Sources said that trial is likely to proceed as scheduled earlier this month by U.S. District Court Judge Thomas Penfield Jackson. The resumption of the trial, which was adjourned in late February and set to resume in the middle of May, was delayed while Jackson presided over another trial.
The Justice Department and 19 states allege that Microsoft is a monopolist that has acted illegally to maintain market dominance with its Windows operating system and to create a new monopoly in Internet software.
Jackson had urged both parties to work on a settlement during the recess. Microsoft chief Bill Gates has previously said that any settlement must be guided by two key principles: the integrity of Microsoft's Windows operating system and the continued freedom to innovate.
After two earlier settlement proposals submitted by Microsoft, the government has concluded that the company's latest proposal does not go far enough to repair the damage the software giant inflicted on the industry, sources close to the case told the Seattle Times.
The hurdle seems to be Microsoft's unwillingness to add to the list of business practices it will consider changing, according to the report.
When the trial resumes, each side will present three rebuttal witnesses. Earlier, each side presented 12 witnesses.
Yesterday, Microsoft lawyers questioned IBM's Garry Norris, who will be a key rebuttal witness for the government, for three hours at a deposition. Norris testified that computer makers feared buying IBM's OS/2 operating software because of threats from Microsoft, among other claims.
Reuters contributed to this report.