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Microsoft one step closer to settlement

A federal judge says that both parties had complied with laws governing antitrust settlements, a nod that could signal a final ruling soon.

WASHINGTON--In a move that could bring Microsoft and the Justice Department closer to an approved settlement deal, a federal judge said Tuesday that both parties had complied with laws governing antitrust settlements.

In a memorandum dated Monday but released Tuesday afternoon, U.S. District Judge Colleen Kollar-Kotelly concluded the settling parties had complied with provisions of the Tunney Act. The memorandum is an important step forward in her approving the November settlement between the Justice Department, Microsoft and nine of 18 states.

Nine other states are seeking stiffer sanctions. That separate matter also is before the judge.

"I would expect we will get her final ruling on the merits of the settlement quite soon," said Emmett Stanton, an antitrust attorney with Fenwick & West in Palo Alto, Calif. "There is no reason to issue that if the final decision is not coming fairly promptly."

As mandated by the Nixon-era Tunney Act, the settlement must pass two important hurdles before Kollar-Kotelly can approve the deal. The first was a determination that all parties were above board during the process and that no political backroom negotiations influenced the deal. This includes the proper disclosure of communications, among other things.

Kollar-Kotelly's 36-page memorandum means the Justice Department and Microsoft cleared the first hurdle.

"There was a lot of hue and cry (about) whether the submission was sufficient, whether they had given all the appropriate contacts with Congress and so forth," Stanton said. "(Kollar-Kotelly) decided that it's complete enough, so she doesn't need to hold any further proceedings or require any further submissions by either the Justice Department or Microsoft in order to make a final ruling on the merits."

But the judge must also determine whether the settlement is in fact in the public interest. If she decides that it is not, she would be obligated to reject the proposed deal.

In a footnote to her memorandum, Kollar-Kotelly noted that she had to make the determination on compliance with the Tunney Act in part "because of the significant public objection to the entry of the proposed consent decree (settlement)."

Pursuant to the Tunney Act, the Justice Department accepted comments about the settlement for 60 days. Initially, federal trustbusters said about half the 30,000 comments opposed the proposed deal. But in the final tally, 12,500 participants opposed the deal, 10,000 were in favor, and 9,500 did not express a view one way or another.

The judge put to rest one hotly contested issue raised by some opponents of the proposed deal: Charles "Rick" Rule, a Microsoft attorney with Fried Frank Harris Shriver & Jacobson, based here, was counsel of record and therefore able to negotiate with the Justice Department on behalf of the software giant.

In a January lawsuit filed by the American Antitrust Institute and during a March hearing, critics of the settlement questioned the legitimacy of Rule's role.

"Mr. Rule has represented Microsoft at various stages in these proceedings, both in litigation and in settlement proceedings," Kollar-Kotelly wrote in a footnote to her memorandum. "Accordingly, the court is satisfied communications are properly treated as communications by 'counsel of record.'"

Critics also charged that Rule's having worked as a lobbyist negated his role as a negotiator. But in the same footnote, Kollar-Kotelly said she found no indication the former assistant attorney general acted in the capacity of a lobbyist when negotiating the settlement.

Not surprisingly, Microsoft heralded the judge's decision as a victory.

"We are pleased the court affirmed our position and the Department of Justice's position on a number of threshold issues related to the Tunney Act," said company spokesman Jim Desler. "We look forward to the Court's ruling on our settlement and believe it is the appropriate remedy for this case."

Stanton reiterated that Kollar-Kotelly could soon reveal how appropriate the settlement will be. "She almost certainly will rule on the merits soon," he said.

Such a circumstance could foreshadow how the judge will handle the second track of the case, where nine plaintiff states are seeking stiffer sanctions than the settlement.

The plaintiff states are seeking for Microsoft to: sell a second version of Windows, from which middleware such as browsers and media players can be removed; license through auction its widespread Office software for use on competing operating systems; give away for free the source code, or blueprint, to its Internet Explorer Web browser; and carry in Windows for 10 years Sun Microsystems' version of the Java Virtual Machine.

The states contend these stiffer remedies more appropriately address the original two-part ruling issued by U.S. District Judge Thomas Penfield Jackson in November 1999 and April 2000 and a separate June 2001 ruling from a panel of seven appellate judges.

Kollar-Kotelly could approve the settlement and reject the call for a stiffer remedy, reject the settlement and impose a stiffer remedy, or accept both.