States Split on Microsoft Settlement; Hearings Set

Nine of the 18 states aligned against Microsoft in the company's antitrust case have refused to sign the proposed settlement and will continue their legal battle. The nine dissenting states--California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, and West Virginia--complain that the settlement doesn't adequately address Microsoft's illegal activities. Four more states--Illinois, Michigan, New York, and Ohio--almost dissented, but last-minute concessions from Microsoft lured them into agreement.

"This is a bad deal," Massachusetts Attorney General Tom Reilly said yesterday. "It's a bad deal for consumers, it's a bad deal for competition, and in the end it will be a very bad deal for the economy of this country. There is no question in my mind that five minutes after any agreement has been signed with Microsoft they will be looking for ways to violate that agreement. That is their nature. That is what they have been doing throughout. That's why we're in court."

The four wavering states, however, agreed to the settlement late Monday night when Microsoft offered last-minute concessions. The concessions include:
   - Sharing technical information about products other than Windows Server. In the original consent decree, Microsoft agreed to share technical information about Windows 2000 Server and its successors; the company broadened the agreement to include any forthcoming "Microsoft server operating systems products."
   - Removing the security exclusion. In the original document, Microsoft agreed to share information with third parties unless that information compromised security. Microsoft tightened this language, which now reads "security of a particular installation or group of installations."
   - Allowing states to ensure compliance. The language of the compliance section now gives the states a more active role in ensuring that Microsoft lives up to its end of the deal.
   - Including the Internet as a communications protocol. In perhaps the most significant addition, given complaints that the agreement didn't cover Microsoft's .NET products, the company included the Internet with local networks as a communications protocol under which information exchange is covered in the agreement. Because Microsoft's plans involved Internet-based .NET servers, this addition appears to close a major loophole.
   - Redefining ISV. The original agreement defined the term ISV as "independent software vendors." This agreement defines an ISV more generally as anyone "engaged in development or marketing of software products."

In a meeting yesterday with Microsoft representatives, the US Department of Justice (DOJ), and the 18 states, Judge Colleen Kollar-Kotelly denied a Microsoft request to halt proceedings by the nine dissenting states. She also spelled out the schedule for the next few months. First, the dissenting states have 3 months to draft a detailed analysis of the proposed settlement, which needs to explain why the states consider the settlement "ineffectual" and list their proposed remedies. In March, the judge will hold hearings on the proposed remedies.

Meanwhile, Microsoft Chairman and Chief Software Architect Bill Gates issued a statement directed at the states that didn't sign the agreement. "We made every effort to reach a compromise to address the states' concerns and allow everyone to move forward," Gates said. "Yesterday, at the request of the states, we made some additional revisions to clarify the proposed decree and better capture the intent of the parties. We hope that the remaining states will join in this agreement, so that everyone can focus on the future and avoid the unnecessary costs and delays of further litigation."

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