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States ask judge to curb a vain Microsoft

The plaintiff states in the antitrust case tell the judge that the software giant "still doesn't get it," and implore her to "tell them what it's all about."

Microsoft refused on Wednesday to offer further concessions to end its antitrust case, rebuffing a federal judge's invitation to revisit the demands of nine states seeking stiffer sanctions against the software giant.

The state's proposed sanctions were "fundamentally flawed," Microsoft attorney John Warden told U.S. District Judge Colleen Kollar-Kotelly during closing arguments.

"We can't remedy this by changing a few words here and there," Warden said. "We can't fix it."

The nine states, in contrast, heeded the judge's instructions and identified their most important demand--a requirement for Microsoft to share computer code that allows rival software to work well with Microsoft's dominant Windows operating system.

The states accused the company of "thuggish" business practices in their closing presentation, and portrayed the judge as the last chance to stop Microsoft's bullying.

"I suggest to you that Microsoft still doesn't get it and you're the only one left to tell them what it's all about," states' attorney Brendan Sullivan told Kollar-Kotelly.

The nine states have refused to sign a settlement of the case reached in November between Microsoft and the U.S. Justice Department and endorsed by nine other states previously party to the four-year-old case.

Kollar-Kotelly issued an order Tuesday telling both sides to come to court prepared to answer questions on how their proposals could be modified if she rejects their respective remedies as currently written--suggesting she is open to some hybrid of the two positions in a modified settlement agreement.

The judge's request "suggests that she's trying to understand what's most important to the parties and what causes the least amount of pain," said Mark Schechter, an antitrust attorney with the firm Howrey Simon Arnold & White.

"I think it's reasonably likely that the court will order some additional conduct restrictions" that go beyond the Justice Department settlement, Schechter said.

Outside the courthouse afterward, the holdout attorneys general said they were not surprised by Microsoft's decision to reject any further compromise.

"I think it's a gamble that the judge may not mean what she said and is going to go with what they want," said Connecticut Attorney General Richard Blumenthal.

The states said the sharing of key Windows computer code was even more important than demands for a version of Windows with removable features that could be replaced by competitors' software.

Microsoft would be forced to behave "more like a company facing competition and less like a firm existing in a comfortable monopoly" under the dissenting states' proposals said Steve Kuney, another attorney for the states.

Kuney accused Microsoft Chairman Bill Gates of arrogance and advocating monopoly when he testified in April.

"Somehow they know better than anyone else what's best for this PC ecosystem. What's good for Microsoft is therefore good for the economy, good for consumers and good for everybody else," he said.

Warden, for Microsoft, accused Kuney of misrepresenting the company's position. "Microsoft does not claim that monopoly is the preferred form of industrial organization," he told Kollar-Kotelly.

Warden also took exception to Sullivan's portrayal of Microsoft as a scofflaw. "We haven't failed to get some message. We haven't claimed that we're immune from the law or anything of that kind," he said.

Microsoft argued that the states' demands go way beyond addressing the antitrust violations it actually committed and would harm consumers and the entire computer industry.

Warden said U.S. Supreme Court precedents for sweeping antitrust remedies, cited by Kuney for the states, were not applicable to the Microsoft case.

Last June, a federal appeals court upheld trial court findings that Microsoft illegally maintained its Windows monopoly in personal computer operating systems by acts that included commingling Web browser code with Windows to fend off Netscape's rival browser.

The appellate judges rejected breaking the company in two to prevent future antitrust violations, but sent the case to a new judge, Kollar-Kotelly, to consider the best remedy.

Microsoft has argued that the restrictions being sought by the states would benefit rivals such as AOL Time Warner and Sun Microsystems, and would deprive consumers of a reliable platform for software.

Under the Justice Department settlement, Microsoft would be required to let computer makers hide desktop icons for some features of its Windows operating system to allow the promotion of competing software by computer makers.

The holdout states say stricter sanctions are needed to protect new technologies such as Internet services and handheld computers from any anticompetitive tactics.

The nine states still pursuing the case are California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, West Virginia, plus the District of Columbia.

Story Copyright © 2002 Reuters Limited. All rights reserved.