Settlement talks fail in Microsoft case

WASHINGTON - Talks between Microsoft Corp. and government lawyers failed after the company insisted on its own proposal to settle the antitrust lawsuit and not because of disputes between state and federal officials, persons familiar with the negotiations said yesterday.

The talks broke down Saturday, sending the case back to U.S. District Judge Thomas Penfield Jackson in Washington, who last fall issued a finding of fact that Microsoft used its monopoly powers to thwart competition. A decision on the lawsuit is expected any day, and if Jackson sides with the government, he will begin the lengthy process of determining a penalty that could include a breakup or restructuring of the company.

Sources said government lawyers no longer were insisting on a breakup, but that Microsoft refused to accept proposals submitted by the Justice Department and 19 states that sued the company.

Even before the states made new proposals Friday, "It was clear Microsoft was rejecting the government's proposal and insisting on their own approach," said an individual familiar with the government's position, who would not be quoted by name.

Microsoft Chairman Bill Gates said Saturday that "it became impossible to settle because the Department of Justice and the states were not working together. Between them, they appeared to be demanding either a breakup of our company or other extreme concessions."

William Kovacic, an antitrust expert and professor at the George Washington University School of Law, said he expects Jackson's ruling "will be a very favorable treatment of the government's views."