Realnetworks Sues Microsoft's Over Digital Media

[DudeAsInCool]

RealNetworks sues Microsoft over antitrust

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By RACHEL KONRAD

Dec. 18, 2003  |  SAN JOSE, Calif. (AP) -- Microsoft Corp. was hit Thursday with yet another antitrust lawsuit, this one accusing the software giant of illegally monopolizing the growing field of digital music and video.

RealNetworks Inc. said Microsoft illegally tied its Windows Media Player software with copies of the ubiquitous Windows operating system, whether Windows users want Microsoft's player or not.

That, the lawsuit said, makes it harder for RealNetworks's own Real One software to compete, "resulting in substantial lost revenue and business for RealNetworks."

The charges are similar to those brought by the European Commission, which has accused Microsoft of trying to squash competing audiovisual software by including its Media Player with Windows. European regulators are demanding Microsoft either produce a version of Windows without the Media Player or incorporate rival programs into the package.

RealNetworks filed its lawsuit in U.S. District Court in San Jose. Company spokesman Greg Chiemingo said many of the experts and witnesses who will testify in the case live in Silicon Valley. Microsoft's headquarters is in Redmond, Wash., near RealNetworks' in Seattle.

Microsoft spokesman Jim Dessler said he had not yet seen the lawsuit and could not immediately comment.

RealNetworks said Microsoft broke the law by restricting how PC makers install competing media players with Windows, which controls more than 90 percent of personal computers.

"We believe our business would be substantially larger today if Microsoft were playing by the rules," RealNetworks chairman and chief executive Rob Glaser said in a statement.

Bob Kimball, RealNetworks' vice president and general counsel, said the case "is based on many of the same types of Microsoft conduct that U.S. courts have already declared to be illegal, such as failure to disclose interface information and imposing restrictions on PC makers."

Microsoft has tried settling several other antitrust suits filed by competitors and the federal and state governments. Still pending are lawsuits by Santa Clara-based Sun Microsystems Inc. and Santa Rosa-based Burst.com.

Those cases claimed Microsoft violated state antitrust laws and laws against unfair competition. They were filed in the wake of a 1999 federal court ruling that Microsoft abused its power to maintain its monopoly on the Windows operating system.

Microsoft already agreed to pay $750 million to Time Warner Inc., which had seen an erosion in the market share of its Netscape browser as Microsoft's Internet Explorer grew. Microsoft also agreed to pay $23.3 million to Mountain View, Calif.-based Be Inc.

The state of Massachusetts continues to appeal the landmark antitrust settlement approved by a federal court last year, with a hearing scheduled next week before an appeals court. The U.S. Justice Department, Massachusetts and 18 other states had sued over Microsoft's use of the Windows operating system to muscle out rivals.

In late October, Microsoft agreed to give $200 million worth of computer-gear vouchers to customers to settle class-action antitrust lawsuits in Kansas, North Carolina, North Dakota, South Dakota, Tennessee and Washington, D.C. With similar cases settled in California, Florida, Montana and West Virginia, Microsoft's total payments to consumers exceed $1.55 billion.

Shares of RealNetworks surged 43 cents, or 8.8 percent, to close at $5.34 Thursday on the Nasdaq Stock Market. Microsoft shares rose 36 cents to close at $27.40.

[DudeAsInCool]

RealNetworks Accuses Microsoft of Restricting Competition

By JOHN MARKOFF

AN FRANCISCO, Dec. 18 - RealNetworks filed a $1 billion antitrust lawsuit on Thursday accusing Microsoft of using its monopoly power to restrict competition and limit consumer choice in digital media markets.

Legal experts said that the lawsuit, which cites new evidence suggesting that Microsoft's business practices have remained unchanged after its landmark court battle with the federal government, indicated that its legal woes were not necessarily over despite the company's accommodation with the Bush administration and its settlement of several other lawsuits.

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In a 65-page complaint filed in Federal Court in San Jose, Calif., RealNetworks, a maker of software for playing digital audio and video content, argues that Microsoft has unfairly damaged its business by linking Windows Media Player to the Windows operating system.

