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Taking heed of the incensed debates that threaded their way through Web discussion groups today, Microsoft has admitted that its Passport software's terms of use license is out of date.

Tom Pilla, a spokesperson for the company said, "We haven't explained (to people) that the existing Passport terms of use need to catch up with the product. The terms of use are being updated, and it's our fault that they are still up. People should judge us on the privacy statement on Microsoft.com, which would override anything anyway."

What's in the writing that's causing such a furor?

Basically, when signing up for Passport, an authentication service that alerts member merchant sites of a user's identity, consumers agree to a slew of demands set by the Redmond, Wash. company.

The agreement includes granting Microsoft and its affiliated companies permission to use anything a user brings with them to a site. Did someone say Master's Thesis?

In summary, the company said it would:

1. Use, modify, copy, distribute, transmit, publicly display, publicly perform, reproduce, publish, sublicense, create derivative works from, transfer, or sell any such communication
2. Sublicense to third parties the unrestricted right to exercise any of the foregoing rights granted with respect to the communication
3. Publish your name in connection with any such communication

Besides conceeding to the above, users are asked to agree that intellectual property is not "limited to rights under copyright, trademark, service mark or patent laws under any relevant jurisdiction."

Perhaps most biting is the statement that, "No compensation will be paid with respect to Microsoft's use of the materials contained within such communication. Microsoft is under no obligation to post or use any materials you may provide and may remove such materials at any time in Microsoft's sole discretion."

One flabbergasted discussion group respondent wrote, "Talk about trying to own the world. Using the ".NET" Word to write up your patent would give Microsoft rights to use the patent. Sending information about your patent via MSN EMail or IM does the same."

The company, which aims to pull in Internet shoppers who abandon shopping carts before cashing in on goods, hopes that Passport, a virtual electronic wallet, would enable online consumers to store encrypted billing and shipping information at Passport-enabled merchant sites. The company said there are currently more than 40 million consumers now using the Passport service.

Pilla said Microsoft adheres to strict privacy policies by posting privacy statements on its site and insisted Microsoft was upgrading its licensing agreement. The current terms of use will expire in a few days, to be replaced by an "updated version."

"The new agreement will reflect a strong privacy commitment. In a couple of years Passport as it exists now will be nothing like this," he said.