In 2004, Bill Gates stood before a room full politicians, economists and business leaders and declared a war on spam.

"It will soon be a thing of the past," Microsoft's chief software architect told those gathered at the World Economic Forum in Davos, Switzerland, before laying out a three-pronged approach to eradicating the scourge of unsolicited e-mail.

He promised to have the job done within two years. Now, one year later, even some critics say he's making progress.

Microsoft has been working on a number of anti-spam projects, including SmartScreen technology in Microsoft mail servers and the Sender ID program. In addition, the company has set up more than 100,000 MSN Hotmail "trap" accounts. These are accounts that the company monitors to draw in spam and follow the possible links to phishing scams.

The good news, said Craig Spiezle, Microsoft's director of industry and external relations for the technology care and safety group, is that the amount of spam making its way into electronic mailboxes is on the wane.

"Microsoft has 80,000 desktops, and 85 percent of the spam, we are catching in our filters," he said. "However, spammers are always learning new tricks, and we are constantly updating technologies and filters."

One approach that hasn't garnered the attention Gates may have expected is the Penny Black project he suggested. Essentially, the system would require e-mail senders to pay a fee to send a message. Microsoft Research has been working on the "postage" method since 2001, said Spiezle. Another twist on the program, he said, was that, instead of paying a penny, the sender would "buy" postage by solving a simple puzzle or quiz.

"Our interest is strategic," Spiezle said of the company's large-scale anti-spam efforts. "It is the number-one complaint from our customers."

While some say Microsoft's battle has eased the spam traffic for the end-user, others believe the problem has only worsened as for-profit virus writers have entered the fray, joining forces with for-profit spammers.

Robert Kramer, owner of CIS Internet Services, an Internet service provider in Clinton, Iowa, can attest to the ills of spam.

Kramer accused three companies of sending his 5,000-customer ISP millions of pieces of spam between August and December 2003.

A court recently awarded him $1 billion in damages, but not before he was almost forced to shut down; many of his customers moved to other ISPs.

"It is highly unlikely that amount would ever be collected," Kelly Wallace, Kramer's attorney, said of the judgment. He believes a settlement of $10,000 might be more effective in deterring spammers.

"At least then they would realize somebody might actually come and get that kind of money," he said.

The costs to business are often staggering, and the toll spam takes on worker production can cripple a company. It is estimated that the average loss per employee per year to a business due to spam is $1934, while the predicted volume of spam as a percentage of all e-mail in 2004 was more than 50 percent.

Microsoft has also taken the charge to where it hurts spammers the most -- in the wallet. Redmond has filed 97 lawsuits in the Untied States against spammers, naming 213 defendants including 118 individuals and 95 corporate entities. In total, more than $736 million in judgments will be handed down. An additional 117 suits have been filed against virus writers, who often team with the spammers to launch phishing attacks through e-mail.

Anne Mitchell, president of the Institute for Spam and Internet Public Policy, said she sees the problem increasing and believes working with ISP and legislations is ultimately the best tool.

"In order to effectively fight spam, you really need to have the ISPs involved," she said.

CAN-SPAM, the federal law which became effective January 1, 2004, bans distribution of unsolicited e-mail whose primary purpose is advertising or promoting a commercial product or service, including content on a Web site. However, it only allows lawsuits to be brought by the Federal Trade Commission, state attorneys general and ISPs.

"There's no private right of action for businesses or individuals," said Mitchell.

And even some big telecommunications companies have been accused of hosting the spammers, which can be a very lucrative business.

Craig Newmark, founder of craislist.com, told internetnews.com earlier this year that a major telecom was helping to wreak havoc with his business.

"We are trying to figure out what to do next," he said. "We may go public. We've proven pretty conclusively that the telecom hosts a service that's knowingly hosting a rather prolific spammer."

Microsoft has said it is happy with the progress it has made in a relative short among of time, but it will have to increase its efforts ten-fold if Gates expects to meet his self-imposed deadline.

"It really can't be done," Mitchell said. "He probably meant it as hyperbole."