MS/DOJ - Mediation Ends, Case Back in Judge's Hands

Jackson had appointed 7th Circuit Court of Appeals Chief Judge Richard Posner last November to mediate talks between Microsoft and plaintiffs, the US Department of Justice (DOJ) and 19 state attorneys general. Posner yesterday issued a written statement announcing that mediation "proved fruitless" because "it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged."

Microsoft officials, including Chairman Bill Gates and Chief Counsel Bill Neukom, called a press conference on Saturday in which Gates said that mediation fell apart because the DOJ and the states didn't work together. "Between them, they appeared to be demanding either a breakup of our company or other extreme concessions that go far beyond the issues raised in the lawsuit," Gates said in a written statement read at the beginning of the press conference.

"In good faith we had a lot of good ideas," Gates said during the press conference. "We really covered what should have been all the legitimate concerns and certainly went beyond the issues in the case. There were divisions and extreme views on the other side that brought us to the point where a mediation wasn't going to be successful."

Gates also said that if the government had a "sane" proposal to settle the case, mediation might have gone differently.

However, asked by a reporter if the problem had been with the state attorneys general, Gates replied, "I think that's going a tiny bit too far." Gates said in both the statement and in comments at the conference that Microsoft "certainly went the extra mile" to try to arrive at a settlement with the government.

Microsoft's mediation team of senior executives and lawyers spent more than 3,000 hours on the settlement attempt in the last four months, according to the written statement, which also has been posted at Microsoft's Web site. Gates said that the mediation process has been a top priority of his and other top company executives.

The effort put into the negotiations was one of the reasons Posner decided to issue his statement. He wrote that he wanted "to correct the impression created by some news reports that there were no serious negotiations over possible terms of settlement until two weeks ago. On the contrary, almost 20 successive drafts of a possible consent decree evolved over the past months, had been considered by the parties before it became clear late last night that the case would not settle, at least at this stage of the litigation."

The statement went on to praise the DOJ and Microsoft saying that mediation did not collapse "due to any lack of skill, flexibility, energy, determination, or professionalism" on the parts of those two sides. Broadcast reports Saturday night and published reports today made much of the fact that Posner did not specifically mention the state attorneys general. Various of those reports pointed at the states as having been insistent on a harsher remedy than Microsoft was prepared to accept to settle the case.

Posner's statement, available at the Microsoft Web site and various news outlet Web sites, took such media accounts to task, noting first that mediation is confidential and that he will not comment, publicly or privately, on aspects of the case involved in that process. He added, "Despite my strenuous efforts to maintain the confidentiality of mediation, there has been a good deal of leaking and spinning, and this leaking and spinning have given general rise to news reports that have created a misleading impression of several aspects of the process and that should be heavily discounted by anyone interested in hewing to the truth."

The Washington Post today quoted Joel Klein, the assistant attorney general for the DOJ antitrust division, saying that the DOJ will work for a remedy "that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice." The newspaper further cited anonymous sources close to the government who said that Microsoft would not budge on its "final, final offer," which was "wholly inadequate" as far as fixing damage done by Microsoft's anticompetitive behavior.

Judge Jackson last November issued his "findings of fact," in which he ruled that Microsoft is a monopoly. The next step is for him to issue his verdict, which will establish whether the judge thinks Microsoft broke federal antitrust laws through its business practices. Jackson had reportedly been ready to issue the verdict, but delayed its release because it seemed that the two sides were close to a settlement to end the litigation.

Microsoft's Neukon vowed at the press conference to fight until the end, so even if Jackson does -- as he is widely expected to -- find that Microsoft broke antitrust laws, the case will likely drag on in appeals court for some time to come.

(Martyn Williams in Tokyo contributed to this report.)

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