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Japan’s anti-monopoly agency demanded on Tuesday that Microsoft Corp. drop a clause from contracts with Japanese electronics makers, wording it suspects allows the U.S. software giant to unlawfully appropriate patented technology. Microsoft said it would contest the order, which comes five months after agency investigators raided Microsoft offices following complaints by electronics companies. Fair Trade Commission official Toshihiro Hara said authorities are not certain that any patents have been violated by Microsoft, the world’s dominant software company, or other companies who are partners with it. It is difficult to determine such matters because so much of Microsoft’s basic code is secret. Several Japanese electronics makers have complained about suspected infringements of patents since December 2000, especially regarding multimedia technologies that are increasingly vital in the industry as audio and video become more widespread on the Internet, Hara said. He refused to disclose the makers’ names. Major Japanese consumer electronics companies that are partners with Microsoft include Sony Corp., Toshiba Corp. and Matsushita Electric Industrial Co. Some have been exploring technologies that would make them less reliant on Microsoft software. The disputed contract clause, called the “non-assertion of patents provision,” says companies that sign Windows licensing agreements will forgo the right to sue over suspected patent infringements linked to the licensing. “Even if personal computer makers develop their own technology, if it becomes linked with Windows OS (operating system), then Microsoft and other personal computer makers can take a ‘free ride,’ but they can’t demand damages,” Hara said. It’s the first time any government has demanded the clause be excised from contracts. Hara said the clause was also “restrictive” by making it difficult for Japanese electronics companies to obtain royalty fees — even when rivals violate their patents. The commission raised concerns that the clause violates Japan’s fair trade laws and may be a threat to free competition by hurting the incentives of Japanese manufacturers to develop key technology. It did not levy a fine or issue other penalties. In a statement issued through its Japanese subsidiary, Microsoft said it objected to the Fair Trade Commission’s conclusions and indicated it wanted to challenge them. It has until July 26 to respond. Immediately following the raids in February, Microsoft said it had already omitted the provision from new contracts. But the Fair Trade Commission said the clause remains in a number of current contracts and should be removed. The Redmond, Wash.-based company maintains that the disputed provision is legal under Japanese, U.S. and European Union law. Microsoft officials say such clauses were necessary to protect the company from costly lawsuits. Microsoft’s objection means the commission would open hearings and hear from the company before issuing a ruling. If Microsoft decides to appeal, the case moves to a Tokyo court. It is not clear how long the hearings process would last, Hara said. Analysts say Japanese authorities are trying to curb possibly monopolistic behavior in an effort to give more opportunities to alternative operating systems such as Linux, which because it is open-source and is developed in the public domain, its basic instructions are non-proprietary. “The commission is sending a strong message against Microsoft,” said Tadaaki Mataga, a Gartner analyst in Tokyo. “There’s a need for balance to promote innovations and development in an industry.” In 1998, the Fair Trade Commission ordered Microsoft to stop bundling software pre-installed in personal computers in a way that put competitors at a disadvantage. But the company wasn’t fined or charged with a crime. Microsoft faces similar challenges from other parts of the world. In March, the European Commission found that Microsoft has abused its “near monopoly” with Windows software, levied a record fine of some $613 million and demanded changes in how Microsoft operates in Europe to improve competition globally. Microsoft is appealing that decision. In the United States, an appeals court last month approved an antitrust settlement Microsoft negotiated with the Justice Department that was far more gentle than the EU-ordered sanctions. “It’s part of the evolving trend toward alternatives such as Linux not only in Japan but around the world,” said Tatsuya Iwamura, an analyst at Marusan Securities. “There’s long been a commonsense notion that something is wrong with the domination of one maker.” Copyright 2004 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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