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Texas sues Microsoft

The state of Texas files a lawsuit against Microsoft, charging the software giant with interfering in an antitrust investigation.

The state of Texas filed a lawsuit against Microsoft (MSFT) today, charging the software giant with interfering in the state's antitrust investigation.

Texas attorney general Dan Morales asked a state court Microsoft under the gun in Travis County today to prohibit the company from undermining the state's investigation into possible antitrust violations by the company.

According to the suit, "Microsoft improperly binds its customers and licensees to contract terms that require them to inform Microsoft before providing information to state and federal antitrust investigators."

Today's lawsuit follows last month's charges by the Justice Department that Microsoft has violated a 1995 consent decree governing its licensing practices. Critics have accused the company of strong-arming computer makers into accepting the terms of its deals.

"We think the lawsuit is unnecessary and reflects a misunderstanding of our nondisclosure agreements," a Microsoft spokeswoman said. "Our agreements are similar to those used throughout the industry, and nothing in them prevents companies from communicating with government regulators if they have concerns."

Company spokesman Mark Murray pointed to similar requirements required by Sun Microsystems and Novell.

But Microsoft's assertions don't appear to satisfy everyone, including at least one other state attorney general investigating the software giant.

"We've been concerned about this contract requirement, and we're looking into the legality of it in the course of our ongoing inquiry," Connecticut attorney general Richard Blumenthal told CNET's NEWS.COM. "If we find that it is impeding our investigation, we will take similar action."

Connecticut--along with Massachusetts, New York, Texas, Oregon, and California--are believed to be investigating Microsoft's business practices.

Dan Appelman, a software licensing attorney at Heller Ehrman White & McAuliffe in Palo Alto, California, said he has never heard of a company requiring that it be notified of a subpoena before the other party was allowed to comply. "I couldn't see the justification for that except that it's Microsoft using its muscle to gain an advantage" that weaker companies couldn't, he said.

He added, however, that it is reasonable for a company to ask to be notified of a government investigation so that it can request an order sealing documents that contain trade secrets or other confidential information.

Of the two contracts cited by Microsoft's Murray, only Sun's agreement, which governs Microsoft's use of the Java programming language, requires that it be notified before complying with the request. Novell's nondisclosure agreement, or NDA, requires only that it be given "prompt notice" of a law enforcement request.

Morales's suit alleges that Microsoft has interfered with the state's "constitutional and statutory responsibilities to conduct unfettered confidential investigations." It echoes accusations the Justice Department made last month that such NDAs unlawfully prevent those who do business with Microsoft from complying with government investigations. Both actions seek a court order exempting companies from the requirement.

The Texas attorney general's office said there is no state law specifically prohibiting the requirements. But the office has broad powers to "issue information demands and have those demands honored," spokesman Ward Tisdale said. Microsoft's NDAs "hurt our ability to receive information, which has the effect of violating the law."

A hearing for a preliminary injunction in the Texas case will take place November 24.