Microsoft loosens grip on software before ruling

Microsoft Corp. said Monday that it is moving ahead to adopt some remedies of its proposed antitrust settlement with the U.S. Department of Justice (DOJ) and nine states, such as allowing the unbundling of its “middleware” products and revealing some key intellectual property to competitors, enabling them to create products that are interoperable with Microsoft software.

The announcements came as part of what Microsoft said will be periodic updates to its progress on the settlement agreement.

Microsoft said that it is on track to release Service Pack 1 for Windows XP by the end of September, allowing end users and original equipment manufacturers (OEMs) to select default programs that are displayed on the Start Menu and in other locations. Using the Service Pack, users will be able to remove five of the company’s key “middleware” products: the Internet Explorer (IE) browser, Media Player, Outlook Express, Microsoft Messenger and Microsoft Java Virtual Machine.

Additionally, the company said it is unveiling nearly 300 new application programming interfaces (APIs) related to these five components, and posting them on the Microsoft Developer Network on Aug. 28. The APIs will be provided for free, allowing developers to create software that is interoperable with Windows.

The company said that it will only be withholding one API related to the five middleware features, a Windows file protection API that allows replacement of critical Windows assistant programs.

“In the wrong hands, (the withheld API) would expose users to more viruses and worse viruses,” Charlie DeJong, director of development in the Windows Platform group, said during a conference call Monday.

The software maker was quick to douse accusations that it was holding back on key technical information, after some critics predicted last year that it would hoard critical APIs.

“This (API) is a single exception. We are clearly not swallowing the rules,” Brad Smith, senior vice-president and general counsel for Microsoft, said during the call.

However, Dan Kusnetzky, vice-president of system software at market research firm IDC, questioned how long the newly revealed APIs would stick.

“Is Microsoft committing to live with these APIs for a certain specific period of time, or is this transitory?” he said, noting that companies would be rightfully chagrined to invest money in research and development only to have Microsoft change the technology.

The software maker also announced that it will begin a licensing program Tuesday for its internal communication protocols, allowing third parties to create server software that is interoperable with or can communicate with Windows 2000 Professional, Windows XP and future operating systems. The licensing program is divided into 12 tasks, such as licensing for file serving, print serving and streaming media, Smith said. The company said that the program will be royalty-based and the pricing will only be available to third parties entering into nondisclosure agreements.

As part of the licensing program, the company will also be providing 50 base protocols that are needed regardless of which task a developer wants to perform, Smith said.

“There is very substantial intellectual property and valuable technology in these protocols,” Smith said.

Smith conceded that it was an unusual licensing program, calling it “the first of its kind.”

“It’s hard to imagine any other competitors licensing their intellectual property … but we have an obligation and a responsibility to live up to this decree,” he said, referring to the proposed settlement.

But although the software juggernaut is being forced to reveal its APIs under the terms of the settlement, one cannot overlook the fact that the new licensing plan presents a revenue opportunity, Kusnetzky said.

“Not only are they trying to comply with the current consent decree, they’re also looking at IBM (Corp.)’s revenue from licensing their technology. IBM makes a couple billion a year just from their intellectual property,” he said.

However, during the call Smith eschewed implications that the company was looking to the licensing plan as a new source of revenue.

“The prices (of the licensing plans) are very small compared to the prices of the products involved,” Smith said.

The DOJ released a compliance advisory on the announcement Monday, saying that it received drafts of the licenses last week.

“The licenses are complex and present novel issues that require comprehensive analysis,” the statement said. “The Department has not pre-cleared the licenses.”

Acknowledging that the DOJ has yet to approve the licensing scheme, Smith added that Microsoft is eager for feedback from the government and industry.

“It’s very nice that Microsoft is doing this as part of an effort to comply with the government, but no one has agreed to those terms,” said Michael Gartenberg, research director at Jupiter Media Metrix Inc.

Microsoft’s announcement comes as U.S. District Judge Colleen Kollar-Kotelly considers a remedy ruling in the DOJ’s five-year antitrust case against the software maker. The government and nine of the 18 states that pursued the antitrust case against Microsoft reached a settlement last year, although the nine remaining states refused to go along, saying the settlement did not do enough to rein in the software maker.

Kollar-Kotelly is expected to announce at any time whether she accepts the settlement terms or wants to impose harsher remedies. The nine nonsettling states have proposed more stringent remedies of their own, and Kollar-Kotelly is also expected to rule on these remedies. The judge has a number of options, one of which is to combine elements of both proposals.

Microsoft’s pre-emptive moves appear to be an attempt to ease anticompetitive concerns about the software maker and fend off more stringent remedies.

Microsoft has already made an effort to shake off its anticompetitive moniker by loosening its licensing terms with OEMs. Under pressure from the federal court case, the software maker made concessions last year such as allowing OEMs to remove access to the company’s Internet Explorer (IE) Web browser and giving them choices on how to configure the Windows XP desktop.

Showing further compliance with the settlement terms, the company released Service Pack 3 for Windows 2000 last week, which allows users to choose what middleware programs, such as the Web browser and media player, they want to use.

Microsoft has set up a Web page at to explain the remedies it is putting into place before the Kollar-Kotelly’s settlement ruling is released.

– With files from Tom Krazit

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