Microsoft has settled a dispute that software rival SCO brought before the European Commission, agreeing to release SCO from a "restrictive" contract over Unix technology royalties.
The EC said Microsoft has waived restrictive clauses in a contract signed with SCO in 1987, following Commission objections earlier this year.
The Commission had objected to clauses that required SCO to use Microsoft code in future versions of its Unix operating system - and to pay royalties for it, even if it did not in fact use the code. The dispute stemmed from work Microsoft contributed to AT&T's unified version of Unix, which was later sold to Novell and then SCO.
"Microsoft has unilaterally and irrevocably waived its rights under contract provisions to which the European Commission had objected on the grounds that they prevented another software firm from competing freely with Microsoft," the EC said.
The contract between SCO and Microsoft required SCO to base its Unix products on work done by Microsoft in 1987 and to pay a set royalty per copy. It also insisted that SCO make its versions of Unix backwardly compatible with certain MS applications available in 1987, it said.
"These restrictions harmed SCO's ability to compete with Microsoft...in the field of operating systems for workstations and servers where there is vigerous competition between Microsoft's NT product and a variety of versions of Unix," the EC said.
Under the waiver, SCO can design its future Unix products as it wishes without being obliged to use any Microsoft intellectual property and has the option to use the technology at a set royalty.
Microsoft was involved in 1987 with AT&T in unifying the different versions of the Unix operating system and retained technology rights after AT&T sold on its rights in the system, first to Novell, then to SCO.
Microsoft's public affairs director for Europe, John Frank, said SCO had asked not to pay royalties any more on its use of the Unix technology.
"We said you are using our technology, you pay our royalty. They took it to the Commission and the Commission had some possible concerns," he said.
A Microsoft statement said the company offered to waive the backward compatibility and development requirements earlier this year but retained its demand for royalty payments.
In early November, after talks with SCO failed to resolve the issue, Microsoft unilaterally waived the the compatibility and development requirements in the contract, it said.
After receiving the waiver, the Commission cancelled a hearing on its May statement of objections, which had been scheduled for 13 November.
The EC rejected SCO's request for further action and closed the case, after which SCO withdrew its complaint.
"We're pleased that we were able to resolve these issues to the satisfaction of everyone involved, and we're particularly pleased that the Commission upheld our right to collect royalties for the use of our technology," Microsoft said.
"This principle is fundamental to the entire software industry," its spokesperson added.
Frank insisted that if SCO wants to use Microsoft technology in its forthcoming Gemini 64 Unix technology it will have to pay a royalty.
SCO paid Microsoft about $4 million in the last year in royalties, he said.
Microsoft holds a stake of 10-20 per cent stake in SCO, he said.
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