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updated 1/16/2004 9:01:12 PM ET 2004-01-17T02:01:12

One of the most important provisions of the antitrust settlement negotiated with Microsoft Corp. is falling short of the federal government's hopes that it would energize rivals of the world's largest software maker, the Justice Department acknowledged Friday.

U.S. antitrust lawyers told the trial judge they are increasingly uneasy that efforts to persuade competitors to license Microsoft's Windows technology for their own software products "are not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop."

(MSNBC is a joint venture of Microsoft and NBC.)

The landmark antitrust settlement compels Microsoft to offer its technology to competitors to build products that seamlessly communicate with computers running Windows software. When the settlement was negotiated, the judge and government lawyers described that requirement as among its most significant provisions toward restoring competition in the technology industry.

Government lawyers told U.S. District Judge Colleen Kollar-Kotelly in court papers that Microsoft's licensing agreements have turned out too complex and potentially too expensive for competitors.

The Justice Department said Microsoft has agreed to change the agreements. But even after changes are made, government lawyers warned, Microsoft "cannot foresee with confidence that the improvements will be sufficient and remove the need for further changes."

Microsoft said it will lower prices and make agreements as attractive as possible for its business rivals, but it argued that it shouldn't be held responsible if competitors choose not to use its Windows technology for their products.

Further investigation
Unsatisfied that the license offers were effective enough, the trial judge urged government lawyers in October to investigate why only nine companies had paid Microsoft for licenses. The government said Friday that number has climbed to 11, and Microsoft said it was negotiating with 20 more.

Lawyers from all sides were expected to meet next week with the judge to broadly describe the company's efforts to abide by terms of the settlement.

Authorities in Massachusetts, the only state still pursuing tougher court penalties against Microsoft, also criticized the company's license offers on Friday as ineffective.

The state's attorney general, Thomas F. Reilly, also disclosed in court papers that his lawyers were investigating claims Microsoft has planned an intensive campaign against unspecified rival Internet search engines and against Adobe Systems Inc.

Adobe's ubiquitous Acrobat software is among the most popular methods for exchanging electronic documents across the Internet and is regularly used by organizations, including the federal courts and Justice Department.

"If Microsoft is taking steps to hobble the competitive effectiveness of these rival products and thereby supplant them, such serial killing of competing technologies is a serious and troubling prospect," Reilly wrote.

Microsoft spokeswoman Stacy Drake McCredy said it was difficult to respond to the Massachusetts charges "given the vague and unsubstantiated nature of these allegations."

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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