Microsoft, DOJ Make Changes to Settlement

Near midnight Wednesday, the same day Microsoft Corp. asked U.S. District Judge Colleen Kollar-Kotelly to dismiss the antitrust suit
brought by the nine states which refused to join the U.S. Department of Justice’s proposed settlement, Microsoft and the DOJ
introduced several changes to that settlement.

The changes are intended to pacify critics who have argued the settlement is full of loopholes favorable to the software maker.
Microsoft has agreed to the changes, though it maintains the changes only clarify the existing document.

“After reviewing the public comments on the settlement, the Department of Justice and Microsoft proposed a number of clarifying
changes to more accurately reflect the intent of the parties and address some of the misperceptions of the proposed decree,”
Microsoft spokesman Jim Dessler told Thursday.

Dessler explained that the complaints about loopholes arose in the public comments required by the Tunney Act.

“I think that this was just a misinterpretation or misperception that did not accurately reflect the intent of the parties,” he

The revised document includes five changes. Most significantly, Microsoft and the DOJ deleted a provision (Section III.I.5), which
several of the non-settling states have argued would give Microsoft the ability to use hardware technology patents from computer
makers without having to pay licensing fees.

In a filing supporting the changes Wednesday, Microsoft said, “The provision made clear that Microsoft could seek licenses to
protect itself against claims of indirect infringement by third parties that obtain access to APIs and related Documentation under
Section III.D or Communications Protocols under Section III.E. Under Section III.I.5, Microsoft would have been able to seek a
license “no broader than necessary” to enable Microsoft to provide the options and alternatives required by the RPFJ [Revised
Proposed Final Judgment] without fear of claims that in so doing Microsoft had engaged in indirect infringement. Nevertheless, the
provision apparently generated a great deal of misunderstanding and wild charges that Microsoft would use the right to
misappropriate the intellectual property of others.”

The filing continued, “The non-settling states even claimed erroneously that the provision had some relationship to Microsoft’s
well-established ability to insist on “non-assert provisions” in its Windows licenses to OEMs. In light of all the confusion caused
by this narrow provision, the United States asked that Microsoft agree to drop Section III.I.5 altogether. Microsoft continues to
believe that the provision was reasonable and justified, but in the interests of eliminating confusion and facilitating the
expeditious entry of the decree, Microsoft has consented to the removal of Section III.I.5.”

Another change was made to Section III.E of the RPFJ, which requires Microsoft to make available all communications protocols that
are in a Windows operating system product and are used to interoperate natively with a Windows server operating system.

“Some competitors of Microsoft have erroneously claimed the language is unclear,” Microsoft said in the filing. “This assertion
apparently is based on Microsoft’s consistently stated view that third-party server operating systems currently can and do
interoperate effectively with Windows operating system products in a variety of ways without access to Microsoft’s proprietary
communications protocols. The critics speciously argue that Microsoft will refuse to make available all (or perhaps any) of its
communications protocols on the ground that those proprietary protocols are not necessary to “interoperate” with a Windows operating
system product.”

While noting that the RPFJ already requires Microsoft to make available all communications protocols, the company added,
“Nevertheless, in 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 Section III.E.”

Other changes included broadening the definition of API (application program interface) in Sections III.D and VI.A, adding language
in Sections III.H.2 and III.H.3 clarifying that a requirement that Microsoft enable end-users to access non-Microsoft Middleware
products on Windows operating systems be presented in an unbiased manner, and clarifying the definitions of “Microsoft Middleware”
and “Timely Manner.”

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