Microsoft hopes to head off restrictions on its business practices being sought by the US government, by drafting a settlement proposal to end the antitrust suit.

Last week litigators abandoned efforts to break up the software giant.

The government wants rules that would allow hardware makers to choose from competing software products, rather than being forced to follow Microsoft's dictates when licensing the Windows operating system, according to the Wall Street Journal.

Free choice Under the proposed rules, PC makers would be free to adopt such products as Internet browsers, Sun Microsystems's Java software, multimedia software plug-ins and instant-messaging software. Government lawyers have accused Microsoft of unfairly targeting products seen as a threat to Windows' market domination.

Even if Microsoft manages to reach a settlement with federal litigators, the company may not be out of the woods. The attorneys general of California and New York, among 18 states joining the US Justice Department in the case, have threatened to seek tougher penalties if they are not satisfied with the outcome of the Federal case. European Union regulators are separately pursuing their own antitrust investigation of the company.