New Mexico settles with Microsoft –

New Mexico said yesterday it has settled its antitrust claims against Microsoft Corp., the first of 19 states attorneys general to bow out of the legal battle since Microsoft was deemed last year to be a predatory monopolist by a U.S. District Court.

New Mexico Attorney General Patricia Madrid said she had negotiated a deal with Microsoft to pull out of the lawsuit, which charged the software giant with using its monopoly power in the PC operating systems market illegally to harm competitors in other fields.

"It was a very simple settlement in which Microsoft agreed that New Mexico would get the benefit of anything negotiated with the Department of Justice and any remaining states," Madrid said in a telephone interview. "Microsoft also agreed to pay the attorneys' fees and costs for the state." She estimated that cost to be about US$100,000.

New Mexico's action comes one day after Microsoft made a significant concession in the case, allowing PC manufacturers to remove Microsoft's Internet Explorer browser from Windows and allow software from Microsoft rivals to show up on Windows PCs.

Madrid applauded the other state attorneys general who are still locked in battle with the Redmond, Washington, software maker, but said New Mexico did not have a vested interest in how behavioral remedies against Microsoft are crafted. She also said the cost of continued litigation was too great for New Mexico.

"In the future, if this case was to go into litigation on the issue of a breakup or structural remedies, I think the burden could become onerous on the state of New Mexico," said Madrid, who inherited the case from her predecessor. "It puts the (remaining) states in a very good position for negotiating," she added.

Microsoft spokesman Jim Desler said the company did not plan to release details of any settlements it reaches.

"We are pleased to have resolved this matter with the state of New Mexico and we thank Attorney General Patricia Madrid for her leadership in hammering out this settlement," Desler said.

A federal appeals court delivered a ruling late last month in the landmark antitrust case between Microsoft and the U.S. government, sending the case back to a lower court to be reviewed by a new judge while upholding a lower court's April 2000 verdict that Microsoft acted illegally to maintain its monopoly.

Since then, Microsoft officials have indicated a renewed interest in settling the case. Thursday, the company reiterated its keenness to resolve the case out of court, noting that it is "committed to working with the federal government and the remaining state attorneys general to resolve the remaining issues in this case," Desler said.

One legal expert said the settlement is a significant win for Microsoft but doesn't portend a speedy conclusion to the case.

"I think that event is notable, but by itself it doesn't have a whole lot of impact on the case one way or the other," said Dana Hayter, an attorney at the law firm Fenwick & West LLP and a former member of the U.S. Department of Justice (DOJ) in San Francisco. "What really matters of course is what settlement is reached with -- or what remedies are granted to -- Iowa, Connecticut, California and the United states. They seem to be the folks with the most stake in the outcome."

Other observers speculated that the settlement with New Mexico could lead to similar agreements with the other parties involved in the case.

"I'd say that if one state settles, the likelihood of others being of a like mind is fairly significant," said Chris Le Tocq, principal analyst at Guernsey Research in Los Altos, California.

Gerry J. Elman, attorney and chief executive officer of Pennsylvania law firm Elman & Associates, agreed.

"It is highly likely that various staff members of all of the attorney general offices are in communication with each other and taking into account the actions of other states," he said. "It would seem that this particular attorney general became comfortable that the case had gone as far with the state's resources as would be appropriate."

However, New Mexico's decision to settle highlights a deep divide among some of the states that have pursued Microsoft. Earlier Thursday, for example, Iowa Attorney General Tom Miller, who has headed the states' legal assault against the software maker, said Microsoft's decision to loosen restrictions on how PC makers can configure its software on PCs brings it no closer to a settlement.

"Over the years we have seen a pattern where a defendant does something wrong or illegal, achieves its objective, and then says it won't do the same thing again when it's really too late to make a difference," Miller said in a statement. "That seems to be the situation here. Much of the Microsoft announcement deals with the browser -- but the browser war is over. Microsoft has won."

Miller added that Microsoft's concession "falls far short of the remedies or relief we think are necessary." He reiterated criticism that Microsoft may be employing similar tactics with its Windows XP operating system. Following New Mexico's announcement, Miller issued another statement saying that he would continue his efforts full steam.

"We have a very strong team, and we recently received a strong finding of liability by a unanimous Court of Appeals. This will not hamper the states," he said. "We of course have the resources and will proceed without New Mexico."

(James Niccolai and Ashlee Vance of the IDG News Service San Francisco bureau contributed to this report.)

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080, or

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