Microsoft To Settle DRM Suit with InterTrust

UPDATED: Microsoft has ended a three-year legal battle over digital rights management with DRM software maker InterTrust Technologies by agreeing to pay $440 million in order to license InterTrust’s patent portfolio.

Microsoft, often raked over the coals for vulnerabilities in its software products, said it would benefit from the agreement because it relies on DRM technology to secure its digital media software, such as Windows Media Player for personal computers.

With the deal, neither customers who use Microsoft media products nor
developers who build products on top of Microsoft technology need an
InterTrust license. However, developers, including systems integrators, may need a license from InterTrust for other uses of Microsoft technology including cases in which Microsoft technology is combined with third-party technology.

InterTrust, which holds 30 DRM-related U.S. patents, will receive rights under Microsoft patents to design and publish InterTrust reference technology specifications related to DRM and security. In a public statement, Microsoft and InterTrust said they believe this agreement will accelerate the adoption and development of DRM technologies.

Microsoft’s Marshall Phelps, deputy general counsel and corporate vice president of intellectual property at Microsoft, said in a statement that the deal is an agreement to give customers and partners “peace of mind.”

“DRM solutions are essential to secure valuable personal, business and commercial content in a massively connected world,” said Will Poole, senior vice president of the Windows client business at Microsoft. “With our existing technology and IP portfolio combined with our new agreement with InterTrust, Microsoft is committed to working with the broader industry to accelerate the promotion of DRM standards and solutions.

Steve vonder Haar, analyst with Interactive Media Strategies, said the
settlement serves dual purposes for Microsoft.

“You first clear the deck in the DRM industry of uncertainty associated with
different flavors of the technology,” vonder Haar told “The worst thing you can have in the DRM sector is
cacophonies of claims and counterclaims about the relative merits of
competing security platforms. You eliminate some of that uncertainty and it
paves the way to drive broader adoption of secure multimedia applications.
The second purpose is that it helps clear away some of the legal clouds
hanging around Microsoft. One of the biggest drags on any company’s stock
price can be legal uncertainties and if you put your fight with Sun behind
you, you put your fight with InterTrust behind you it eliminates some of the
uncertainty even though you chip away at your cash hoard to do that. To have
Microsoft making peace with a variety of rivals does nothing but good for
the industry.”

In April 2001, InterTrust, now owned by
Sony and Royal Philips, sued Microsoft in the U.S. District Court for the Northern District of California, alleging that Microsoft’s .NET framework implementation infringed various InterTrust patents.

InterTrust followed the initial complaint in October 2001 by claiming that Microsoft’s .NET and Windows XP infringed on three more of its DRM patents.

Santa Clara, Calif.-based InterTrust alleged that certain “product
activation” features of Windows XP, Office XP and other products infringed on its technology patents. Specifically, the company said Microsoft had borrowed too much from its own building blocks, or “assemblies,” which can be shared across the Web as a form of peer-to-peer (P2P) networking.

Microsoft denied any wrongdoing at the time.

Microsoft spokesman Jim Desler told also said at the time that InterTrust was on another “fishing expedition.”

“This is a completely random complaint based upon what we’ve seen in our initial review,” Desler said. “It appears that it is not connected at all to .NET infrastructure and based on what is in their filing, it appears they don’t have the slightest of what .NET is all about. We’re an IP company. We respect the rights of other IP companies and we prefer innovation over litigation.”

The move marks the latest pay-off by the Redmond, Wash. software giant, which a week and a half ago agreed
to pay Sun Microsystems about $1.95 billion to settle patent and antitrust suits against it. In that blockbuster deal, Microsoft and Sun agreed to make competing products interoperate.

But other legal woes have since popped up for Microsoft. The South Korean Internet portal Daum Communications has filed an antitrust lawsuit against Microsoft, alleging the concern violated trade regulations by tying
instant messenger software to its Windows operating system. Daum is seeking $8.7 million in compensation.

Microsoft’s Desler told that the company hadn’t had time to fully review the suit, so he couldn’t comment on its specifics. He also was not aware of whether competing instant messaging products in South Korea are free or paid, but he said, “There is robust competition in the South Korean market, and that continues to be a good thing for consumers.”

Desler said that while the company doesn’t tailor each version of Windows for individual markets, “Microsoft takes all steps necessary through legal review and other means to ensure our [products] are fully compliant with laws and regulations throughout the world.”

Microsoft and Time Warner also recently increased their equity stake in another DRM company, Content Guard. Content Guard is principally involved with the creation of DRM (define) technology that it patents for licensed use. Its portfolio of DRM technology includes 16 currently issued patents as well as an undisclosed number of additional technologies that are in the patent pipeline.

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