Lawyers and executives for Microsoft have previously bristled over suggestions that any settlement would require them to disclose the "source code" blueprints for the company's monopoly Windows operating system, the underpinnings of its multibillion-dollar business.
Microsoft officials also have warned they wouldn't accept any broad prohibitions against bundling new features into Windows.
The prospective agreement is a five-year consent decree between the government and Microsoft, with a possible two-year extension if the company violates its terms, a person close to the talks said. A three-person advisory committee would oversee compliance with the agreement. Those details were first reported by The New York Times.
James, the antitrust chief, recently announced the government won't seek to break up Microsoft and will not pursue that part of the original lawsuit that was thrown into question by a federal appeals court over the summer.
XP release
He also decided not to try to block Microsoft from releasing Windows XP, its newest version of its operating system.
The original judge in the case, Thomas Penfield Jackson, ordered the breakup of the software giant into two companies after concluding Microsoft violated antitrust laws by illegally stifling its competitors.
But a federal appeals court reversed that penalty this summer, and appointed a new judge to determine a new penalty in one of the most significant monopoly cases in American history.
The new judge strongly urged both sides to settle the case last month and gave them a deadline of yesterday.
One person who had been briefed on some of the draft settlement proposals being discussed in recent days, who spoke on condition of anonymity, said the ideas being discussed included:
-- Letting Microsoft add new features into its flagship Windows software, but requiring the company also to offer a version that doesn't include those additions.
-- Banning restrictive contracts that would force computer makers to buy versions of Windows with new features, but allowing financial incentives such as discounts to make those versions more enticing.
-- Forcing Microsoft to reveal parts of its Windows blueprints relating to its Internet browser software, but not the blueprints to Windows.
Shares of Microsoft were down US$0.73 to close at US$58.15 in trading on the NASDAQ Stock Market Wednesday.
In the past year, shares of Microsoft have as high as US$76.15 on June 28, and as low as US$40.25 on Dec. 21 last year.
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