Digital rights management company InterTrust had contended that virtually all of Microsoft's products, ranging from core Windows, Office and Outlook features to the .Net platform and the Xbox game console, violated the smaller company's patent rights.
At the core of these broad-ranging claims were ways of protecting information against unauthorized use, even if it is moved between computers or across a network like the Internet. As Microsoft aims to become the standard infrastructure for digital audio and video and Web services, this roving content protection will become increasingly significant.
"Microsoft really wants to make sure that Windows is the best platform for secure digital media," said Directions on Microsoft analyst Matt Rosoff. "This allows Microsoft to continue forward with some of its digital rights management initiatives."
The $440 million settlement, which will give Microsoft a perpetual license to InterTrust's patents, appears to be part of a larger drive to clear up the software company's intellectual property landscape in advance of releasing its newest version of Windows, dubbed Longhorn.
Microsoft has already put a strong emphasis on protecting data. Features in the new Microsoft Office suite prevent unauthorized access to or forwarding of Word documents or e-mail, for example. The company also has focused on building and marketing its Windows Media digital rights management tools, which many digital music and video companies have adopted to distribute songs or video programming online.
But these security technologies are collectively expected to be more deeply integrated with Longhorn, alongside related hardware-based security measures aimed at protecting computers from hackers. Developers and hardware partners will ultimately want assurances that critical security technologies are not still subject to litigation when they release support for these tools, analysts said.
In an interview Monday, Microsoft acknowledged that InterTrust's patents had come to be key to the company's future development plans.
"More and more, it became clear to us that InterTrust had some foundational patents that we would need to license," said David Kaefer, Microsoft's director of technology policy.
InterTrust's patents involve ways of attaching rules to particular bits of data that would control how that information could be used in different environments.
For example, a piece of music might be authorized by record labels to be played only for a month, without additional payment. If that rule system followed that song while it was downloaded from the Internet, put onto an MP3 player, and even transferred to the Xbox hard drive to be played later, it would likely run squarely into InterTrust's patent portfolio.
"In traditional approaches, you had to protect the computer to protect information," said InterTrust Chief Executive Officer Talal Shamoon. With his company's technique, the particular computer itself is less critical, because "the information is always protected," he said.
While popularly associated with protecting media like music or video, these types of rule-based techniques--and InterTrust's patents--also can be applied to data transferred in the course of ordinary computing procedures, particularly as Microsoft and other companies move toward "secure computing," or attempts to ensure that hackers and virus writers don't take over the innards of personal computers.
The settlement is a clear sign that Microsoft sees digital data security, whether in the multimedia, business or ordinary computing context, as increasingly fundamental to its future, analysts said. The company also increased its stake last week in ContentGuard, a digital rights management developer. ContentGuard's technology underpins the way that Office keeps business documents secure, supplementing InterTrust's techniques.
"Those two technologies might be moving closer together," Directions on Microsoft's Rosoff said. "Microsoft might even be working on some kind of unified rights management technology that might be applied more broadly. I think that's the direction they're moving in."
CNET News.com's Matt Hines contributed to this report.