Lawyers for Microsoft met the US justice department and 19 states on Wednesday in the first round of settlement talks before the court's new mediator as the two sides remained deeply divided in the landmark antitrust case.
Consultants indicated the exploratory talks in Chicago remain unlikely to find a compromise acceptable to all three parties.
External advisers to the lawyers leading the case say they believe continued litigation is likely to yield a more satisfactory conclusion than a compromise deal, as both sides remain convinced they will ultimately win their case in court.
The discussions before Judge Richard Posner, the voluntary mediator, were held behind closed doors.
Judge Thomas Jackson, who has presided over the year-long litigation, said Judge Posner would make a snap decision on whether there are grounds for further negotiations.
He said last month: "I don't think that he is going to be prepared to waste a whole lot of time if it looks from the outset that it's not promising."
Judge Jackson made the surprise move of naming a mediator after delivering a damning first ruling against Microsoft last month. In his findings of fact, the judge said Microsoft had used its monopoly power in the computer industry to harm consumers and innovation.
He is due to deliver his final ruling - on whether the company violated competition laws - next year, although both sides expect him to rule against Microsoft again at that point.
Both sides have expressed cautious optimism in public about the new round of settlement talks, and stated their confidence in Judge Posner.
But advisers to Microsoft and the state attorneys general suggest the two sides will find it hard to negotiate over common ground.
Mr Ronald Cass, law professor at Boston University and a consultant to Microsoft during the trial, said: "If I was Microsoft I would want to get out of the litigation. But at the same time if you look at most of what the judge has done, you would say I can get this reversed on appeal.
"If the justice department says they have problems with Microsoft's contracts with equipment manufacturers - the exclusionary practices - I would expect Microsoft to agree not to do that any more, in no small part because Microsoft's position is that it never did that in the first place."
Lawyers close to the 19 states, who asked not to be named, say there is little chance of the attorneys general agreeing to a deal restricting Microsoft's conduct, in line with a failed 1994 consent decree with the justice department.
The department insists it will only agree to a settlement which addresses the competitive issues which Judge Jackson highlighted in his first ruling.
