[opendtv] News: Microsoft Settles InterTrust Suit
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Mon, 12 Apr 2004 08:07:25 -0400
Microsoft Settles InterTrust Suit
Deal to Pay $440 Million Clears Up Patent Litigation Over Digital Technology
By DON CLARK
Staff Reporter of THE WALL STREET JOURNAL
April 12, 2004; Page A3
In the latest in a series of moves to clear up legal issues,
Microsoft Corp. has agreed to pay $440 million to InterTrust
Technologies Corp. to settle a broad patent suit that had cast a
cloud over Microsoft's plans in digital media.
The deal gives the software giant a license to InterTrust's large
portfolio of patents in technology for protecting music, movies and
other digital content against unauthorized copying.
Stopping unauthorized sharing of copyrighted material has been a
pressing issue for media concerns ever since the early days of
Napster and similar Internet services that opened the way to freely
swapping music. New legal download services, such as Apple Computer
Inc.'s iTunes Music Store, use "digital rights management," or DRM,
technology to limit the number of copies that can be made from a song
the consumer purchases. DRM technology is also essential to plans by
the movie industry to begin distributing high-definition movies on
disks and over the Internet, without fear of losing sales to piracy.
Microsoft has been trying to convince music and movie companies to
use its digital-media software, which includes antipiracy technology.
InterTrust's patent suit against the company, filed in April 2001,
raised the possibility that Microsoft customers might have to pay
royalties to InterTrust for use of such features.
As a result of the deal, customers generally won't be required to
license InterTrust patents for using Microsoft software, though they
may need to seek a license if they combine it with other technology
to create new products.
Microsoft has been spending freely to settle outstanding court cases.
In its biggest deal to date, the company on April 2 agreed to pay Sun
Microsystems Inc. $1.95 billion as part of a settlement that ended
Sun's antitrust suit against Microsoft. Though antitrust cases have
made most of the headlines, the company also has been named since
1998 in at least 35 patent suits.
Last May, Microsoft reached a settlement with Time Warner Inc. over
Microsoft's alleged tactics against the Netscape Communications
business acquired by Time Warner's America Online unit. Also last
year, Microsoft agreed to pay $35 million to settle a suit filed by
Immersion Corp. over technology that allows joysticks and other
devices to move along with action in a game or other software.
Microsoft last month agreed to settle a patent suit filed by AT&T
Corp. over voice-recognition technology; financial terms weren't
disclosed.
Of course, Microsoft, which had more than $50 billion in cash and
short-term investments at the end of December, continues to fight
many of its legal challenges, including the long-running antitrust
case in Europe. Last month, the European Commission, in addition to
leveling a $614 million fine against Microsoft, ordered the company
to offer a version of Windows without its Media Player program.
Microsoft is appealing the ruling.
But the settlement with InterTrust furthers Microsoft's aim of
defining digital-media formats and DRM technology, giving the
software giant important influence about how home gadgets evolve and
work with one another.
The deal is also a boost to InterTrust, a Silicon Valley company that
was purchased for $453 million in 2002 by a joint venture of Sony
Corp., Philips Electronics NV and Stephens Inc., an
investment-banking company based in Little Rock, Ark. Besides the
cash infusion, the settlement could strengthen InterTrust's hand in
seeking licensing deals from other companies for DRM technology.
"The floodgates are now open," said Talal Shamoon, InterTrust's chief
executive. "I think you will see very rapid adoption of DRM
technology."
Will Poole, a Microsoft senior vice president, said the InterTrust
licenses augment his company's own intellectual property as well as
patents that Microsoft had licensed from ContentGuard, a start-up
spun off from Xerox Corp. He argued that all the patent rights give
Microsoft advantages over competitors in digital media, such as Apple
Computer and RealNetworks Inc.
InterTrust, founded in 1990 by entrepreneur Victor Shear, went public
during the Internet boom and swelled to 360 employees. But the Santa
Clara, Calif., company failed to commercialize its DRM software and
retrenched sharply, switching from selling products to licensing its
30 U.S. patents. It now has just 32 employees.
Mr. Poole acknowledged the breadth of InterTrust's patent portfolio,
which he said stretched beyond digital media to cover products such
as a file-protection feature in a recent version of Microsoft Office.
Microsoft came close to investing more than $100 million in
InterTrust during a series of licensing negotiations between 1998 and
the end of 2000. Those talks broke down, and InterTrust sued
Microsoft in federal court in Oakland, Calif., for allegedly
infringing 11 patents with Windows and other popular products.
Microsoft denied the allegations and filed counterclaims. A judge
last summer pressured the two companies to begin settlement talks.
--Robert A. Guth contributed to this article.
Write to Don Clark at don.clark@xxxxxxx
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