A tentative settlement in the Microsoft antitrust case was in jeopardy today after splits emerged among the 18 states that sued the software giant along with the government.
The coalition of 18 states has split into three, with two-thirds poised to settle the three-year landmark case and the others determined to go to trial.
The deal to settle the antitrust charges was reached between the justice department and Microsoft, but the states asked to be given until today to evaluate the terms. Six of the states negotiated some additional terms.
Microsoft expressed frustration that the federal government's state partners could not agree. "The issues in this case have been beaten to death and they have been beaten to death by people who are worn out," Microsoft lawyer John Warden said.
He said roughly one-third of the states was prepared to accept the terms negotiated by the justice department and another third had reached a supplementary agreement with the company that could allow them to accept the settlement.
But Brendan Sullivan, a lawyer for the states, told the judge the remaining states were unwilling to accept the terms and wanted to proceed to trial.
Mr Sullivan did not identify which states were willing to settle and which were holding out. But several attorneys general hinted at their plans yesterday.
California and Massachusetts indicated they were prepared to reject the settlement as inadequate, but New York and Illinois were inclined to settle. Phil Beck, a lawyer for the justice department, said the agency had received the supplementary agreement reached by some of the states early today and was reviewing it.
He described the changes as "clarifications, not substantive changes to the agreement. It does not appear to us that we'll have any objections", Mr Beck said.
The rift in the coalition grew yesterday during intense lobbying over how to proceed. Trying to preserve the fragile negotiations, the court-appointed mediator, Eric Green, met officials from New York, Ohio, Connecticut, California, Iowa and Massachusetts.
Negotiations continued today until moments before a court hearing, resulting in the supplementary agreement with a third of the states. The changes to the negotiated agreement include some that would affect Microsoft's business-level server computers.
The settlement already negotiated between Microsoft and the justice department requires the company to provide technical details to help rivals make products compatible with its monopoly Windows operating system and to give an oversight panel full access to its books and plans for five years.
It also bans exclusive contracts with computer makers that put rival software vendors at a disadvantage. But critics portray the 21-page agreement as rife with loopholes, including one clause that permits Microsoft to restore after 14 days any changes made to Windows by computer makers.
It also allows Microsoft to maintain the secrecy of any technical details of its anti-piracy, security, anti-virus or encryption technology.
California attorney general Bill Lockyer, whose state is home to Silicon Valley, emerged as one of the harshest critics of the settlement.
He said that his resolve was hardened after listening over the weekend to advice from technical experts and officials from Microsoft's competitors, such as IBM, AOL Time Warner, Sun Microsystems and Novell.
The states have been some of Microsoft's most aggressive critics and were blamed for the failure of settlement talks last year.