Microsoft has reached an agreement with the US Department of Justice on the outlines of a settlement in the antitrust suit against the software firm, the Washington Post reported today. Both sides hope to reach a settlement by Friday, it said.

However, the wording of the agreement had not been finalised and talks could still break down before a settlement is agreed, the Post report said, citing unnamed sources who had been briefed on the talks.

State attorney generals, who have taken a harder line against a settlement than DoJ officials, are reported to have reviewed the proposed agreement yesterday. Their acceptance of a settlement agreement with Microsoft would remove one of the largest obstacles to ending the antitrust suit.

The proposed settlement would require Microsoft to give computer makers more latitude to determine how software applications are displayed on Windows-based computers, the Post said. The agreement would also set rules for how much of the Windows source code would have to be shared with outside software firms and would create a technical committee to review disputes about such disclosures, the sources said.

The settlement would expire after five years and would be extended by two years if Microsoft was determined to have violated the agreement, the Post said.

Of course Microsoft still has to deal the European version of the case, the outcome of which could be far less favourable.