By Ted Bridis
The Associated Press

WASHINGTON - A key element of the antitrust settlement Microsoft Corp. negotiated with the Bush administration isn't working as effectively as hoped, the government and trial judge said Friday.

The criticism comes just weeks before a U.S. appeals court considers tougher sanctions against the world's largest software company.

U.S. District Judge Colleen Kollar-Kotelly urged government lawyers during a court hearing to investigate why only nine companies have paid Microsoft to license its Windows technology for their own software products.

One of the most important provisions compels Microsoft to permit competitors to license parts of its technology to build products that seamlessly communicate with computers running Windows.

The judge said nine companies that signed agreements "look like it's pretty much the heavy-hitters." But government lawyers explained it will take months to determine whether the deals will ensure Microsoft can't abuse its control over Windows computers.

The judge scheduled another oversight hearing for late January.

The licensing requirement was considered central since it would prevent Microsoft from locking out rivals developing products that compete with Microsoft's own. Under the agreement, Microsoft must offer licenses under "reasonable and nondiscriminatory terms."

The judge urged lawyers to interview companies that decided against licensing Microsoft's technology to determine whether the court should require changes to the terms. She said it was unclear whether competitors were unhappy with those terms or simply not interested, adding "there's not much we can do about that."

Microsoft expects to sell additional licenses within months, lawyer Rick Rule said.

"Ultimately the question should be, are these potentially available," Rule said. "It shouldn't be how many licenses are there."

Friday's hearing preceded next month's arguments before the U.S. Circuit Court of Appeals by lawyers for Massachusetts, the only state to formally dispute the antitrust settlement as inadequate. They have asked the appeals court for tougher sanctions, accusing Kollar-Kotelly of a "profound misunderstanding."

"There is no objective evidence that the settlement has had any positive impact in the marketplace and the competitive landscape," said Ed Black, head of the Computer & Communications Industry Association, a trade group also contesting the antitrust settlement. "There is no change in their strategy and tactics to continue to misuse their monopoly, and it continues to work."

The day before the hearing, Microsoft reported a 28 percent surge in quarterly profits, as sales rose 6 percent to $8.22 billion. The increase drove up the company's already remarkable cash reserves to more than $51.6 billion.