States say Microsoft profited from settlement
Nine AGs opposed to settlement seek participation in upcoming hearing.
February 20, 2002: 6:03 p.m. ET
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NEW YORK (CNN/Money) - The attorneys general of the nine states that have rejected the U.S. Justice Department's proposed antitrust settlement with Microsoft told a federal judge they have evidence the software maker profited from the deal.
They also asked the judge presiding over the case to consider that evidence in an upcoming hearing on the settlement so they could present that evidence.
In a petition filed in the U.S. District Court in Washington late Tuesday, the holdout states said statements made by a top Microsoft executive in a deposition show that Microsoft has profited from the settlement with the federal government by "using it as a sword to extract valuable concessions" from PC manufacturers.
At issue are provisions in the company's settlement with the Justice Department with respect to PC makers' patents. They argue that a provision in the Justice Department settlement requiring Microsoft to set uniform licensing agreements with all PC makers undercuts their ability to protect their patents against Microsoft.
Using excerpts from a deposition of Microsoft (MSFT: up $0.97 to $59.90, Research, Estimates) senior vice president Richard Fade taken on Feb. 8, the holdout states argue that the company informed PC makers "that there could be no negotiations of any of the new uniformly onerous terms and that the new [non-assertion of patents] provision" was required by the Justice Department settlement.
Microsoft called the holdout states' claims baseless, saying that the licensing provisions referred to in Tuesday's filing did not represent a shift in the company's licensing practices.
The company said its Windows license agreements have long had provisions in which a computer manufacturer agrees that it will not ship Windows on its PCs and then turn around and sue on the grounds that Windows and its operation on its PCs infringes the company's patent rights.
"It is fairly predictable that the non-settling states would distort information gathered in the deposition process in their attempt to undermine the settlement reached by Microsoft, the Department of Justice and a bipartisan group of states," said Microsoft spokesman Jim Desler.
U.S. District Court Judge Colleen Kollar-Kotelly has set a hearing to review the Justice Department's proposed settlement, which has been approved by nine of the 18 states that had joined in the four-year old antitrust suit.
Such a hearing is required under the Tunney Act, which requires a federal judge's determination of whether an antitrust settlement is in the public interest.
The nine holdout states, which have proposed more far-reaching sanctions against the company, asked Judge Kollar-Kotelly to consider their latest allegations as part of that review. 
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