FTC SLAPS MICROSOFT & INTEL
KEYWORDS: ANTITRUST, ANTIMONOPOLY, PATENT, CONTRACT, LICENSE

First of all, lets keep things in perspective. The Japanese Fair Trade Commission did indeed hit Microsoft, but compared to what the Europeans did, it was more like a pat on the wrist. This has more to do with the fact Japanese business interests have used their influence on the ruling Liberal Democratic Party to keep the FTC relatively powerless. The FTC, for the most part, is relatively powerless because Japanese business and government likes it that way. In 1998 the FTC warned Microsoft to stop selling Excel and Word as a package and to sell them separately. It also warned Microsoft to make available a version of its Windows operating system without the Internet Explorer. Microsoft agreed. In this case, it raided the offices of Microsoft in February, 2004 for violations of the Antimonopoly Law in relation to software licensing. In Japan, such a raid is a major loss of face, but not a fine or jail time. In fact, the FTC’s action  was to issue a warning, which is what the FTC usually does. It is to be taken seriously and Microsoft did decide to drop the violating clause in its licenses, while protesting that it was entirely legal, with no objections to it in the USA or Europe. The clause, which Microsoft imposed on Japanese computer manufacturers required them to reveal proprietary information that could violate patents. The clause, a non-assertion of patent, prohibits signatories from suing Microsoft or other signatories even in cases of patent infringement. It could also permit the incorporation into Windows of proprietary technologies developed by Japanese companies. Japanese firms are increasingly concerned about this as the multimedia capabilities of computers improve. The fact that Microsoft is also trying to incorporate Windows-like operating systems for home appliances is also a concern. Microsoft says the clause prevents frivolous lawsuits and helps to promote innovation. Microsoft has demanded a rehearing from the FTC and may appeal to a higher court. The Japan subsidiary expected that the parent company would reject the warning. However, the company said it would drop the clause from contracts after August 1, 2004, but would strictly enforce those concluded before that date. The company is reportedly switching to cross-licensing agreements. Microsoft’s R&D spending has increased from $470 million in 1993, to nearly $7 billion today, enabling it challenge even the most powerful Japanese electronics firm, even as it challenged Sony in game players.

The FTC in April, 2004 also raided the offices of Intel’s Japan subsidiary. The FTC is accusing Intel of striving to prevent Japanese computer makers from using microprocessor chips of other competitors. Intel had an 85% market share in Japan as of last 2003. This was particularly of concern with respect to chips for notebook computers, which are particularly heat sensitive. Intel had reportedly been having difficulty in succeeding with such chips for its latest generation of chips. Another competitor, Transmeta Corp., was reportedly ahead in this field and was reaching a tie-up with NEC, which Intel was thought to be concerned about.

Copyright 2005. All rights reserved Attorney Roderick H. Seeman

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