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Microsoft-AOL Settle Netscape Lawsuit

Microsoft will pay AOL-Time Warner $750 million to settle the private antitrust lawsuit involving AOL's Netscape browser, the companies said Thursday afternoon.

The settlement closes an antitrust lawsuit AOL brought against Microsoft in January 2002. Building on antitrust case findings that Microsoft had used anticompetitive practices to leverage its operating system monopoly to help its Internet Explorer come from behind to dominate the browser market, AOL had sought triple damages. When the browser wars were going on, Netscape Communications owned the Netscape Navigator browser. AOL bought Netscape in March 1999.

"While our companies will continue to compete, I'm pleased that we've been able to resolve our prior dispute, and I'm excited about the opportunity to work together collaboratively to make the digital decade a reality," Bill Gates, Microsoft chairman and chief software architect, said in a statement.

AOL-Time Warner chairman and chief executive office Dick Parsons, like Gates, expressed excitement about a new era in relations between AOL-Time Warner and Microsoft. "We welcome the opportunity to build a more productive relationship with Microsoft," Parsons said in a statement.

Aside from the $750 million payment out of Microsoft's $40-billion war chest, the companies' announcement of the settlement reads more like a description of one of the blockbuster business deals of the late 1990s.

One of the biggest elements is a royalty-free, seven-year license for AOL to use Internet Explorer technology with the AOL client. The companies also signed a long-term, non-exclusive license allowing AOL to use Windows Media Series 9 digital media platform and successor Microsoft digital rights management software, which should be appealing to the Time Warner side of AOL-Time Warner house.

Microsoft also committed to help AOL, which its own MSN Internet service trails in subscribers. For one thing, Microsoft promises to make sure AOL gets pre-release builds of the upcoming Windows "Longhorn" operating system at the same time as other independent software vendors get the code, a move that is supposed to help AOL interoperate better with Windows. Also, Microsoft will send AOL discs to small PC manufacturers who obtain their Windows discs from authorized Microsoft distributors, opening a new distribution channel to AOL.

An especially interesting, although fuzzy, provision in the settlement says that the two companies will "explore ways" to make their instant messaging networks interoperate. Success in that field would mean AOL and MSN instant message users could reach one another across the proprietary networks.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.