The judge in Microsoft's landmark antitrust trial has crafted a twin-track strategy to resolve the year-long litigation.

In court Judge Thomas Jackson has set a series of rolling deadlines for the two sides to submit their arguments over whether Microsoft has in fact violated antitrust laws.

But out of court, in what he calls a "voluntary" process, Judge Jackson has kick-started settlement talks under the mediation of an outside judge, Mr Richard Posner, in an effort to bring the warring parties together.

Judge Jackson has repeatedly urged both sides to seek settlement talks during well-crafted lulls in the legal proceedings. The current break comes between his first damning findings of fact, released earlier this month, and his final conclusions of law, expected in late March.

The justice department and 19 states are due to file their written arguments at the start of December, while Microsoft must file its reply by the start of January. Oral arguments in court are due to take place on February 22nd.

However, it is the appointment of the voluntary mediator Judge Posner, the chief judge of the court of appeals in Chicago, which has raised the greatest hopes of finding a solution where both sides remain implacably opposed to compromise.

In his chambers last week, Judge Jackson indicated he was ready to take the surprise step of appointing a mediator because he was concerned over reports that the plaintiffs, the US government and 19 states, were increasingly divided in their approach. "I think this is probably as propitious a time for any possible negotiated outcome as you have," he said.

Judge Posner enjoys the rare position of starting with the respect of both sides, as a respected conservative jurist with a wide-ranging interest in economics and a dislike of close government regulation.

But Judge Posner will find it exceptionally hard to mediate at a time when the two sides have been deeply divided since their first failed settlement talks in May 1998.

Microsoft insists it will not compromise on the design of its Windows operating software, while the government insists the design of Windows lies at the heart of Microsoft's monopoly power.

Mr Robert McTamaney, antitrust partner at Carter Ledyard and Milburn in New York, said: "I think Judge Posner is strong enough to remind the government that they have won the first round but there is a long road to go and they could well lose substantially or even entirely on appeal."

However, one former colleague of Judge Posner suggests he is just as likely to remind Microsoft of the possible dangers it faces in court. "I think he will say this is the last-chance saloon for Microsoft. He could be so libertarian that he does an end-run around the company and sides with the government."