Educators turning on new Windows computers in the coming months could see important new changes, including prominent links for programs such as music and internet software from some of Microsoft Corp.’s biggest corporate rivals.

But a court’s Nov. 1 decision not to impose tougher penalties than those negotiated with the Bush administration means Microsoft’s flagship operating system will remain mostly unadulterated as the engine for the technology industry and for the company’s own extraordinary profits.

In an enormous victory for Microsoft, U.S. District Judge Colleen Kollar-Kotelly approved only minor changes in the antitrust settlement. She will permit computer makers, for at least five years, to activate software from rivals as soon as a new PC is switched on by consumers. She also will prohibit Microsoft from threatening to retaliate against anyone who cooperates with its rivals.

The judge established a corporate committee—consisting of Microsoft board members who are not company employees—to make sure the company lives up to the deal, and she gave herself more oversight authority.

But she would not go further in punishing Microsoft, deriding arguments by attorneys general from nine states and the District of Columbia that tougher penalties were essential to restore competition in the technology industry. The judge said many of these additional proposals were developed chiefly to benefit Microsoft’s rivals, not consumers, and said the states’ legal strategy had been hopelessly flawed.

What a difference a judge makes. Kollar-Kotelly, 59, adopted a remarkably narrow view of the issues surrounding the case and indicated she was particularly skeptical over the failure to show how Microsoft’s business decisions hurt consumers, even as these actions proved devastating to technology rivals.

The judge in the earlier Microsoft trial, Thomas Penfield Jackson, occasionally lost his temper toward witnesses during a 78-day trial and laughed openly at Microsoft chief Bill Gates. Jackson also eagerly broadened the case beyond questions surrounding web browser software and frequently butted heads with the appeals court.

When Jackson handed down his punishments, also overturned later by an appeals court, he ordered Microsoft split in two. The Nov. 1 decision by Kollar-Kotelly—which is the closest thing yet to a resolution in the case—was far more favorable for Microsoft.

Gates pledged a personal commitment to abide by the judge’s instructions, which he called “a good compromise and good settlement.”

Officials for the nine losing states were studying their options at press time. They could appeal the judge’s denial of additional penalties, although California’s attorney general, Bill Lockyer, acknowledged that after a four-year court fight, “We’re all fatigued.”

Microsoft and the government had argued that the settlement they secretly crafted one year ago was sufficient. The agreement:

  • Prevents Microsoft from participating in exclusive deals that could hurt competitors;
  • Requires uniform contract terms for computer manufacturers;
  • Allows manufacturers and customers to remove icons for some Microsoft features; and
  • Requires Microsoft to release some technical information so software developers can write programs for Windows that work as well as Microsoft’s own products do. Microsoft’s extraordinary impact on everyday life is hard to understate: Its lucrative Windows and Office products are essential tools for American businesses, consumers, and school districts.
  • According to market research firm Quality Education Data, 91 percent of districts surveyed currently own Windows-based PCs, and 69 percent said they plan to purchase Windows PCs this year.

    Although Microsoft’s most prominent court battle seems headed toward conclusion, the company’s antitrust troubles are not over. It still faces private lawsuits by Sun Microsystems and AOL Time Warner Inc. And European antitrust regulators—who were awaiting the U.S. judge’s decision—have hinted they will announce sanctions against Microsoft by year’s end on related matters.


    Judge Colleen Kollar-Kotelly’s ruling