Microsoft Corp. has offered to pay penalties and change its business practices in a new, 11th-hour proposal to settle the landmark federal antitrust case against the software giant.
Hopes for a deal were high as lawyers for the Justice Department and Microsoft headed to Chicago this weekend to meet with a federal mediator.
Lawyers close to the case said both sides have reportedly made major concessions, just days before a judge was to issue his final verdict in the historic suit.
The Justice Department has dropped its demand that Microsoft be split up into three or five separate companies and Microsoft is willing to accept major restrictions on its business practices, the sources said.
Officials close to the case say there is no agreement yet and cautioned that the talks could still collapse.
But if things go well this weekend, there could be direct discussions between the company’s billionaire chairman Bill Gates and Joel Klein, head of the antitrust division of the Justice Department, according to officials close to the case.
The dramatic session in Chicago in front of federal appeals court Judge Richard Posner, a court-appointed mediator, represents the last chance to settle the lengthy and bitter lawsuit over Microsoft’s hardball business tactics.
If there’s no settlement, Judge Thomas Penfield Jackson, who issued a harshly worded finding of Microsoft’s business practices at the conclusion of an eight-month-long trial, will issue a final verdict on the case Tuesday.
The settlement talks, stalled since November, have come to life in the last 10 days with an exchange of phone calls and e-mails through Posner.
Microsoft, in the last few days, has come up with a draft of settlement conditions in which it agrees to “conduct remedies that would impose restrictions on its business practices.”
These would include Microsoft agreeing to sell two versions of its industry-dominant Windows operating system — one that includes its Internet Explorer Browser and one without it, sources said.
Microsoft also is expected to agree to language giving computer manufacturers more choice of what software they want to install on personal computers and agreeing to rules in which the company would not favor or punish computer makers through pricing of Microsoft products, sources said.
At the same time, the Justice Department, under pressure from some of the 19 states that have sued Microsoft, has taken its demand that Microsoft be divided into “Baby Bills,” off the table, and is instead demanding that “handcuffs” be placed on the software giant.
The Justice Department, already burned by a 1995 settlement it reached with the company, also will be pressing for guarantees that the agreement will be strictly enforced, sources said.
A contributing factor in the movement toward settlement is Microsoft’s fear that a ruling next week could result in hundreds of costly lawsuits being filed on behalf of customers, clients and competitors, sources said.