"We believe that our business would be substantially larger today if Microsoft were playing by the rules," said Rob Glaser, chief executive of RealNetworks, which is based in Seattle.

On Thursday, RealNetworks' stock rose 8.8 percent, to $5.34, in Nasdaq trading. In interviews, company executives emphasized that they expected revenues, despite financial losses, to continue to grow.

While Microsoft clearly won the browser wars with Netscape that prompted the government's antitrust case, the new lawsuit represents an effort by RealNetworks to avoid a similar fate in the market for software used to play music and watch videos on computers and hand-held devices.

"In a sense this is the next chapter following on the heels of the Netscape issue," said Andrew I. Gavil, a law professor at Howard University in Washington. "In some ways, it's become even more significant because of the expansion of the digital content issue."

A Microsoft spokesman called the lawsuit unfortunate and surprising. In a statement, the company said there was vibrant competition in the media player market and that the growth of RealNetworks showed that it was thriving.

Jim Desler, the spokesman, defended that position that a media player should be considered an integral part of Windows. "Microsoft is focused on improving the operating system and its features and functionality," he said.

The new lawsuit also highlights the legal difficulties Microsoft faces with European antitrust regulators. Microsoft, based in Redmond, Wash., has been in negotiations with the European Union in recent months over its decision to bundle its Windows Media Player as part of the Windows operating system.

Legal experts said that Microsoft was gambling that such lawsuits would not prevent it from continuing to integrate applications with its operating system, which still effectively monopolizes the PC market.

"This is a calculated risk on Microsoft's part," said Herbert J. Hovenkamp, an antitrust expert at the University of Iowa. "I anticipate they will continue to have to litigate every time they bundle."

In the federal antitrust case, Microsoft unsuccessfully argued that Web browsers were integral components of personal computer operating systems. That argument, Mr. Hovenkamp said, will be an even more difficult claim to make in the case of a software application that is intended to play music and videos.

RealNetworks filed the case in the heart of Silicon Valley, legal experts said, in part because companies in the region have traditionally bitterly opposed Microsoft's business tactics. RealNetworks executives said the company chose San Jose because many of the experts and witnesses who will testify in the case live in Silicon Valley.

During the remedy phase of the federal antitrust trial, the judge struck from the record an e-mail message that could come back to haunt Microsoft. Sent by Barry Schuler, who then ran the AOL division for Time Warner, the message said that negotiations had broken down when Microsoft insisted that AOL drop RealPlayer.

The new lawsuit cites a note written by a RealNetworks executive, Bruce Jacobsen, of a conversation in 1997 with Robert Muglia, a Microsoft executive, in which Mr. Jacobsen claimed that Mr. Muglia said that Microsoft "would target us for obliteration."

Microsoft is still facing lawsuits from other rivals as well, including those from Sun Microsystems of Santa Clara, Calif., and Burst.com, another Silicon Valley company.

To settle another lawsuit, Microsoft has already agreed to pay $750 million to what was then AOL Time Warner, which owns the Netscape browser. Microsoft agreed to settle an antitrust lawsuit with Be Inc., a defunct Silicon Valley software company, by paying $23.3 million.

The Commonwealth of Massachusetts continues to appeal the landmark antitrust settlement that a federal court approved last year. A hearing is scheduled next week before the United States Circuit Court of Appeals.

NY Times.com

[HolyMoly]

Sounds like a lot of sour grapes to me. Real Networks has branched out to control a lot of major media outlets in the country ... forcing people to get their "Gold Pass" premium account to watch news videos online. I'm surprised Microsoft hasn't fought back to claim their share of online video content revenue. But, there's one thing Microsoft has learned over the years. It's far easier to stiff competition and pay a settlement later than to walk around on eggshells, worrying about being sued.

Hehe. I still remember that joke on the Jay Leno show. During the Clinton administration, Attorney General Janet Reno demanded Microsoft turn over certain documents to the government for their investigation of Microsoft's monopoly practices. Microsoft balked ... and Reno personally threatened Bill Gates with "million dollar a day" fines until he complied. Of this threat, Leno said on his show, "Can you imagine it ... a million dollar a day fine? At that rate, Gates will run out of money about the same time the Earth collides with the Sun."