Microsoft Rebuffs Japanese Antitrust Inquiry

Microsoft immediately rejected Japanese antitrust regulators’ call Tuesday to retroactively nullify its contract provisions that limit the legal recourse of PC manufacturers in Japan to which it licenses its Windows operating system.

Microsoft, noting it had already removed the provisions from new contracts as of last February, took issue, as expected, with making the action retroactive to older agreements.

The Redmond, Washington, software maker issued a statement saying it had already removed the non-assertion of patents (NAP) provision from its new contracts and had announced last year a new policy based on “expanded licensing of its intellectual property rights with others in the industry.”

The company argued it is not necessary to include previous agreements in the change because those contracts would have little impact.

Violations Cited

In its report and recommendation released Tuesday, the Japanese Fair Trade Commission (JFTC) said that when licensing Windows to PC manufacturers, Microsoft has included provisions that a licensee agrees not to sue, prosecute, assist or participate in any judicial, administrative or other proceedings of any kind against Microsoft, its subsidiaries or other licensees for patent infringement.

The Japanese antitrust officials said the conditions “unjustly restrict [licensees’] business activities,” calling it a violation of Japan’s Unfair Trade Practices and Antimonopoly Act.

The JFTC called on Microsoft to terminate the provisions in both current and — the source of Microsoft’s protest — previous agreements made with Japanese PC manufacturers. The Japanese antitrust body also directed Microsoft to communicate to its manufacturing partners that it will notenforce the NAP provisions.

Significance Downplayed

“Microsoft respects the JFTC’s role in the implementation of the Fair Trade Law and has cooperated fully with the JFTC’s investigation since their inquiry began February 26,” the Microsoft statement said.

“However, we respectfully disagree with the conclusions reached by the JFTC at this stage of the process, and will avail ourselves of the mechanism set out in the law and regulations to seek a review of this decision,” the statement said.

Pointing to its February announcement to remove the NAP provision from agreements with computer makers in new contracts going forward, Microsoft downplayed the need to change agreements retroactively.

“While we decided earlier this year to remove this particular provision in contracts going forward, this balancing provision has a limited continuing effect under past agreements,” Microsoft said.

The company, which described the NAP as a “narrow provision designed to encourage computer manufacturers to raise any intellectual property concerns they may have before shipping a new version of Microsoft Windows,” said the provision “fairly balances IP protection and the need to create a stable environment for the development of the IT industry by avoiding disruptive IP disputes.”

Larger War

Laura DiDio, a senior analyst at Yankee Group, told TechNewsWorld that Japanese officials are not appearing as forceful as the European Union against Microsoft, but added, “However, the Japanese must feel that where there’s smoke, there’s fire, so they’re investigating.”

DiDio said Microsoft must defend its own IP vigorously while being “scrupulously honest about not stepping on anybody else’s IP” at the same time.

Gartner research director Martin Reynolds told TechNewsWorld the Japanese issues were all part of Microsoft’s larger antitrust war with a number of governments and companies. The analyst said that while there may be specific patent issues from Japanese manufacturers that are the root of the JFTC findings and recommendations, the NAP issue is unlikely to have a major impact on many businesses.

“It’s probably nothing,” Reynolds said. “It’s just part of an ongoing game between Microsoft and governments and industry.”

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