Collision course for Symantec and Microsoft

Its lawsuit against Microsoft could put the brakes on Vista as competition between the companies heats up.

Symantec's trade secret lawsuit against Microsoft is a sign of heightened competition between the two companies, but it's not a declaration of war, analysts said.

Last week, Symantec sued Microsoft, accusing it of misappropriating intellectual property related to data storage technology. It is the first time that the Cupertino, Calif.-based security specialist and the software giant have been on opposite sides in a legal case. In the past, the companies have teamed up to take software pirates to court.

"The relationship has definitely shifted from collaboration to 'coopetition' and, in some cases, to outright competition," said Andrew Jaquith, an analyst at Yankee Group Research. (Coopetition is a mixture of cooperation and competition.)

Symantec is asking a court to bar Microsoft from further developing, selling or distributing software, including Windows Vista and Windows Server "Longhorn," until all of Symantec's intellectual property is removed. Microsoft has described Vista as one of the most important Windows releases in its history.

"Symantec has everything to gain by any potential delay in Microsoft shipping Vista," Gartner analyst John Pescatore said. Vista, slated to be broadly available in January, includes spyware protection, a much-improved firewall and new backup tools--areas in which Symantec sells products, especially to consumers.

The waters between the companies have been muddied ever since Microsoft announced three years ago that it was entering the security space. But Symantec CEO John Thompson has repeatedly said his company won't compete by going to court or complaining to antitrust regulators. Thompson said it would instead rely on its security wits and reputation to beat Microsoft.

That hasn't changed, said Michael Cherry, an analyst at research firm Directions on Microsoft. The lawsuit is over a contract dispute that Symantec inherited when it acquired Veritas Software, he noted.

"Symantec owes it to its shareholders to vigorously protect its intellectual property. I don't think there is a wider significance to this," Cherry said.

The complaint involves Symantec's Volume Manager product, which allows operating systems to store and manipulate large amounts of data. Microsoft licensed a "light" version of Volume Manager from Veritas in 1996. In its lawsuit, Symantec accuses Microsoft of violating the license.

Symantec is conservative, legally speaking, Jaquith said. "In the areas where they compete, such as anti-spyware, Symantec won't be afraid to pull the legal trigger if they feel they need to," he said. "But Symantec will never be confused with SCO. Legal maneuvers will supplement their strategy, not substitute for one."

SCO Group has been involved over the past few years in a legal campaign targeting Linux customers and vendors. The company has claimed that some Linux software includes source code from Unix, which it controls. In June 2003, for example, it launched a related intellectual-property suit against IBM, seeking $3 billion in damages.

The analysts agreed that Symantec would not have brought this action if it had not felt sure that it had a case and there was no other way to resolve the dispute. "I don't believe Symantec is the type of company that tries to compete via litigation," Pescatore said.

The courtroom opponents say they continue to have great relations, Jaquith said. As Symantec put it last week, the companies "agreed to disagree" and take the Volume Manager dispute to court for a resolution.

But with Microsoft branching out into security products and continuing its push into the data center, there are bound to be more collisions between the world's biggest software vendor and smaller players, Cherry said.

"This is probably not the first, nor is it the last, of the lawsuits we're going to see, as the lines of the utility vendors and the operating-system vendors keep butting up against each other," he said.

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