Microsoft is benefiting from the proposed settlement with the US
Department of Justice (DoJ) and nine US states by using it to
impose onerous licensing terms that squeeze PC makers out of their
patent rights, according to several of the states who have not
reached a settlement with the software giant.
In a filing with the US District Court for the District of
Columbia, seeking rejection of the proposed settlement, the states
cited testimony from a Microsoft executive to prove their claim
that the settlement "has fostered new monopolistic practices and
fettered the market with new anticompetitive practices."
Based on the 8 February deposition of Richard Fade, a Microsoft
senior vice-president, the states charge that the proposed
settlement "has provided a sword for Microsoft to gather additional
fruits and to reap a net gain."
Microsoft, by referring to the proposed settlement, was able to
impose licensing terms on PC makers that gives it free access to
their patents. These customers were precluded from enforcing their
patents against Microsoft because of a "nonassertion of patents"
provision in the licensing terms, the states said.
"Microsoft took advantage of the opportunities presented by the
language [of the proposed settlement] to adopt significantly more
onerous licensing terms and to impose those on the [PC makers],"
the states said in the filing. Microsoft told PC makers that the
patent provision was required by the settlement, the states said.
PC makers might have reasonably expected a net benefit in their
relationship with Microsoft following a consent decree with the
government, but every one of the top twenty PC makers in the world
believes that Microsoft has benefited from the proposed settlement
at their expense, the states said. The court filing cites specific
examples from Hewlett-Packard and Gateway. Both PC makers
complained to Microsoft about the licensing terms, the states said.
Furthermore, the states say there is "significant evidence" that
Microsoft did not simply take advantage of language that was
included in the proposed settlement, but that the software company
negotiated the language of the proposed settlement with the intent
of profiting from its terms.
Having free access to these patents would allow Microsoft to expand
its hardware business and compete directly with the PC makers.
Previously, Microsoft had been limited in its ability to produce
its own hardware based on the patents owned by the PC makers, the
states said.
"The [proposed settlement] has provided the licence by which
Microsoft can expand its hardware production to present a real
threat to the [PC makers], using the [PC makers'] own intellectual
property," the states said.
According to Fade's testimony, Microsoft has long sought a waiver
from the PC vendors of their patent rights, the states said. Up
until now the major PC vendors have always managed to keep the
patent provision out of their contracts with Microsoft, the states
said.
California, Connecticut, Florida, Iowa, Kansas, Massachusetts,
Utah, West Virginia and the District of Columbia asked US District
Judge Colleen Kollar-Kotelly to allow them to present the evidence
gathered in Fade's deposition at a 6 March hearing on the proposed
settlement.
Nobody at Microsoft was immediately available for comment.