Massachusetts vows to appeal Microsoft ruling

WASHINGTON -- The broad-based antitrust fight against Microsoft Corp. dwindled Friday to Massachusetts versus the software giant, as seven other states announced they would accept the landmark settlement reached by the company and the Bush administration.

Massachusetts Attorney General Tom Reilly, one of Microsoft's most outspoken critics, on Friday asked a U.S. appeals court to reconsider tougher sanctions against the software company than those in the settlement.

The appeals court has twice sided against the government on important antitrust issues in recent years, even as it agreed that Microsoft had illegally maintained its monopoly on Windows software.

Microsoft reached its agreement last year with the Justice Department and nine states that were part of a lawsuit that at one point included as many as 21 states.

Three pulled out of the legal case even before the settlement.

"There was nothing in the deal with Justice that will change Microsoft's business practices in any substantial way," said Reilly, a Democrat. "We are prepared to go it alone."

West Virginia was the only other state to leave open the possibility of filing an appeal by Monday's deadline.

Massachusetts, West Virginia and seven other states -- California, Connecticut, Florida, Iowa, Kansas, Minnesota and Utah -- had considered the settlement inadequate and pushed during hearings earlier this year for tougher penalties against Microsoft.

But those seven states plus the District of Columbia plan no additional court action and will focus on making sure Microsoft obeys the settlement, Iowa Attorney General Tom Miller said Friday. He has been coordinating the antitrust fight since the Bush administration and the nine states negotiated the deal last year.

Miller also disclosed that Microsoft will pay $25 million in legal reimbursements to be divided among states based on how much they spent on the antitrust case. California has borne the brunt of legal costs.

The company was required under federal law to pay those legal fees, though $25 million is far more than the out-of-pocket costs for those states. Government lawyers are paid fixed salaries, but the law calculates reimbursed fees based on hourly rates for private attorneys.

Microsoft said in a statement, "Our focus remains on complying fully with the court's judgment, working collaboratively with governments to address important public policy issues and on developing innovative products that will benefit consumers."

The company previously agreed to pay $10 million more in legal fees to the nine states that agreed last year with the Justice Department to settle the case. Those states were New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina and Wisconsin.

Federal law bars the Justice Department from being reimbursed.

Microsoft also will pay $3.6 million for all 18 states that stuck to the antitrust case until last year to monitor the software maker's actions under the settlement, Miller said.

In a reflection of Microsoft's enormous wealth, the company said it would not be required to announce the payments in U.S. securities filings because the $28.6 million would not have any material impact on its revenues. The company's net income this year was $7.8 billion.

Reilly maintained Friday that his state, which also is entitled to reimbursement of some attorneys' fees, can afford to continue the court fight alone because the most expensive parts of the case have already been paid.

His decision won plaudits in Washington from Rep. Ed Markey, D-Mass., who said Reilly "now becomes the de facto antitrust division chief of the United States and a high-tech hero to consumers and entrepreneurs." Markey is the top Democrat on the House Commerce Committee panel on telecommunications and the Internet.

U.S. District Judge Colleen Kollar-Kotelly earlier this month accepted nearly all the provisions of the settlement. She rebuffed arguments that tougher sanctions were essential to restore competition in the computer industry, and concluded that some penalties proposed by the states would chiefly benefit the company's rivals.

"Consumer interests are now best served by turning our focus to enforcement," said Connecticut Attorney General Richard Blumenthal.

California Attorney General Bill Lockyer said Friday the settlement was "not completely satisfying." But he said it "closed enforcement loopholes, keeps compliance with the remedies squarely before the court and allows us now to turn attention to making sure that Microsoft competes fairly in the marketplace."

Under the settlement, Microsoft:

--May not participate in exclusive deals that could hurt competitors.

--Must offer uniform contract terms for computer manufacturers.

--Must let manufacturers and customers remove icons from desktops for some Microsoft features.

--Must release some technical information to rival software developers.

Miller acknowledged "serious issues" to appeal in the judge's decision approval of the settlement even as he decided not to pursue them.

"For most of our states, it is time to dedicate our resources to enforcement of the decree and the law," Miller said, adding: "We will be vigilant and hold the company to compliance, to make certain that Microsoft does not abuse its extraordinary market power in violation of the law and the courts' decisions."

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On the Net:

Massachusetts Attorney General: http://www.ago.state.ma.us

Microsoft: http://www.microsoft.com

National Association of Attorneys General: http://www.naag.org