Microsoft Buys Liquid Audio DRM Patents

By Peter Galli  |  Posted 2002-10-01 Print this article Print

Microsoft will pay $7 million for U.S. and foreign rights to several key DRM patents held by Liquid Audio.

Microsoft Corp. on Monday agreed to pay $7 million for U.S. and foreign rights to a number of digital rights management (DRM) patents held by Liquid Audio Inc.—a move that strengthens the companys growing DRM arsenal. Liquid Audio, which provides software, infrastructure and services for the secure digital delivery of media via the Internet, holds several key DRM patents. The U.S. patents cover such technologies as content distribution, audio encoding, digital watermarking, content distribution, lossless compression, secure content transfer to portable devices as well as the ability to honor territorial restrictions for digital music content. In a statement released Tuesday, Liquid Audio said the terms of the deal include a royalty-free license that will allow it to continue using this patented technology in its digital distribution system.
"Selling the rights to our patent portfolio to a leading technology partner such as Microsoft helps us shift our strategy in preparation for the merger with Alliance Entertainment," said Gerry Kearby, president and CEO of Liquid Audio.
"This direction is consistent with our move away from product development and toward an exclusive focus on the digital distribution of media to the retail community, which is entirely complementary to Alliances physical media distribution business for home entertainment products," he said. A Microsoft spokeswoman told eWEEK that the Liquid Audio agreement underscored the companys ongoing commitment to developing innovative new digital rights management technologies. "While it is too early to provide details on how we will use the intellectual property we acquired yesterday, we do see it as important in helping us realize our long-term vision for DRM technologies," she said. "Our long-term DRM vision is to develop innovative technologies that will be powerful catalysts for new entertainment, business and personal scenarios. This vision is what drives our efforts, including the Liquid Audio agreement." This deal follows news that the Redmond, Wash., software maker is working on a DRM server, slated for beta testing later this year. The company also currently offers a DRM system, Microsoft Windows Media Rights Manager, which is being used by seven music and video subscription services. But Microsoft sees a broader opportunity for the DRM server solution. "Personal information such as medical and financial data; corporate information such as legal and business documents; and commercial content such as software, music and movies may all require DRM," a Microsoft spokeswoman told eWEEK recently. Other Microsoft officials are positioning the DRM server as an attempt to define read-and-write privileges more broadly than they are currently defined. Bill Veghte, corporate vice president for the Windows .Net Server group, recently told eWEEK that that there are several "services" Microsoft plans to layer on top of Windows .Net Server 2003, as they will not be ready when the platform is released to manufacturing this year. Microsofts goal is to find a way to incorporate a set of interfaces around DRM and its real-time communications server—code-named Greenwich—into the platform while still being able to develop and charge for solutions or services built on top of that. Microsoft has already applied for a patent for a DRM operating system, but would not say if the DRM server would be based on this. In a recent interview with eWEEK, Microsofts group vice president of productivity and business services Jeff Raikes also said the company "may be able to surprise you in what we can do with DRM" in Office 11. "There was some really good work done on DRM for eBooks, but the real business opportunity for that is to use those technologies more broadly for business documents. It also needs to go across corporate boundaries. "So the work has been under way, but weve made a corporate decision not to talk publicly about it right now. But I have some optimism about what well be able to do in the Office 11 timeframe," he said. (Editors Note: This story has been updated since its original posting to include comments from Microsoft.)
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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