Microsoft Seen As Big Winner

A federal judge handed Microsoft Corp. an enormous victory on Friday, endorsing nearly all of its antitrust settlement with the Justice Department and rejecting harsher penalties sought by nine states.

U.S. District Judge Colleen Kollar-Kotelly warned company founder Bill Gates and other Microsoft executives, however, that she would hold them individually responsible for complying with her instructions.

The nine dissenting states, joined by the District of Columbia, had argued that tougher sanctions were needed to restore competition in the computer industry. But the judge said penalties they sought would chiefly benefit the company's rivals.

Kollar-Kotelly made a few minor changes to the settlement that require acceptance by Microsoft and the Justice Department, which sued the software giant 4 1/2 years ago when Democrats held the White House and economic times were rosier.

Appeals by the dissenting states were considered likely, although state officials said they were still studying their options.

"We've got plenty of fight," Iowa Attorney General Tom Miller said. "We haven't lost it at all. We need to talk to our colleagues, analyze it more and make a decision."

The original trial judge in the case ordered the world's largest software company split in two, touching off two years of wrangling. Friday's result was far more favorable to Microsoft.

Gates said he was "personally committed" to abide by the agreement, which he called "a good compromise and good settlement." He said Microsoft was unlikely to challenge the decision.

"This settlement puts new responsibilities on Microsoft, and we accept them," Gates said, adding: "At this point, we're not seeing anything that would be cause for appeal, but we need to make a full assessment."

His corporate partner, chief executive Steve Ballmer, struck a conciliatory tone toward Microsoft's behavior toward rivals. He said the company has "learned and grown through the experience of the last four years. We are committed to moving forward as a responsible leader in an industry that is constantly, constantly changing."

Attorney General John Ashcroft called the decision "a major victory for consumers and businesses."

Although the decision gives consumers more choices, Microsoft's competitors consider those choices meager.

One executive whose company's Web browser competes with Microsoft's dominant Internet Explorer said the ruling seals a toothless settlement.

"There were no real remedies, no actual punishment. I'm not too surprised," said Jon F. Von Tetzchner of Opera Software.

The ruling allows Microsoft rivals more flexibility to offer competing software features on computers running Windows.

Microsoft has already enacted terms of the settlement, and now allows users of its latest Windows versions to replace some built-in features, such as instant-messaging or music players, with those from competitors.

While rejecting the states' arguments, the judge acknowledged that Microsoft has a "frustrating" tendency not to admit to its illegal corporate conduct. She warned Microsoft that she will demand that its directors, especially Gates, enforce the settlement provisions.

"Let it not be said of Microsoft that 'a prince never lacks legitimate reasons to break his promise,' for the court will exercise its full panoply of powers to ensure that the letter and spirit of the remedial decree is carried out," the judge wrote, quoting Renaissance philosopher Niccolo Machiavelli.

"The importance of this settlement is sending a message to the Microsoft board of directors that it will be held accountable at the highest levels of the corporation," said Connecticut Attorney General Richard Blumenthal.

Miller and his colleagues concentrated on the few changes the judge made to the U.S. settlement that respond to criticisms the states raised. Kollar-Kotelly required Microsoft to disclose some technology to its rivals months earlier than the company and government had agreed.

She also eliminated a technical committee that would have enforced the settlement terms. In its place, a corporate committee consisting of board members who aren't Microsoft employees — will make sure the company lives up to the deal. The judge also gave herself more oversight authority.

Sen. Herbert Kohl, D-Wis., chairman of the Senate Judiciary Committee's antitrust panel, said that while the Justice Department settlement had shortcomings, "the time for arguing the merits of the settlement at the trial court has passed."

But University of Baltimore law professor Robert Lande said the case "might not be resolved for another two years."

Microsoft and the government had argued that the settlement they secretly crafted one year ago was sufficient. The agreement, which would last at least five years: