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WASHINGTON, D.C. -- Microsoft has urged a U.S. District Court to apply the proposed antitrust settlement to all parties, including the nine states and the District of Columbia who are holdouts seeking stronger penalties.

Responding in a brief to a second settlement proposal offered by the holdout parties, Microsoft says those plaintiffs should be held to the same settlement already accepted by the Department of Justice and nine states, calling the the new proposal "radical and punitive" and saying all states can be bound by the first deal.

In a 36-page filing, Microsoft said that the nine holdout states are seeking to broaden the antitrust settlement beyond its rightful scope and are attempting to damage Microsoft's business. The holdouts are California, Massachusetts, Connecticut, Iowa, Florida, Kansas, Minnesota, West Virginia, and Utah, as well as the District of Columbia.

Microsoft instead urged the court to rule that the current settlement proposal applies to all states, including the holdouts. Because Microsoft reached its settlement with the DOJ, which represents the U.S. public, Microsoft contends all U.S. citizens will benefit from that settlement, including residents of the holdout states. The company used that argument to urge the court to dismiss the holdout states' claims and rule the initial proposed settlement is sufficient for all parties.

The holdout states' newest proposal would force Microsoft to open the source code to its Internet Explorer Web browser, aid in the porting of its Office suite to rival platforms such as Linux and provide the government with forewarning of any impending company purchases. They have said they do not want to abide by the deal struck by the DOJ and other plaintiffs. The next step could be a hearing to address the conflict.

Penalties Would Hurt

Calling the proposal "fundamentally misguided," Microsoft said that these remedies would "result in, among other things, wholesale confiscation of Microsoft's intellectual property and unprecedented government regulation of Microsoft's product design decisions."

The company said that such provisions would damage it, third party companies and consumers because, among other things, Microsoft wouldn't have any incentive to improve Internet Explorer. Further, Microsoft charged that the states are trying to impose a penalty on Microsoft, rather than propose a remedy, which is what the law calls for.

"It is readily apparent (both from the terms of their proposal and from their comments to the press) that the non-settling States seek to punish Microsoft and to advance the commercial interests of powerful corporate constituents" including Apple Computer, Sun Microsystems, Palm, and Oracle, Microsoft said.

The proposal "(seems) calculated to inflict maximum commercial harm on Microsoft," the company went on to say.

Microsoft found further fault with the proposal, saying that it exceeds the boundaries established by the original rulings and case.

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