Microsoft, IBM Settle Antitrust Claims

Microsoft will pay IBM $775 million and extend a $75 million credit for
Microsoft software at IBM to resolve claims stemming from the United States
v. Microsoft antitrust case in the mid-1990s.

In a statement, IBM said it will not assert claims for server monetary
damages for two years and will not seek to recover damages on such claims
incurred prior to June 30, 2002. Microsoft also dropped antitrust claims
versus IBM.

The settlement addresses discriminatory pricing and overcharge claims
IBM made in the mid-1990s as part of the antitrust case. The claims related to the IBM OS/2 operating system and SmartSuite products,
with the exception of claims for harm to IBM’s server hardware and server
software businesses.

In November 2003, Microsoft and IBM entered into agreements
extending the statute of limitations on antitrust claims based on the U.S.
antitrust case while exploring resolutions that would avoid protracted

The agreement was set to expire in July, leading the
parties back to settlement talks and today’s announcement.

Microsoft and IBM cooperate as much as they compete. The technology powerhouses work together in standards groups to facilitate the creation of
Web services and other protocols that will ensure more efficient
transactions over the Internet.

But the companies also compete on a cutthroat level in middleware such as
application servers.

Microsoft’s Exchange Server often finds itself going head-to-head with IBM’s
WebSphere Application Server when it comes to new accounts, though the
arguments are generally settled when a customer decides to work with either
Microsoft’s .NET environment or IBM’s Java software.

Putting the current legal malaise behind them can only reinforce both the
cooperation and the competition.

“With these antitrust issues behind us, both Microsoft and IBM can move
ahead, at times cooperatively and at times competitively, to bring the best
products and services to customers,” said Brad Smith, general counsel and
senior vice president, Microsoft.

“Over the last few years we have been focused on resolving our disputes with
other companies, and today’s announcement takes another significant step
towards achieving that goal.”

As Smith said in his statement, Microsoft has made strides in terms
of settling legal scores with high-tech complainants large and small in the
last couple of years.

In April, the Redmond giant agreed
to pay Gateway $150 million over the next four years, stemming from the
finding that the software giant’s practices had hurt the computer maker’s

Last month, the software maker settled
with, creator of video and audio delivery software for IP
networks. had claimed Microsoft stole technology and trade secrets acquired
during two years of negotiations. It brought suit against Microsoft in June
2002, charging anti-competitive behavior and the violation of state and
federal antitrust laws.

In April 2004, Microsoft agreed
to pay Sun Microsystems $1.95 billion to quash patent and antitrust suits.
The companies are working on helping their products interoperate.

For all of the money Microsoft is shelling out to make peace with rivals and
other vendors in the U.S., the company remains on the hot seat with the
European Union. The EU is scrutinizing the company’s software bundling
practices overseas.

The EU levied a
record fine of $613 million in March 2004 and imposed other penalties
against Microsoft.

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