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MICROSOFT TO EASE SETTLEMENT TERMS AGAIN

Microsoft Corp. has agreed to do more to help rivals compete after antitrust enforcers complained a key piece of their landmark settlement with the company has "fallen short," the U.S. Justice Department said on Friday.

Microsoft has pledged to make it simpler and easier for competitors to license the computer code needed to make server software work properly with its Windows operating system, the department said in a report to a federal judge on the 2002 settlement.

The Justice Department said it might seek even more changes later, noting that it "cannot foresee with confidence that the improvements will be sufficient ...."

Six new complaints against Microsoft and a handful of older complaints, received since the settlement went into effect, are under investigation, the report said.

The department was "concerned that the current licensing program has thus far fallen short of fully satisfying the goals of (the settlement)."

To date, 11 companies have signed licenses for the Windows computer code, known as protocols. But the department said most have been for development of niche products that are "not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop."

"The fact remains ... that a majority of the licensees appear to be developing a relatively narrow set of products," the department said.

The department said it had asked Microsoft to shorten the 50-page licenses to make them more like other Microsoft licenses.

It also asked the company to make the licenses apply more broadly so that computer companies will not have to go back and ask Microsoft to sign additional agreements.

"Microsoft has agreed to make additional modifications to the (licenses) in an attempt to address these concerns," the department said.

Making the licenses more useful could help companies such as Sun Microsystems Inc. that are battling Microsoft in the market for software that runs servers, the powerful machines that manage computer networks.

Microsoft said in separate comments to the judge that it is "working hard" to promote the licenses and is in "active discussions" with 20 other companies interested in them.

The company brushed aside the department's concerns about the small number of firms that have participated. It said many potential competitors either did not need them or found other ways to make sure their software works well with Windows.

At the same time, Microsoft spokeswoman Stacy Drake said Microsoft officials "remain open to industry and government feedback that will result in improvement to the program that will make it easier for interested companies to license the protocols."

Before the latest report, Microsoft had already made several concessions to the department to resolve questions about compliance with the antitrust settlement.

Last year Microsoft agreed to make it cheaper and easier for rivals to license the same computer server protocols and to give more prominent display to a button in Windows that allows computer users to remove Microsoft's Internet Explorer.

Justice Department officials have been charged with monitoring compliance with the settlement since it was endorsed by District Judge Colleen Kollar-Kotelly in November 2002.

The pact is designed to give computer makers greater freedom to feature rival software on their machines by allowing them to hide some Microsoft icons on the Windows desktop.

Massachusetts, the only original litigant that has refused to sign the settlement, told the judge in a separate filing that it continued to receive and investigate complaints that Microsoft was engaged in "troubling business behavior."

"The results of our investigations portend badly for the efficacy of the Nov. 1, 2002 judgment," it said.

An appeals court is considering a challenge to the settlement by Massachusetts and two computer industry groups.