AOL Time Warner, Microsoft Settle Antitrust Suit

Microsoft agreed to pay AOL Time Warner $750 million and help the content company combat online piracy.

AOL Time Warner Inc. settled the private antitrust lawsuit that its Netscape Communications unit brought against Microsoft Corp. last year, and Microsoft agreed to pay AOL Time Warner $750 million and help the content company combat online piracy.

"This marks a new day," Richard Parsons, chairman and CEO of AOL Time Warner, said late Thursday. Settlement discussions began about six to eight weeks ago when Microsoft Chairman and Chief Software Architect Bill Gates gave him a call, Parsons said in a conference call with reporters.

Noting that both companies face challenges in todays marketplace, Gates said that litigation is not the best way to use limited resources. "[The agreement] puts any past issues behind us," Gates said. "I was impressed with the fact that they are looking forward, and Im very happy with what weve come up with here."

Microsoft will give AOL Time Warner a royalty-free, seven-year license to Internet Explorer technologies, and provide technical information in beta versions of Windows at the same time it provides it to independent software vendors.

At this point, AOL Time Warner does not intend to get rid of the Netscape unit, which is located in Mountain View, Calif., Parsons said. Noting that Explorer works very well, he said that his company is still exploring other opportunities with Netscape.

The agreement does not provide for interoperability between the companies Instant Messaging systems, but it does create a framework for discussions about it, Gates said.

Under the settlement, Microsoft will broaden its product support and services contract with AOL to provide dedicated engineer support, and an AOL development team will be permitted to work at Microsofts Redmond, Wash., offices. The companies will set up an executive council to meet periodically to resolve problems.

To promote digital media, the two companies will work together to find ways to prevent online piracy, which Parsons and Gates cited as the primary roadblock to widespread adoption of digital content delivery. AOL Time Warner will have access to Microsofts digital rights management and digital media technologies, and the two companies will collaborate on further technical protections. AOL Time Warner will be able to use Microsofts Windows Media 9 Series and future software for creating, distributing and playing back high-quality digital media.

"Theres been an interest in having a media company and a technology company take some bold steps in this areas," Gates said.

Parsons emphasized that the deal with Microsoft is not exclusive and that AOL Time Warner will continue to do business with Real Networks.

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