Week in review: Microsoft, AOL make nice

The software giant is paying $750 million to AOL Time Warner as part of a wide-ranging settlement that also calls for the companies to jointly cooperate on software distribution and digital media. As part of the deal, the companies will drop pending litigation, including an antitrust complaint filed by AOL Time Warner's Netscape Communications unit in January 2002 against Microsoft.

Key elements of the pact and its ramifications include AOL receiving a long-term, nonexclusive license to use Microsoft's Windows Media 9 software and a seven-year, royalty-free license to continue using Internet Explorer on its flagship online service.

Also, the companies will explore ways for AOL Instant Messenger and MSN Messenger to interoperate. The promised cooperation comes after years of IM acrimony between the two tech giants. But it's not clear that the talks will end IM turf wars--the companies did not provide a specific time line for allowing their rival services to communicate.

If AOL and Microsoft are serious about interoperability, the result would end years of nasty, brutish, below-the-belt fighting between the two giants. The companies have been at odds since the summer of 1999, when Microsoft launched its own Web-based client called MSN Messenger. At the time, most IM users used AOL-owned products, either AOL Instant Messenger or ICQ.

The settlement brings the software giant a powerful ally in extending its digital media technology--part of Microsoft's plan to keep Windows the world's dominant computer operating system and expand onto new devices. The deal allows--but does not require--AOL Time Warner to use Microsoft's Windows Media 9 Series software and future versions of the multimedia technology, including its digital rights management (DRM) tool for securing music and video files from piracy.

Despite the open-endedness of the terms, the deal represents an important victory for Microsoft, which has tried for years to overcome reluctance from AOL Time Warner and other media companies to embrace its digital media technology over that of rivals, notably RealNetworks and Apple.

Unix upheaval
SCO Group's campaign against Linux has created a backlash from the open-source community, with some questioning its claims of Unix ownership. Novell, the second in the chain of four companies to own rights to the Unix operating system, has challenged the legal basis of actions that SCO is taking against Linux and companies using it.

In a letter to SCO, Novell asserted that it retains Unix patents and copyrights SCO says it owns. Novell demanded that SCO reveal where Unix source code has been copied into Linux, and raised its own threat of legal action to compensate for damage that it says has been done to customers, programmers and companies using Linux.

But SCO said that issue was beside the point, because the company bought full rights to the Unix intellectual property, including its copyrights, patents and the right to enforce those patents. SCO's claims are the basis of a $1 billion lawsuit against IBM that alleges that Big Blue misappropriated SCO's Unix trade secrets by building Unix intellectual property into Linux and violated its Unix contract with SCO.

Even Linux founder Linus Torvalds is being dragged into the fray, but SCO Chief Executive Darl McBride said a published report that his company may take legal action against Torvalds was overstated. "Virtually we see no reason why that would ever happen," McBride said. "We're not trying to go down that path."

Torvalds, meanwhile, said he sees legal action against him as ineffectual but not inconceivable. "I don't see what (SCO) would expect to gain from suing me, but they don't seem to be acting very rationally," he wrote in an e-mail interview.

Music: Fee or free?
Apple limited a music-sharing feature from the latest version of iTunes after some Mac owners used it to swap songs over the Internet. In an update to iTunes, the Mac maker removed a feature that had been exploited to allow Mac users to swap songs over the Internet. Version 4.0.1 of iTunes removes the ability to share iTunes playlists over the Internet, limiting the feature to streaming songs over a local network.

Apple said in the statement that it was "disappointed" that people had used the new feature in iTunes to copy music with strangers.

On the other side of the fence, users of file sharing programs such as Kazaa and iMesh are being urged to install a security patch after a serious bug was discovered in their underlying network. A security researcher recently found a potentially critical vulnerability in the program that drives the FastTrack network.

FastTrack is used by peer-to-peer software service including Kazaa and iMesh. Joltid, the maker of FastTrack, initially said the flaw was not serious, but has since done an about-face, and plans to plug the loophole. The makers of Kazaa released a patch and are urging customers to install it as soon as possible.

Perhaps not long from now, historians will look back at 2003 as a year that redefined the music industry. Although the significance of Apple's iTunes music service is debatable, it underscores an undeniable trend toward bringing digital music to the masses. In a three-day special report, CNET News.com examines myriad elements of the music universe that were unthinkable only a few years ago.

Also of note
The local government in Munich, Germany, has voted to move 14,000 computers from Microsoft's Windows to the rival Linux operating system, despite efforts by the software giant to hang onto the multimillion-dollar contract...While many students would be expelled from their computer science programs for writing a virus, the University of Calgary plans to make writing such malicious programs a part of the curriculum...Sony introduced the PSX, a follow-up to the hugely popular PlayStation 2, and touted it as a device that creates a new entertainment category.