Microsoft to change licensing terms

NEW YORK - Under scrutiny from the U.S. government, Microsoft Corp. is changing the terms under which companies can license protocols that allow third-party software to interoperate with Windows.

At a hearing Thursday with U.S. District Judge Colleen Kollar-Kotelly, U.S. Department of Justice attorney Renata Hesse said that changes that Microsoft is making to the licensing terms of the protocols are making progress toward satisfying the concerns the government has about Microsoft's compliance with the November 2002 antitrust settlement.

In a status report to the judge earlier this month, the DOJ and the 18 states involved in the case said they remained concerned about the royalty rates and structure the company was proposing for access to its communications protocols.

But at Thursday's hearing, Hesse told Kollar-Kotelly that new terms that Microsoft will detail next week are helping to allay concerns about the licensing issues, which both the judge and the government consider a key issue in the settlement, according to DOJ officials Thursday.

A key element of the case was the finding that Microsoft used its monopoly in the operating systems market to quash competition from competing software. As part of the settlement, Microsoft is supposed to make it easier for companies to create software that works with Windows, by offering "reasonable and non-discriminatory" terms for protocol licensing.

The new licensing terms, to be announced next week, call for companies to pay royalties of 1 percent to 5 percent of the revenue from any products that use the protocols, which enable interoperability with Windows client operating systems, according to Microsoft spokesman Jim Desler. The percentage paid will depend on which protocols are licensed, he said.

"Last August we set up terms for our Communications Protocol Licensing Program, and we encouraged feedback on whether these terms were reasonable. ... Over the course of the year we've received feedback and as a result we're making changes," said Desler, after the hearing.

Kollar-Kotelly ordered the DOJ, the states in the case and Microsoft to report on the status of the licensing terms and compliance with the settlement in three months' time, rather than the six months she had originally specified.