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Microsoft broadens licensing terms

As part of its antitrust settlement with the government, the company outlines new terms under which other companies can gain access to Windows protocols.

Microsoft on Friday outlined new terms under which other companies can gain access to Windows protocols, an important element in its antitrust settlement with the federal government.

Last week, Microsoft said it would alter the terms to make it cheaper and easier for software developers to license protocols that allow other products to work with Windows. Following the concessions, Microsoft received approval from U.S. District Judge Colleen Kollar-Kotelly that it was in compliance with the terms of its landmark settlement. Under that deal, Microsoft is supposed to license such code on "reasonable and non-discriminatory" terms.

So far, EMC, Network Appliance, VeriSign and Starbak Communication have licensed the protocols, but other companies have complained that Microsoft's terms have been unreasonable. Massachusetts regulators had also argued that more court intervention was needed.

"Given the unprecedented scope of the program and complexity of the technology, we knew it would be important to obtain feedback from government and industry on ways the program might be improved," Microsoft General Counsel Brad Smith said in a statement. "The changes announced today should make the program more appealing to software developers."

Among the changes, Microsoft:

• Created a new royalty structure that calculates the amount owed to Microsoft as a percentage of the licensee's revenues from products that use Microsoft's technology. The fees range from 1 percent to 5 percent on many products and from 0.5 percent to 2.5 percent on embedded hardware.

• Reduced the upfront fee from $100,000 to $50,000. Such a payment is standard in the industry, Microsoft said, and is required only after a company has signed a licensing agreement and has had a chance to review technical information about Microsoft's technology.

• Broadened the licensing program to include, without an additional charge, communications with older Microsoft operating systems such as Windows 95 and Windows 98. The prior license covered only communications with Windows XP and Windows 2000.

• Agreed to allow licensees to renew their licenses for another five-year term at any time before November 12, 2007.

• Eliminated some criteria for entering the program that the U.S. Department of Justice said "may have deterred some prospective licensees from taking a license."

• Improved the license warranties and requirements for technical documentation.

Microsoft said its existing licensees have the option to convert to the new terms and pricing at any time, while the old terms will be available as an option to new licensees through Sept. 30.

The company added that it is "generally willing to provide even broader usage rights for the company's protocol technology" than is called for either under the current settlement or in its existing licensing terms.

Massachusetts and other states had been seeking stiffer penalties against Microsoft, but Kollar-Kotelly rejected their request last November. Massachusetts is the only state still pushing an appeal of that ruling, with a hearing slated for Nov. 9.