RealTime IT News

Microsoft Slashes Royalty Rates

Software giant Microsoft on Friday announced it would immediately rejigger its licensing terms to smooth the way for competitors to use its code to make server products that interoperate with its flagship Windows OS.

The licensing concessions, which was part of an antitrust settlement with the U.S. government, goes into effect immediately, the company said, adding that details of the changes are now available on its Microsoft Communications Protocol Program (MCPP) Web site.

The new licensing terms, hailed by Microsoft as a "simplified, low-cost royalty structure" that was much more favorable to prospective licensees, would be available for existing licensees.

As part of its deal with federal authorities, Microsoft has agreed to let third party developers obtain licenses and implement Microsoft's protocol technology in their own server products to improve interoperability with Windows.

"Given the unprecedented scope of the program and complexity of the technology, we knew it would be important to obtain feedback from government and industry on ways the program might be improved. The changes announced today should make the program more appealing to software developers," Microsoft general counsel Brad Smith said in a statement.

Microsoft also agreed to slash its advance royalty rates in half -- from $100,000 to $50,000 -- and set up a new royalty rate structure based on the licensee's product revenue. The plan is to charge between 1 percent and 5 percent of revenue as a royalty.

Royalty rates on Microsoft protocol technology used in embedded hardware products will now range from 0.5 percent to 2.5 percent.

Microsoft has also extended the score of the licenses without any increase in the royalty rate. In addition to Windows 2000 and Windows XP and future operating systems, the license will now cover communications with any Windows legacy client such as Windows 95 and Windows 98, the company said.

In its announcement, the company was it was generally willing to provide even broader usage rights for its protocol technology than is required by the anti-trust settlement.

The latest details of the licensing concessions comes on the heels of earlier announcements that Microsoft would lessen restrictions and fees it charges competitors to see the innards of the server operating system. In May, Microsoft also dropped the price of its Office XP family of desktop applications and tweaked the terms for its volume licensing program in response to customers' concerns.