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Marija Danilunas is an intellectual property partner at Hammond Suddards.
LAST MONTH Microsoft settled part of the civil anti-trust proceedings brought against it by the US Department of Justice, thereby avoiding a finding of contempt of court and a $1m-a-day fine.
Industry may view the practice of a licensor requiring licensees to buy all its products as a condition of getting a licence to patented products as sound business practice. But, this process can breach anti-trust legislation by constituting unlawful "bundling" of goods.
In the Microsoft action, the Department of Justice alleged that Microsoft was guilty of illegal bundling by forcing PC manufacturers to take their Internet Explorer browser program as a condition of obtaining a licence to the operating system, Windows 95.
In the consent decree, Microsoft had agreed not to "bundle" other Microsoft products as a condition of PC manufacturers obtaining a licence, but it was not prohibited from developing "integrated products".
Microsoft alleged that the Internet Explorer was an "integrated" product permitted under the consent decree, leading the Department of Justice to prove the Explorer easily could be "uninstalled".
Microsoft settled the preliminary dispute by removing the Explorer icon, thus "hiding" the browser program and not requiring the program to be a condition of licences granted to equipment manufacturers.
The Justice Department declared the settlement a victory for consumers proving that other companies would not be "snuffed out by Microsoft's exercise of monopoly power".
Microsoft, however, was not defeated losing nothing by settling the interlocutory issue. More serious for its competitors, Microsoft will continue to integrate programs into its systems as a single integrated package. Its future software programs will not be easily "uninstalled", nor will Microsoft be in breach of the consent decree.
If Microsoft's operating systems continue to dominate 80-95 per cent of the market, the firm's dominance will grow, and it may dominate other industries as well if, as predicted, Microsoft moves into the television and telecommunications arena. The Department of Justice's victory may thus be short-lived, as Microsoft's competitors see their market shares eroded with the loss of independent research and consumer choice.