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Microsoft Corp. suffered a major setback when a federal judge today rejected the Justice Department's proposed settlement of its antitrust case against the giant computer software firm. In an unusual move, U.S. District Judge Stanley Sporkin ruled the settlement is not in the public interest because it was too narrow, lacked mechanisms to assure compliance and failed to address "certain anticompetitive practices." Microsoft, which made founder Bill Gates a billionaire, provides the operating systems for about 80 percent of the world's personal computers. The July 1994 settlement would have prohibited Microsoft from using licensing procedures which the government claimed gave the company an unfair advantage over its competitors. Those competitors had been up in arms over the Justice settlement.TIME technology editor Philip Elmer-Dewittsays that today's ruling was prompted by a"white paper"commissioned by competing companies to clarify allegations against Microsoft for the judge. "These software companies did the homework that the Justice Department was not prepared to do," Elmer-Dewitt says.