The issue surfaced in a court-mandated briefing filed jointly by Microsoft and federal and state regulators. The compliance update says there are ongoing discussions over the "Shop for Music Online" feature in the operating system.
"Plaintiffs are concerned that the feature invokes Microsoft's Internet Explorer, rather than the user's chosen default browser, in a manner that may be inconsistent" with the settlement, according to the filing.
Discussions between the parties have continued, though the issue remains unresolved. "If Plaintiffs and Microsoft are unable to resolve this issue, the parties may seek assistance from the Court," the filing states.
The filing also notes that four additional companies have signed up to license certain Windows communications protocols that the company is required to make available as part of the settlement.
A Microsoft representative said Monday that the company believes it has adhered to the settlement terms.
"We believe that the use of Internet Explorer by the Shop for Music Online feature in Windows XP is consistent with the design rules established in the consent decree," Microsoft spokeswoman Stacy Drake said.
The feature is located inconspicuously inside the Windows "My Music" folder, which is created automatically when Windows XP is installed.
Clicking the link opens an Internet Explorer window--even if another browser such as Opera is the computer's default browser--and takes the computer user to a Microsoft page advertising a handful of top artists' albums, along with a space to search for other artists by name.
Typing an artist's name into the search box results in a list of albums, which in turn lead to links to Web stores including CDNow, Buy.com, A&B Sound Online and MusicSteps.com where the albums can be purchased. In the case of Buy.com, the first and most prominently highlighted store, the link leads to the company's presence on MSN, rather than to the independent Buy.com Web site.
The parties are due in court for a status conference on Friday, according to the filing, although it is unclear whether this issue will come up.
The court-mandated filing was an update by both Microsoft and regulators on various matters pertaining to Microsoft's compliance with the terms of its settlement agreement.
News.com's John Borland contributed to this report