Microsoft and AOL Time Warner Settle Antitrust Lawsuit

May 29, 2003. Microsoft and AOL Time Warner announced that they settled the private antitrust lawsuit brought by AOLTW against Microsoft. They announced that Microsoft will pay $750 Million, license Internet Explorer royalty free, and work with AOLTW on digital media and digital rights management initiatives.

The two companies issued press releases. See, Microsoft release and AOLTW release. They also held a press conference. See, transcript of May 29, 2003, press conference of Bill Gates (Chairman and Chief Software Architect of Microsoft) and Richard Parsons (Ch/CEO of AOLTW). However, they did not release the text of a settlement agreement.

On January 22, 2002, AOLTW's Netscape unit filed a complaint in U.S. District Court (DC) against Microsoft alleging violation of the Sherman Antitrust Act, the parallel sections of the District of Columbia Code, and the common law claim of tortious interference. AOLTW relied upon facts and conclusions of law previously adjudicated in the government's antitrust action against Microsoft. See, Judge Thomas Jackson's Findings of Fact [PDF] (November 5, 1999), Conclusions of Law (April 3, 2000), and Final Judgment (June 7, 2000). See also, opinion of the U.S. Court of Appeals (DCCir) (June 28, 2001).

In addition, AOLTW alleged that Microsoft continued to engage in illegal and anticompetitive conduct. AOLTW sought treble damages and injunctive relief. See, story titled "AOL Time Warner Files Treble Damages Antitrust Suit Against Microsoft" in TLJ Daily E-Mail Alert No. 352, January 23, 2002.

Microsoft and AOLTW announced that the settlement provides AOLTW with "a royalty-free, seven-year license to use Microsoft's Internet Explorer technologies with the AOL client." In addition, the settlement includes "a commitment by Microsoft to make available technical information contained in test or ``beta´´ versions of its Windows operating system to AOL at the same time that Microsoft makes them available to other independent software vendors. Microsoft will also ensure that AOL can participate in other programmatic offerings relating to the development of Microsoft's next-generation ``Longhorn´´ version of Windows on the same terms and at the same time as other independent software vendors."

It also provides for "a long-term, non-exclusive license agreement allowing AOL Time Warner to use, if it so chooses, Microsoft's entire Windows Media 9 Series digital media platform, as well as successor Microsoft digital rights management software."

The settlement also provides that the two companies will work together on several digital media and digital rights management initiatives.

The settlement also provides that "The two companies have agreed to explore ways to establish interoperability between AOL and MSN Instant Messenger networks in a manner that will protect consumer privacy, security and network performance."

Bill Gates stated that "There are a lot of provisions in this agreement. It puts any past issues behind us. It extends technical cooperation that we've had with AOL in areas like the browser. It creates a new technical relationship on the media-related issues, and so it's the most comprehensive media license that we've done."

Ed Black, P/CEO of the Computer and Communications Industry Association (CCIA), stated in a release that "We are pleased that AOL Time Warner was successful in extracting a substantial measure of compensation for the destruction of Netscape, however the settlement is a relatively small price to pay for illegally crushing the company that brought the worldwide web to most consumers."

He added that this settlement "demonstrates that only vigorous government enforcement and judicially imposed restraints will have any real chance to restrain Microsoft's ongoing unlawful conduct".