New Lawsuits Expected Today in Microsoft Case

WASHINGTON — Like President Clinton and millions of others ensnarled in litigation, software giant Microsoft Corp. is about to find out if it pays to put principle before compromise.

The Justice Department, California and at least 19 other states were poised to file broad, new antitrust suits against Microsoft today after last-minute talks between the company and government officials collapsed Saturday.

In forcing a showdown with the government, Microsoft may be taking significant risks in the courtroom as well as the court of public opinion, experts say. In a similar confrontation a generation ago, the federal government sued IBM Corp. in 1969, igniting litigation that dragged on for more than a decade before the government decided to drop the case in 1982.

Like IBM, “Microsoft has an excellent legal position; they have not violated the law,” said Microsoft legal advisor Charles F. Rule, a Washington antitrust expert who once served as head of the Justice Department’s antitrust division. But Rule said IBM lived to regret its decision to litigate.

“At the end of the day, IBM had to spend so much money and time on those legal fights with Justice that they lost the war that counts: the war for the hearts and minds of consumers,” Rule said.

In an interview with Time magazine, Microsoft Chairman Bill Gates continued to hold out hope for a settlement even after his company drew a line in the sand over the weekend.

“I do sometimes shake my head and wonder why this is happening,” Gates told Time in the article to be published this week. “I just don’t understand. We worked hard to settle. I wish we had been able to. I’ll seize every opportunity to do so.”

Representatives of at least 20 state attorneys general were scheduled to participate in a conference call Sunday to discuss what course of action to pursue against the software giant.

Microsoft spokesman Mark Murray said Sunday that his company had not heard from the Justice Department or any of the states since talks broke up Saturday and was bracing for “five to 10 years” of litigation.

The Times could not independently reach knowledgeable government officials about the outcome of the conference call.

Microsoft and government negotiators ended their talks Saturday after they were unable to resolve complaints that Microsoft--whose family of Windows software runs more than 90% of the world’s personal computers--is attempting to extend its dominance in computer operating systems to Internet browser software and other products and thereby stifle competition.

Microsoft argues that it should be free to include new features in its products to satisfy customers.

Government lawyers, however, wanted Microsoft to allow personal computer makers to have more control over the look and functionality of its Windows system, particularly the look of the “boot-up” screen--the first full-color display that computer users see when they turn on their machines.

Microsoft’s Murray said his company already allows computer makers to alter the boot-up screen. He noted that the boot-up screen of his own Toshiba laptop features a Toshiba logo. But he said that the government wanted to go further than mere cosmetics and force Microsoft to include the Internet browser of archrival Netscape Communications Corp. in Microsoft’s upcoming Windows 98 operating system.

The collapse of negotiations has apparently left the parties firmly squared off in a bitter, finger-pointing stalemate that most experts expect to lead to the filing of at least two antitrust lawsuits by the Justice Department and the states in U.S. District Court today.

Government officials have said privately that Microsoft negotiators refused to talk about issues they had earlier indicated they would negotiate and seemed more interested in using the talks as a publicity stunt to attract interest in Windows 98.

One official close to the government charged that Microsoft negotiators were more than an hour late for settlement talks held at the Justice Department on Friday and were tardy again on Saturday, when discussions were moved to the Washington offices of Sullivan & Cromwell, a law firm representing Microsoft.

What’s more, the official noted that there were media reports that many computer equipment makers hadn’t expected to receive Windows 98 to install in their machines until today. Those allegations, the official said, undercut Microsoft’s claim that it was delaying its previously scheduled May 15 shipment as a gesture to facilitate the negotiations.

Microsoft has maintained that it negotiated in good faith.

Indeed, a source close to the company said it was the government that treated the talks cavalierly, alleging that Joel I. Klein, chief of the Justice Department’s antitrust division, was present for only 20 minutes during the eight hours of talks on Friday.