Microsoft Announces Additional Improvements To Protocol Licensing Program

REDMOND, Wash., Jan. 23, 2004 — Microsoft Corp. today announced that it will make additional changes to its Communications Protocol Licensing Program that will further improve the program and make licensing easier and more attractive. The changes respond to feedback and suggestions made by the government and industry through the consent decree compliance process.

The new licensing terms will be posted on the Microsoft Communications Protocol Program (MCPP) Web site . The changes, which are part of the company’s ongoing effort to improve the program, include shortening and simplifying the license agreement, making approximately 20 protocols available without charge, making other protocols used to perform particular tasks available for a fixed fee or fixed fee per unit, and changing the evaluation program to provide prospective licensees with samples of the technical documentation with no confidentiality restrictions.

Microsoft established the MCPP in accordance with the final judgment in its antitrust case with the Department of Justice and a number of State Attorneys General as part of its overall compliance responsibilities under the final judgment. Under the program, third-party developers can obtain licenses to protocol technology developed by Microsoft as part of its Windows®
family of client and server operating systems. Developers can implement Microsoft’s protocol technology in their own server products to improve interoperability with Windows. The MCPP was released in August 2002. To date, 11 companies have taken licenses to implement Microsoft’s protocols in their products.

“The protocol licensing program under the consent decree is one of many different ways that companies can choose to achieve interoperability with the Windows operating system. This program is unprecedented and the technology is complex, so we have relied on industry and government feedback to help us improve the program and make it more appealing to software developers,” said Mary Snapp, corporate vice president and deputy general counsel for Microsoft.

Changes to the MCPP include the following:

  • A new royalty model for six of the 14 tasks. For the proxy/firewall task, Microsoft will now license for a flat fee. For five other tasks (collaboration server, multiplayer games, print/fax server, VPN and Web server), the license will be based on a flat, per-unit fee. The other tasks will remain on a percent of revenue royalty basis, the percentages ranging from a low of 1 percent to a high of 5 percent for all the tasks combined.

  • The license has been streamlined and rearranged to make it easier to understand. As a result, Microsoft has been able to reduce the body of the agreement by over half.

  • Publication of approximately 20 communication protocols that will be posted to the MSDN®
    developer program Web site and will be available without charge. An executable license and technical documentation can be downloaded from the MSDN site. These protocols will be non-task specific and provide support for general network connectivity. These protocols were previously within and among the 14 tasks available for licensing in the MCPP.

  • Microsoft has made additional changes that have made it easier for the licensee to do business under this agreement. These changes include eliminating the right to audit licensee’s end users, and providing a clear right to distribute to another MCPP licensee on a royalty-free basis under a simplified process.

Microsoft is in the process of reviewing the changes with the Department of Justice and the various States attorneys and expects to post the agreement soon.

The changes announced today are in addition to ongoing improvements the company has made in the past six months. Those changes included a simplified, low-cost royalty structure and new licensing terms that are more favorable to prospective licensees; reduced royalty prepayments; an extended payment plan for the prepaid royalties for smaller companies; and the availability of extensions to the scope of the license.

“We want to send a clear message to the industry. If you are interested in licensing these protocols, talk to us. If you have additional needs, we encourage you to contact us so we can work together to come to an agreement,” Snapp said.

Microsoft also outlined additional and ongoing efforts to continue promoting the program. During the fall of 2003, the company took out advertisements in newspapers and on the Internet which generated a number of leads. The company will continue its evangelizing efforts, reaching out to individual companies and broadly to industry and potential interested parties to educate them on the licensing changes and overall aspects of the program. The Department of Justice, in the Joint Status Report submitted to the Court on Friday, Jan. 16, noted that the Microsoft team “selling” the MCPP had done “excellent work.” In the same report, Microsoft stated that it will continue to work hard to promote the availability of the licenses and to close licenses with developers who express interest. The company also noted that it is currently in active discussions with more than 20 additional potential licensees.

“We believe the changes we have announced today will make it easier for interested companies to sign up. This is an ongoing effort and we remain committed to working with the government and industry to ensure its success,” Snapp said.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software — any time, any place and on any device.

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