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Microsoft invests in Net music firm

Microsoft announces a $15 million equity investment in Reciprocal, which develops technologies for delivering music and other media content via the Internet.

Microsoft announced today a $15 million equity investment in Reciprocal, which develops technologies for delivering music and other media content via the Internet.

The investment gives Microsoft a 10 to 15 percent stake in Reciprocal, formerly known as Rights Exchange, which is expected to go public in the next year or two, the company said.

In addition, the companies have entered into a strategic technology and marketing alliance to accelerate the development and optimization of Reciprocal's Digital Rights Management (DRM) solution and services for the Microsoft Windows operating system.

Reciprocal enables companies to securely share, sell, or distribute content ranging from music to text over the Internet. The software also allows content-oriented companies to track usage and financial transaction patterns.

The investment in Buffalo, New York-based Reciprocal is part of Microsoft's attempt to boost its e-commerce efforts, which have lagged behind those of other technology companies. It also pits the software company against other giants such as IBM and AT&T in a key arena.

"We've chosen Reciprocal as our strategic partner based on its pioneering efforts in developing comprehensive solutions and services for Digital Rights Management," said Brad Chase, Microsoft's vice president of Windows marketing, in a statement.

The move also will help Microsoft in a battle against RealNetworks, which makes software for playing audio and video programming over the Internet.

"The investment by See CNET's MP3 Topic Center Microsoft, as well as our strategic alliance, further validates our vision of the importance and necessity for Digital Rights Management," said Reciprocal CEO Paul Bandrowski in a statement.

"Our mission is to not only enable businesses to migrate their content to the digital world, but to deliver solutions that allow for new business models and revenue opportunities. We look forward to teaming with Microsoft to develop a comprehensive, scalable, end-to-end solution," Bandrowski said.

Securing copyrights over Web content remains one of the most sensitive issues around the Web, especially in areas such as music. Web music downloading has also sparked a conflict that has pitted the recording industry against the widespread playback of the MP3 audio compression format.

The Recording Industry Association of America (RIAA) has said MP3 is the technology of choice among music copyright pirates, and has taken legal action against manufacturers of devices that play back MP3 files. The RIAA is currently working with music and technology executives to develop its own copyright-protection specification called the Secure Digital Music Initiative (SDMI).

Reuters contributed to this report.