U.S. District Court Judge Colleen Kollar-Kotelly has appointed a mediator in the Microsoft antitrust case and has ordered the two sides to negotiate "seven days a week and around the clock" to reach a settlement. The U.S. Supreme Court has refused to hear Microsoft's appeal in the case, putting the company's fate in the hands of the district court.

In other legal news, Microsoft faces a challenge to Windows XP in South Korea, a lawsuit by Novell over misleading marketing materials, and a request for investigation of its licensing practices by a consortium of powerful British companies.

Settlement Talks Ordered

At a Sept. 28 hearing, Judge Kollar-Kotelly ordered the Department of Justice (DoJ) and Microsoft to enter intensive negotiations and report back to her every 10 days, warning that she has "broad discretion" to determine penalties against Microsoft if a settlement cannot be reached. On Oct. 12, with talks making no progress, Kollar-Kotelly appointed a mediator, Eric Green, a professor of law at Boston University with extensive experience in achieving out-of-court settlements but no deep antitrust or computer industry expertise. Any settlement will likely be modeled on interim remedies imposed in the original decision by Judge Thomas Penfield Jackson. (For a list of some of these remedies, see "Legal Update: No Breakup Sought; EC Turns Up Heat" on page 22 of the Oct. 2001 Update.)

Microsoft has no choice but to focus on these settlement talks, now that the U.S. Supreme Court has refused to hear its appeal. The company appealed the entire antitrust case to the Supreme Court because of an "appearance of bias" shown by the original judge hearing the case, Thomas Penfield Jackson. Most legal experts viewed this appeal as a stalling tactic, and thought it had little chance of success. (When Microsoft filed the Supreme Court appeal, Microsoft asked the U.S. Court of Appeals to delay further action in the case until the Supreme Court had a chance to weigh in, but the appeals court refused and sent the case back down to Kollar-Kotelly.)

In spite of the Supreme Court decision and Kollar-Kotelly's emphasis on settlement, Microsoft might continue to fight and use other stalling tactics in an attempt to delay a final verdict for as long as possible. This tactic has paid off so far: despite being judged an illegal monopoly by two courts, the company has so far suffered no penalties.

If the case is not settled by Nov. 2, Judge Kollar-Kotelly will require both sides to submit a list of witnesses and possible remedies in December, in preparation for hearings in Mar. 2002.

Korean Portal Seeks XP Injunction

Daum Communications, South Korea's top Internet portal, has filed papers with the Seoul District Court seeking an injunction against selling Windows XP in the country. Daum and 17 other companies earlier filed a complaint against Windows XP with the Korea Fair Trade Commission and may refuse to sell it on their e-commerce sites. Daum offers an instant-messaging client, Daum Messenger, that controls about 20 percent of the Korean market and is in fierce competition with MSN Messenger and another local system, BuddyBuddy. Daum claims that Microsoft's practice of bundling application-like features, such as instant messaging, with its newest desktop operating system is unfair. Windows XP is scheduled for worldwide retail release on Oct. 25 and was distributed to OEMs in September.

Novell Sues Over Marketing

Networking software company Novell has sued Microsoft over "false and misleading" marketing materials. In Aug. 2001, Microsoft mailed to NetWare users a parody of a breakfast cereal box containing the line "What's the expiration date on that NetWare platform?", suggesting that Novell was getting out of the network operating system business, which would leave its current customers in a pickle. Novell strongly denied the implication and filed a suit in the U.S. District Court in Salt Lake City, UT. Microsoft has promised not to repeat the claims in any future ad campaign and has sent out a retraction letter to all 3,100 recipients of the marketing materials. Novell is continuing the lawsuit to seek unspecified monetary damages.

U.K. Group Files Licensing Complaint

The Infrastructure Forum (TIF), a trade group representing nearly 100 of the largest businesses in the United Kingdom, have written to the U.K. Department of Trade and Industry to demand an investigation into Microsoft's licensing policies. The group, which includes petroleum giant BP-Shell and chemical conglomerate GlaxoSmithKline, is primarily objecting to Microsoft's elimination of its most popular upgrade licenses, such as version upgrades and Upgrade Advantage, in favor of the new Software Assurance program, which will cost more for many customers. TIF claims that Microsoft eliminated other kinds of upgrades to take advantage of its monopoly in desktop operating systems and raise prices, at a time when IT costs in the rest of the industry are dropping. TIF has stated that Microsoft's recent decision to extend deadlines and back down from certain conditions for SA is not enough, as it will do nothing to little to reduce the long-term costs of the new program. (For detailed background, see "Customer Complaints Delay Licensing Changes".)