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Microsoft, C I Settle Software License Dispute

UPDATED: A three-and-a-half-year dispute between Microsoft and a Texas Web-hosting operation has ended, with one becoming a partner to the other in the process.

Dallas-Fort Worth-based C I Host announced on Monday that a federal judge dismissed a long-running suit filed against it by Microsoft .

C I Host is a global Web host and data center operator, serving 215,000 individual consumers and businesses in 190 countries.

The dispute goes back to September 2001, when Microsoft said it first notified the hosting company of its concerns that it might not have taken a service provider license agreement for Windows server products. According to the complaint, C I Host responded in December 2001 by denying wrongdoing and threatening to sue Microsoft for defamation if it went public with the charges.

Nevertheless, in October 2001, C I Host joined Microsoft's Web Presence Program. And, in March 2002, the company began offering Microsoft's newly available .NET framework to its clients, enabling them to run XML services based on their Web sites.

In a complaint filed in U.S. District Court in the Northern District of Texas on November 3, 2003, Microsoft accused C I Host of copyright infringement and breach of contract, saying the hosting company failed to enter a service provider license agreement for Windows 2000 Server and Windows Server 2003. Such a license would have allowed C I Host to provide use of the software to customers in return for sharing service revenues with the software vendor.

As an aside in the complaint, Microsoft added that it wasn't sure that C I Host even had the proper licenses for its internal use of Microsoft software.

In a response filed on December 16, 2003, C I Host denied the allegations and accused Microsoft of maliciously spreading false information about the charges to third parties. "Microsoft's intent was to cause harm to C I Host and steal their customers and/or potential customers," the counterclaim read.

The counterclaim also raised the monopoly issue by asking: "Has Microsoft continued the pattern for which it is know by conspiring with its international counterparts and utilizing its monopolistic position in the computer industry?"

Despite the harsh words, C I Host CEO Christopher Faulkner said, "We at C I Host have offered Microsoft services since 2000 and will continue to do so aggressively." The full terms of the settlement are confidential, but Faulkner said C I's Gold Partner status was part of the settlement.

However, a Microsoft spokesperson disputed the statement that the settlement included Gold Partner status. "CI Host did enter into a Microsoft Services Provider License Agreement (SPLA), granting CI Host the right to legally host its customers using Microsoft software and to charge those customers for that usage," she said.

On December 10, U.S. District Judge Tom McBryde dismissed all the claims by both parties with prejudice, meaning that neither side can sue again. He ordered Microsoft and C I Host to pay their own court costs.

C I Host also is in a dispute with AOL. In August 2003, it got a restraining order against AOL, after it filed a suit claiming that AOL was blocking e-mails sent by C I Host customers. That case has not yet gone to trial in U.S. District Court in Texas.

Updated to include statement from Microsoft.