Massachusetts Gets Another Shot at Microsoft

Massachusetts gets another shot at Microsoft Tuesday morning when the U.S. Court of Appeals in Washington hears oral arguments in the Bay State’s opposition to the Department of Justice’s (DoJ) landmark anti-trust settlement with Redmond.

The original settlement, announced last year, prompted Massachusetts and 18 other states to sue for better terms. Microsoft subsequently settled with the other 18 states, but Massachusetts has refused to come to terms.

Massachusetts Attorney General Thomas Reilly claims the DoJ settlement with Microsoft is riddled with loopholes and does little to change the software giant’s competition-quashing practices. Reilly said the deal, which will pay Massachusetts $28.6 million for legal costs and future enforcement and compliance, “ignored Microsoft’s ill-gotten gains” and wouldn’t spark competition.

For Massachusetts, which started its investigation of Microsoft anti-competitive practices in 1996, it’s been a long fight. In 1998, Massachusetts sued Microsoft for monopolistic practices related to its Windows operating system and claimed victories (along with its co-plaintiff states and the DOJ) in trial and appeals courts.

Reilly, however, was disappointed with the remedies portion of the case, in which U.S. District Court Judge Colleen Kollar-Kotelly rejected stricter measures and approved sanctions that roughly paralleled the agreement hammered out between the DOJ and Microsoft.

If Massachusetts prevails in its appeal, Reilly said Microsoft would be compelled to cover any additional legal fees related to the appeal.

“When Microsoft illegally crushes a new idea, because it threatens Microsoft’s monopoly, it is consumers who pay the price,” Reilly said in a statement when he filed the suit last December. “Competition is also key to what we are doing. Without competition, our economy has no future. It is what provides choices, spurs on new technology, and creates jobs.”

The settlement approved by Kollar-Kotelly does not prevent Microsoft from tying software like its Web browser, e-mail client and media player with its operating system — initially a cornerstone issue in the government’s case. It does, however, require the company to provide software developers with the APIs for its middleware, allowing them to create competing products that can utilize the integrated functions Microsoft includes in its own products.

It also gives computer manufacturers and consumers the freedom to substitute competing middleware software on Microsoft’s operating systems — without fear of retaliation from the industry giant.

Additionally, it requires the company to license its operating systems to PC manufacturers on uniform terms for five years. It also bans Microsoft from entering into exclusive agreements.

Finally, the settlement includes a provision for a panel of three independent monitors, which will work from Microsoft campuses and have full access to the company’s books, systems (including source code), and personnel for five years.

The court will have the option to extend that period for another two years if it finds that Microsoft violates the settlement.

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