsoft to reveal the Windows source code to an outside party.

The states aren't content to stop with their source-code victory, however. This week, attorneys general for the nonsettling states complained that Microsoft's actions since the announced DOJ settlement prove that the agreement is too weak and can't prevent Microsoft from further abuse of its monopoly power. The states say that Microsoft took advantage of the settlement when it recently informed PC makers that the agreement requires them to sign nonexclusionary contracts with Microsoft that prevent them from enforcing their hardware patents. At least one PC maker, Sony, accused Microsoft of this very action in a Tunney Act filing revealed last Friday.

As a result, the nonsettling states have asked Judge Kollar-Kotelly to let them testify in Microsoft's settlement hearing. "The evidence gathered to date indicates that Microsoft may not only have profited from its \[settlement\] negotiation, but negotiated in order to profit," the states noted in a filing submitted Monday. Microsoft and the DOJ have asked the judge to prevent the states from appearing: With the remedy hearing scheduled for the week after the settlement hearing, the judge could either throw out the proposed settlement or push back her decision until the states get their say. In either of these scenarios, the states would win big: If the judge forces Microsoft to accept tougher sanctions, the weaker DOJ settlement will be nullified.

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