Microsoft's Lengthy Legal Ledger


By Jay Greene A smidge of news on Microsoft's (MSFT) latest legal tangles came out on July 13 that was easy enough to miss. A federal appeals court upheld a lower court decision that the software giant was liable on Windows sales overseas for infringing on speech-recognition technology patents held by AT&T (T). While Microsoft's dispute with European regulators gets most of the headlines, plenty of other cases are keeping Bill Gates's lawyers busy.

And that's despite all the effort Microsoft has put into resolving its legal disputes in recent years. It actually settled part of the AT&T matter in March, 2004, leaving the remaining bits to be litigated. Even after paying out more than $6 billion in settlements in the last two years, Microsoft could still be on the hook for well over $1 billion more based on pending cases.

Perhaps the suit with biggest potential settlement is RealNetworks' (RNWK) claims that Microsoft used its Windows monopoly to stymie Real's efforts to get consumers to use its media playing technology. The Seattle company, run by former Microsoft exec Rob Glaser, is seeking $1 billion in damages.

Even some of the companies that Microsoft has settled with still have additional claims against the software giant. Last November, it agreed to pay Novell (NOVL) $536 million to settle claims that it illegally used its monopoly to hamper sales of Novell's NetWare networking software. But Novell filed a separate suit over Microsoft's alleged illegal tactics to ace out the WordPerfect word-processing program, once owned by Novell. Last month, a judge dismissed four of six counts in that case.

New cases continue to emerge. In June, a rival from yesteryear, Go Computer, sued Microsoft over alleged abuses that reach back more than a decade. The pioneering pen computing company accused Microsoft of pressuring other tech companies from doing business with Go, whose founder says the claims emerged from e-mails unearthed in a separate case. Just another of Microsoft's many legal battles.

Here's a list of some of the most significant settlements, followed by some big pending cases:

Sun Microsystems (SUNW) / $1.95 billion

Sun argued that Microsoft illegally altered Sun's Java programming language, weakening Sun's ability to leverage the technology. On Apr. 2, 2004, Microsoft agreed to pay Sun $1.95 billion, and the two have begun collaborating so their rival technologies work better together.

State class actions / $1.9 billion

After Microsoft was found to be a monopolist in the federal antitrust case, class actions emerged in several states, claiming consumers were illegally overcharged. So far, Microsoft has agreed to pay about $1.9 billion to settle cases in 14 states and the District of Columbia.

IBM (IBM) / $850 million and counting

Though IBM never sued, a judge overseeing the federal antitrust case found that Microsoft's business practices damaged IBM. On July 1, 2005, Microsoft agreed to pay Big Blue $775 million and extend a $75 million credit toward the deployment of Microsoft's software at IBM. Big Blue also maintains the right to sue Microsoft for damaging its server business in the time after June 2002.

Time Warner (TWX) / $750 Million

When AOL acquired Netscape, it inherited the private antitrust claims that the Web browser pioneer held against Microsoft. On May 29, 2003, Microsoft agreed to pay Time Warner's AOL unit $750 million to settle the case. It also announced a deal to collaborate on digital media technology.

Novell / $536 million

The one-time software power accused Microsoft of using its monopoly to thwart sales of its NetWare networking software. On Nov. 8, 2004, Microsoft agreed to pay Novell $536 million, though the companies didn't resolve separate Novell antitrust claims regarding its ownership of WordPefect in the mid-1990s. That case is still pending, though four of six counts were dismissed in June.

InterTrust Technologies / $440 million

InterTrust, which has developed digital-rights-management technology that record labels use to sell online music, accused Microsoft of violating its patents. On Apr. 12, 2004, Microsoft agreed to pay $440 million and license InterTrust's technology.

Gateway (GTW) / $150 million

Like IBM, Gateway was among the companies that the judge overseeing the federal antitrust case found were damaged by Microsoft's business practices. On Apr. 11, 2005, Microsoft agreed to pay Gateway $150 million over four years for Gateway to use for marketing and research and development on its products that run Microsoft software.

Burst.com / $60 million

In June, 2002, the Santa Rosa (Calif.) developer of digital media technology accused Microsoft of misappropriating technology that Burst execs discussed with Microsoft execs. On Mar. 11, 2005, Microsoft agreed to pay Burst $60 million to resolve the claims and receive a nonexclusive license to Burst's patent portfolio.

Be / $23.25 million

Be, a tiny operating-system maker, argued that Microsoft's power over the industry prevented it from emerging as a successful rival to Windows. On Sept. 5, 2003, Microsoft agreed to pay Be $23.25 million, which was then distributed to shareholders as part of Be's dissolution.

AT&T / not disclosed

The telecom giant argued that Microsoft's NetMeeting software, used by businesses for real-time online conferences, infringed on patents that reduce the size of digital audio files while improving the quality of the sound. On Mar. 5, 2004, Microsoft agreed to pay an undisclosed amount to settle the most of the claims.

Sendo / not disclosed

In December, 2002, the British mobile phone maker accused its one-time partner, Microsoft, of misappropriating trade secrets and trying to force Sendo out of business. On Sept. 13, 2004, the companies resolved the matter for an undisclosed amount. In June, Motorola (MOT) acquired engineers and patents from Sendo, which ran into financial trouble.

Alacritech / not disclosed

In April, the San Jose (Calif.) startup won a preliminary injunction that temporarily blocked Microsoft from using Alacritech's networking technology in new versions of its server and PC operating systems. On July 13, the companies settled the case for an undisclosed amount with both agreeing to cross-license each other's technologies.

Here are some other unresolved cases:

European Union

European regulators accused Microsoft of illegally using its dominant Windows monopoly to gain leverage in the digital media player and server markets. The European Commission ruled on Mar. 24, 2004, that Microsoft violated European law and ordered it to pay $605 million. Microsoft has appealed.

RealNetworks

On Dec. 18, 2003, digital media rival Real sued Microsoft, accusing it of using its Windows monopoly to deny Real's access to consumers. Real is seeking $1 billion in damages. The case isn't expected to go to trial until 2006 at the earliest.

Eolas Technologies

In 2003, Chicago-based Eolas convinced a jury that Microsoft's Internet Explorer browser infringed on patents that Web-page authors use to run some programs. Microsoft was ordered to pay $521 million. On Mar. 2, 2005, an appeals court ordered a new trial to determine whether Eolas' patent was valid.

State class actions

Six states -- Iowa, Mississippi, New Jersey, New York, Ohio, and Wisconsin -- still have class actions against Microsoft for overcharging.

Go Computer

Go, a pioneer of pen-based computing in the early 1990s, claims Microsoft illegally pressured tech companies to avoid doing business with Go and is seeking an unspecified amount. Go's technology never found much of a market and Go eventually sold itself to AT&T. Greene is BusinessWeek's Seattle bureau chief


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