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WASHINGTON, D.C. -- On the same day Microsoft officially launched its Windows XP operating system, state officials involved in the Microsoft antitrust lawsuit signaled a readiness to pursue the case on their own if the Bush administration seeks an out-of-court settlement unacceptable to them.

The 18 states involved in the lawsuit on Thursday hired Brendan Sullivan, a prominent Washington attorney with a reputation as a tenacious litigator, to represent them in the next phase of the lawsuit. Sullivan defended Oliver North in the Iran-Contra trial.

Sullivan's appointment comes one week before a November 2 court-ordered deadline for the two sides to reach a settlement. Eric D. Green, a Boston-based trial mediator, author, and law professor, was appointed earlier this month by U.S. District Court Judge Colleen Kollar-Kotelly to assist settlement talks. This is the third attempt by both sides to reach an out-of-court agreement.

"If [the states] want to hire somebody that visible, it must mean they want to drive a hard bargain and/or they want to pursue their own litigation down the road," said Robert Litan, a former deputy assistant attorney general in the Justice Department's antitrust division who is now at The Brookings Institution in Washington. The decision means the states are "in for the long haul," said Litan.

Parting Company?

It's also a sharp departure in how the states and U.S. Department of Justice officials have handled the case. Up until now, the states have relied on the Justice Department's lead trial counsel to represent their interest.

The timing of Sullivan's appointment, coinciding with Microsoft's release of XP, probably wasn't a coincidence. Shortly after Justice Department officials said in September that they wouldn't pursue a breakup of Microsoft, the attorneys general of two of the largest states involved in the lawsuit, New York and California, warned Justice officials of the need for a "forward-looking" remedy--one that possibly addresses XP and future operating systems.

California Attorney General Bill Lockyer and his Iowa counterpart, Thomas Miller, announced Sullivan's appointment.

"Mr. Sullivan's reputation is one of being a brilliant, fierce legal bulldog," said Lockyer, in a statement. "This definitely adds legal firepower to the states battling the illegal monopoly of Microsoft." Lockyer also said the states are committed to the mediation process and reaching an "effective, enforceable settlement" with Microsoft but are also prepared to go to trial if necessary "in the interest of consumers and fair business competition."

Jim Desler, a Microsoft spokesman, said the company wouldn't comment on either the appointment or its timing. But he said Microsoft is "engaged in a good-faith effort to settle this case, and we are working hard to resolve the remaining issues. We think a settlement would be positive for the industry and positive for the economy."

Settlement Tougher

It's possible, legal experts said, that the Bush administration could decide to settle with Microsoft. But that wouldn't preclude the states from continuing the case. It's unknown, however, whether all 18 states involved in this case would move in lockstep; New Mexico, for example, recently cut away from state coalition and reached an undisclosed agreement with Microsoft.

The effect of Sullivan's appointment was seen as dimming settlement chances.

"If anything, this may make it more difficult for the parties to reach some middle ground," said Hillard Sterling, an antitrust attorney at Gordon & Glickson PC in Chicago.

Ed Black, CEO of the Washington-based Computer & Communications Industry Association, whose members include Oracle and Sun Microsystems, saw it as hopeful sign that the states want "an effective remedy."

If a settlement isn't reached by Friday and there are no signs that one is possible, the government will have a little more than a month to produce a remedy recommendation to Kollar-Kotelly.

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