Microsoft was planning to announce yesterday that it has reached a US$440 million legal settlement and licensing deal with the InterTrust Technologies Corp, a private company and a pioneer in the development of software to protect digital music and movies from piracy. The settlement of InterTrust's patent infringement suit, filed in 2001, is the latest in Microsoft's continuing drive to resolve its legal disputes. It comes less than two weeks after the company, the world's largest software maker, agreed to pay Sun Microsystems US$1.6 billion to settle Sun's private antitrust suit against Microsoft and to resolve patent claims.
The InterTrust settlement removes a threat to Microsoft's ability to deliver piracy protection technology in its software products for playing and handling digital media.
The technology for so-called digital rights management, analysts say, is crucial for Microsoft's plans to extend its Windows software into the emerging market for legally distributing music and movies over the Internet, in competition with rivals like Apple, RealNetworks, Sony and others.
Last week, Microsoft and Time Warner announced that they had acquired a majority stake in another developer of digital rights management technology, ContentGuard, a small company spun out of the Xerox Palo Alto Research Center. The terms of the purchase were not disclosed.
"The InterTrust agreement and the ContentGuard investment hold the promise of really spurring the availability of digital rights management in the marketplace," said David Kaefer, a director of business development for Microsoft's intellectual property and licensing group.
InterTrust sued Microsoft three years ago after making the accusation that technology that it had shown Microsoft in discussions of a licensing deal started appearing in Microsoft products.
Microsoft, based in Redmond, Washington, had consistently denied the accusations. But the company shifted tactics last summer, when settlement negotiations began.
"We took a look at this, and InterTrust had early patents that we would have to license," Kaefer said.
The settlement gives InterTrust a big paycheck and sharply improves its prospects. The company, based in Santa Clara, California, was founded in 1990 and went public in 1999 with hopes of making its digital rights management software a standard for media distributed over the Internet. But media companies moved slowly in the new market and focused largely on taking legal action against file sharing.
InterTrust struggled, laid off most of its workers and shifted to a new business model of licensing its technology rather than trying to become a software company. Still, its technology was highly regarded. An investment group including Sony and Philips Electronics bought InterTrust for US$453 million in a deal that closed in January last year.