Microsoft Settlement Ditches Licensing Provision

After receiving an onslaught of negative public reaction to its proposed settlement with the software maker, the DOJ is recommending changes to the deal

After receiving an onslaught of negative public reaction to its proposed settlement with Microsoft Corp., the U.S. Department of Justice is recommending changes to the deal, which is set to go before a judge next Wednesday.

The latest changes to the Revised Proposed Final Judgment in the protracted antitrust case were filed with the court late Wednesday. Calling the changes "refinements," Microsoft said they help "state more clearly the parties " agreement. Microsoft said the settlement proposal remains unchanged in meaning and that only one of the changes is significant.

The revision that everyone agrees does make a substantive change in the proposed deal is the removal of a provision that allowed the Redmond, Wash., software maker to seek licenses "to protect itself against claims of indirect infringement by third parties that obtain access to APIs." The provision had been criticized as allowing Microsoft to put burdensome licensing terms on OEMs, and the Justice Department requested that it be removed.

The nine states that rejected the settlement proposal and are pursuing litigation to impose tougher remedies had criticized the provision. "As pointed out by the litigating states in a recent court filing, Microsoft has used the settlement as a sword to extract intellectual property rights they werent able to secure from other companies prior to the settlement," said Iowa Attorney General Tom Miller in a prepared statement. "Once that was revealed, Microsoft said it would stop the practice and has now agreed to remove the provision."

Miller said that the revisions do not change the fundamental nature of the settlement.

Other revisions include a clarification that "API" generally means more than simply the interfaces that Microsoft is required to disclose in one portion of the settlement. Also, Microsoft will have to make available all communications protocols that are in a Windows product and are used to interoperate natively with a Windows operating system. Trying to assuage critics who would argue that Microsoft might not protocols available if they arent necessary to interoperate with Windows OS.

"[I]n order to make crystal clear what is now clear, the United States has proposed, and Microsoft has agreed, to add the word "communicate" (and "communication") to [the proposal]," the company said in its filing with the court.

Additionally, the settlement proposal had obligated Microsoft to design future Windows products to let end-users substitute access to Microsoft middleware with access to a rivals middleware. The revisions filed yesterday clarify that the choice between Microsoft middleware and rival middleware must to be provided to the end user in an unbiased way. "Indeed, [the settlement proposal] made clear that the mechanisms must be unbiased. Nevertheless, in order to avoid any doubt, additional language has been added at various points to make explicit that the mechanisms must be unbiased," Microsoft told the court.

Judge Colleen Kollar-Kotelly will begin hearing arguments in the Tunney Act review Wednesday to determine whether the settlement is in the public interest.