CHICAGO _ Talks between the federal government and Microsoft broke down Saturday as a judge here trying to mediate a settlement in the antitrust lawsuit against the software giant said he was ending his effort.
Last week, the judge hearing the case in Washington postponed his ruling to give the two sides more time to talk.
Federal appeals court Judge Richard Posner said that since accepting the task, he had tried to find a common ground that might enable the two sides to settle their differences.
"After more than four months, it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged," Posner said in a statement.
Posner said he won't make any comment on the merits of the litigation, or on the negotiating positions of the parties involved.
"It's unfortunate that a settlement wasn't possible," Microsoft Chairman Bill Gates said in a conference call. "Microsoft certainly went the extra mile."
Gates said the Microsoft mediation team had devoted more than 3,000 hours to the settlement effort over the four months of talks and that the company had offered "significant concessions."
But Gates reiterated that he believes the company has a strong legal case and dismissed suggestions that the breakdown of talks represented a "corporate death penalty" for Microsoft.
"We are long-term players in the judicial process," said Bill Neukom, Microsoft executive vice president and general counsel.
In Washington, Joel I. Klein, the assistant attorney general in charge of the Justice Department antitrust division, said in a statement: "We would have preferred an effective settlement to continued litigation. But settlement for settlement's sake would be pointless."
Klein said if the ruling goes against Microsoft, the Justice Department "will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition."
At issue is a lawsuit filed by the federal government and 19 states alleging that Microsoft repeatedly engaged in illegal anti-competitive behavior by using monopoly power.
U.S. District Judge Thomas Penfield Jackson in Washington, D.C., agreed with nearly all the allegations in an initial findings in November. He said the company's aggressive use of its monopoly status stifled innovation and hurt consumers by limiting choices.
On Tuesday, Jackson postponed his verdict in the case to give both sides more time to hammer out details of a possible out-of-court settlement.
Jackson has encouraged the parties to make a deal, attorneys have said.
Both sides have reason to reach a settlement. For Microsoft, a harsh ruling could be used against the company in dozens of class-action lawsuits its faces from both rivals and clients.
The government, meanwhile, would have a long wait before the company is forced to change its behavior. Once Jackson issues a verdict, he would have to hold additional hearings to determine what kind of sanctions to impose. Microsoft would likely appeal any decision, possibly tying up the case for several years in a court that could ultimately overturn parts, if not all, of the initial judgment.
Jackson had warned lawyers that he would announce his final ruling as early as Tuesday if they failed to make significant progress toward reaching a settlement.
A recording at the federal courthouse Saturday confirmed the verdict would not be issued Tuesday but offered no additional information.
Microsoft officials _ including Gates _ negotiated with government attorneys just days before the Justice Department filed its original complaint in 1998. An agreement appeared likely until government lawyers complained that Gates reconsidered details in an offer he made. The deal fell through, and the government filed suit.
Once Jackson issues a verdict, he would have to hold additional hearings to determine what kind of sanctions to impose.