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In the News

- Microsoft Pays Burst.com $60 Million to Settle Suit
- Analysis: Enthusiast Web Sites Forced to Reveal Sources to Apple

==== In the News ====

by Paul Thurrott, thurrott@windowsitpro.com

Microsoft Pays Burst.com $60 Million to Settle Suit

Microsoft has reached a tentative agreement to settle a patent-infringement, intellectual property theft, and antitrust lawsuit that Burst.com filed against the software giant. Under terms of the preliminary "agreement in principle," which Microsoft announced Friday, the company will pay Burst.com $60 million and will receive nonexclusive access to Burst.com's patent portfolio.
"While we were confident of prevailing in this lawsuit, we have been open from the beginning to finding a reasonable way to resolve this case," Tom Burt, Microsoft corporate vice president and deputy general counsel, said. "Securing a license to the Burst.com patent portfolio through this settlement allows us to focus on the continued development and deployment of Windows Media technologies to deliver the ultimate media experience to our partners and customers." Burst.com noted that the settlement validates its claims and proves that its work was both pioneering and innovative. Burst.com sued Microsoft in June 2002, alleging that Microsoft had courted the company in a bid to purchase its then-new audio- and video-streaming technology. After 2 years of working closely with Burst.com, however, Microsoft suddenly broke off the relationship and shipped a suspiciously similar technology as part of Windows Media 9 Series. Burst.com says that Microsoft stole its streaming technology and then systematically destroyed related and damaging inhouse documentation to hide that fact.
Is that claim true? We might never know whether Microsoft actually stole Burst.com's digital media technologies. But this week's settlement, although in keeping with Microsoft's recent trend of settling outstanding litigation, is sure to harm the company's reputation. And the Burst.com case isn't the only Microsoft case that deals with digital media: The RealNetworks lawsuit against Microsoft is still outstanding.

Analysis: Enthusiast Web Sites Forced to Reveal Sources to Apple

A California judge in the County of Santa Clara has ruled that representatives of three Macintosh enthusiast Web sites must reveal the insider sources who disclosed plans about upcoming Apple Computer products. Apple, a darling of the media and its users, is risking its untarnished reputation by taking on its most ardent fans, who regularly trade secrets and rumors about the company's upcoming products. It might come as a surprise to some people, however, that Judge James P. Kleinberg, who is overseeing the case, has issued a well-reasoned ruling in defense of Apple's claims, albeit one that is sure to ignite free speech debates for months to come.
"\[Apple's\] trade secrets ... are stolen property," the ruling reads. "The information is not transformed by its form or who receives it. An interested public is not the same thing as the public interest. The right to keep and maintain proprietary information as such is a right \[that\] California legislature and courts have long affirmed and is essential to the future of technology and innovation generally. The Court denies the \[defendants'\] request for a protective order."
Apple filed suits against AppleInsider.com, O'Grady's PowerPage, and ThinkSecret.com in mid-December, charging those enthusiast sites with leaking Apple trade secrets. Specifically, the company noted that the sites divulged specific information about several upcoming products, including a FireWire (IEEE 1394) audio interface for the GarageBand software package. Apple sought to gain access to the email records of the individuals who wrote Web articles about those technologies so that the company could ascertain who leaked the information.
The representatives of the sites claimed to be journalists who were protected from disclosing their sources and claimed the benefits of California's "shield law," which prevents journalists from being found in contempt for not revealing sources. (Even true journalists can't receive protection from identifying sources who have broken the law.) Apple argued that the acquisition and distribution of trade secrets is a violation of California state law and that the federal journalist-protection privilege and California "shield law" therefore don't apply. The court agreed.
The judge also admitted that this ruling will test the boundaries of free speech. "Free speech ... is rife with complexities and restrictions," the order reads. However, the ruling wasn't about general free speech concerns, the judge noted, but rather about discovery. In other words, under California law, Apple's desire to discover information about the illegal distribution of trade secrets is within the company's rights. "This state \[has a\] strong commitment to the protection of proprietary business information," the ruling notes.
The ruling also tossed aside the defendants' free speech arguments as "a recitation of the obvious," noting that the primary purpose of the First Amendment to the US Constitution, which (among other things) grants "the freedom of the press," is to prevent powerful institutions such as the government from halting the distribution of news before it's published. News, in general, is considered to be information that is "in the public good." But in this case, trade secrets were published, and the defendants "did not present a persuasive reason of 'public good' and never answered the Court's inquiry as to why there was a true public benefit from disclosure."
As the ruling further states, "Reporters and their sources do not have a license to violate criminal laws. The claim of 'privilege' is overstated in this context." Noting that the definition of what constitutes a journalist is murky in the online age, the judge demurred on the defendants' journalist status: "The journalist's privilege is not absolute. Journalists cannot disclose information when it relates to a crime."
Finally, the ruling left some unanswered questions. "The Court makes no finding as to the ultimate merits of Apple's claims, or any defenses to those claims," the ruling reads. "Those issues remain for another day." The judge also refused to address whether Web site writers, or bloggers, are journalists because the defendants' claims would have been rejected even if they were journalists.
As I noted Friday in WinInfo Daily UPDATE Short Takes, Apple might have been better served by taking a more personal approach and reaching out to the offending sites. These overzealous Apple fans surely would have jumped at the chance to have a closer relationship with the company, even at the expense of being able to publish secret information early. Both Apple and its fan sites would benefit from such a relationship. The sites would get what they want (i.e., a real relationship with Apple), as would Apple (i.e., a reduction in the distribution of trade secrets). Instead, Apple, although legally correct, is taking an unpopular step at a time when public perception of the company is key to its continued success. Let's hope that this case doesn't backfire on the Mac maker.

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