Microsoft Corp and the Justice Department reached a tentative agreement to settle the historic antitrust case against the software giant, and state attorneys general were reviewing terms of the deal, according to people familiar with the talks.
Terms of the prospective settlement were closely guarded, and people close to the negotiations cautioned that precise language was still being worked out even between Microsoft and the Justice Department.
The attorneys generals from the states that sued Microsoft for antitrust violations were weighing whether to sign onto the deal, the sources said.
Charles James, assistant US attorney for antitrust, disclosed the agreement to the attorneys general on Wednesday and said Microsoft also would accept the terms, the sources said, speaking only on condition of anonymity.
The computer industry has eagerly been monitoring the talks, looking for a possible settlement and hoping it would combine with the release of Microsoft's new Windows XP operating system to invigorate the lagging industry that has helped drag down the stock market.
The new trial judge, US District Judge Colleen Kollar-Kotelly has set a deadline of today to reach a settlement. The sides -- including state prosecutors from Iowa, Connecticut, New York and Wisconsin -- met late into the night Wednesday with mediator Eric Green in Washington.
The considerations in the coming days by state attorneys general and their top lawyers are important. The case was nearly settled during previous negotiations under US Circuit Court Judge Richard Posner, who hinted afterward that states had spoiled an agreement by seeking tough penalties that Microsoft rejected.
Tough state of mind
The states have in the past suggested they would press forward against Microsoft if the US government settles the case in ways unacceptable to them.
A spokeswoman for the Justice Department, Mindy Tucker, declined to comment on the talks.
Microsoft Chairman Bill Gates has hinted in recent days of successful negotiations, saying on The Charlie Rose Show TV show last week that he was "fairly optimistic" an agreement would be reached. Microsoft spokesman Vivek Varma said Wednesday he would not discuss "any aspect of the confidential discussions" but added that, "We believe a settlement would be good for consumers and the overall economy."
An industry trade group that has been critical of Microsoft's business practices braced for the deal, issuing a statement late Wednesday accusing the Bush administration of "selling out" by seeking weak penalties.
The Washington-based Computer and Communications Industry Association charged the administration wasn't pushing for tough enough penalties such as requiring Microsoft to disclose its source code blueprints for its flagship Windows operating system.
"The Justice Department isn't settling this case, it is selling out consumers, competition, and all those who want a vibrant, innovative high tech industry contributing strength to our economy," the group's president, Ed Black, said in a statement.
Microsoft and Justice officials would not immediately comment on the group's charges, but a pro-Microsoft trade group, the Washington-based Association for Competitive Technology, said only Microsoft's competitors don't want to see a settlement. The head of the group, Jonathan Zuck, said a settlement is desirable "particularly in this time of economic downturn and national crisis."
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