Microsoft: Not So Fast, Mr. Gates

California's attorney general wants a tougher settlement

It didn't take California Attorney General Bill Lockyer long to show his populist bent. Back in January, 1999, on his first day as the state's chief law enforcer, the 60-year-old liberal Democrat gave back the free parking spot that comes with the job, insisting that it be used by the office's employee of the month instead. To this day, Lockyer is considered one of the nation's fiercest consumer-rights advocates, battling alleged price gouging by oil companies, aggressive marketing from Big Tobacco, and false advertising by long-distance carriers.

Now, a new side of Lockyer is emerging: champion of some of Silicon Valley's most powerful tech companies in their epic struggle with Microsoft Corp. In the wake of Microsoft's settlement with the Justice Dept. and nine states, Lockyer is becoming the software giant's most potent nemesis. Backed by a powerful anti-Microsoft lobby in the Valley, he has criticized the proposed deal more sharply than any of the eight other attorneys general who are still suing the company. A source close to the states says that he is pushing for the harshest remedies.

His office is footing the bill for Brendan Sullivan, a top litigator hired to represent the nine holdout states. Lockyer has assigned six full-time staffers to the case--more than any of the other attorneys general. "I'm the people's lawyer, and this just isn't a very good agreement for them," he says, insisting that Silicon Valley lobbying has had no influence on his views.

Nor is it a good deal for Microsoft competitors, who plan one last push for a tougher settlement in advance of a looming court deadline. The dissident states have until Dec. 7 to present their alternative-remedies proposal to U.S. District Judge Colleen Kollar-Kotelly. On Nov. 19, several attorneys general and staffers plan to meet in Washington, D.C., for a briefing on the alleged shortcomings of the deal presented by Microsoft opponents. Microsoft rivals also plan to lobby the states to seek a broader package of remedies, including new provisions that go beyond the scope of Justice's proposed settlement, says Washington attorney Glenn B. Manishin, who represents the Software & Information Industry Assn., a trade group that has opposed Microsoft.

Manishin says opponents are pushing a proposal, for example, that would force Microsoft to distribute archrival Sun Microsystems Inc.'s Java software in the Windows operating system. In its unanimous ruling, the D.C. Circuit Court of Appeals held that Microsoft took illegal steps to cripple Java technology. Another new idea would be requiring Microsoft to support open industry standards rather than forcing customers to use its own proprietary protocols.

TOUGH NEGOTIATIONS. According to the source close to the states, Lockyer "certainly is pushing for" those remedies. However, this source says, it is unclear whether the other states will go along with the proposals: "It's going to take some consensus" to get the other states to California's position; "It will be hard."

If Lockyer can't get the other attorneys general on board--especially Connecticut's Richard Blumenthal and Iowa's Tom Miller, who have both played bigger roles in the case--then he's unlikely to win support for a stricter remedy package. But according to the same source close to the states, there is one point that the holdout states are likely to agree on: a provision that would require Microsoft to go further in disclosing its application-programming interfaces, or APIs, to independent software vendors than they would be required to by Justice. APIs are the hooks rivals use to integrate their software with Microsoft operating systems. While the proposed settlement only requires the company to disclose APIs for Windows, rivals say, Microsoft should also have to release the information for its media player, instant-messaging software, and other products. Otherwise, they argue, it will be harder for rivals to offer competing software.

Microsoft declined to comment on Lockyer. Chairman William H. Gates III has made it clear, however, that he would like to end the litigation. "As long as not everyone is signed up to a settlement, you still have some of the uncertainty," Gates told BusinessWeek. The way Lockyer is talking, that uncertainty could last a while longer.

By Ronald Grover in Los Angeles and Mike France in New York, with Jay Greene in Las Vegas

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