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Friday, 2 November, 2001, 18:29 GMT
Microsoft's changing fortunes
By BBC News Online's Kevin Anderson in Washington

The settlement reached by the US government and Microsoft is very different from the remedy handed down more than a year ago by Judge Thomas Penfield Jackson.

He ordered the company to be split in two, but groups critical of Microsoft say that the government has agreed to a settlement that is much weaker even than the one they could have had a year ago when Judge Richard Posner was close to settling in the spring of 2000.

The two sides were so close to agreement, Judge Posner believed, that he asked for a 10-day extension to continue talks.

At the end of March, he had submitted his 18th draft to the two sides. In the end, the talks broke down, and Judge Jackson issued his withering judicial rebuke of the company and handed down the equivalent of the death penalty in an anti-trust case: Break up the company.

Break-up

There is the most dramatic difference between the Judge Posner's final draft settlement, Judge Jackson's ruling and the agreement as settled upon by the US government and Microsoft.

Judge Posner did not propose a break up, but Judge Jackson called for the company to be split into two parts, one that would sell the Windows operating system and another that would sell other Microsoft software including its market dominant suite of office applications.

The US government took break-up off the agenda as a possible remedy in the final negotiations that led to the settlement.

The break-up demand was reported as one of the key reasons that previous talks broke down.

Those close to the talks said that the states were pressing for break-up, but Microsoft chairman Bill Gates was adamant. He would not agree to the dismemberment of the company he founded.

After Judge Posner announced that his mediation efforts had failed, Mr Gates said that the states' demands were not "sane."

Many took this to refer to the steadfast position by the states that the only way to prevent the software giant from abusing its power was to split the company apart.

Source code

Both Judge Posner's final draft and Judge Jackson's ruling would have gone further than Friday's settlement in forcing Microsoft to open its vault of secrets to other software developers.

Judge Posner's final proposal would have allowed computer manufacturers to license the Windows source code itself, often referred to as Microsoft's crown jewels.

And reports at the time said the company might have been willing to do this to settle the case.

Judge Jackson also called on Microsoft to open up the source code of the Windows operating system, which the company called a "confiscation of our intellectual property".

Oversight team

Some hoped that by opening up the Windows source code that competing versions of the market dominant operating system could be designed.

A three-panel oversight team proposed by the final settlement would have access to Microsoft source code, but it does not require the company to license that source code to other software or hardware makers.

Microsoft will have to provide access to technical information including some access to the source code but this will happen in a "secure facility" where competitors would be able to study and ask questions of Microsoft about portions of the Windows code.

Microsoft also must provide rival software companies with wide access to the Windows programming interfaces to develop competing products such as web browsers, e-mail readers and media players.

Pricing and licensing

The final settlement places restrictions on Microsoft's licensing and pricing. Microsoft will be forced to license Windows to major computer manufacturers for five years, and the company is prohibited from entering exclusive contracts that would force hardware manufacturers to use only Microsoft products.

The company must also publish on a publicly available website the price that it is charging for Windows.

Both Judge Posner's final draft settlement and Judge Jackson's ruling would have required Microsoft to charge the same price for past versions of Windows as it does for the latest version of the operating system.

This was intended to prevent Microsoft forcing users to migrate to a new version of the software. Judge Posner's draft settlement would have required Microsoft to support the old version for three years.

The settlement on the table now also prevents Microsoft from retaliating against computer manufacturers for supporting non-Microsoft software.

Microsoft must also include an icon that will allow users to remove elements of Windows from their systems and install competing products.

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