RealNetworks Could Get Backup In Microsoft Suit

The Seattle-based company sued Microsoft Thursday in federal court in San Jose, Calif., claiming the software giant is illegally using its Windows monopoly to dominate the digital media market. RealNetworks is seeking damages that could exceed a billion dollars, in addition to a court order preventing future illegal conduct from the Redmond, Wash.-based, Microsoft.

While RealNetworks is the only plaintiff in the suit, experts say it could be helped later by other companies with similar concerns within their own markets.

"(The lawsuit) is forming a boilerplate for others to come in," Richard Doherty, research director at The Envisioneering Group in Seaford, New York, said.

While declining to name the companies, Doherty said a DVD authoring company, a maker of professional editing tools and others have discussed the possibility of assisting RealNetworks in its suit. "They don't want to go on the record at this point, but they might yet help Real," Doherty said.

Neither RealNetworks nor Microsoft are clients of Envisioneering Group, although both companies subscribe to the market research firm's newsletters.

Microsoft said it was surprised by RealNetworks's legal action, given the intense competition in the digital media marketplace and the plaintiff's own reported growth, massive distribution of its software and more than a 1 million downloads of its RealOne media player a week.

"Thus, this is a case where a leading firm is seeking to use the antitrust laws to protect and increase its marketplace share and to limit the competition it must face," Microsoft said in a statement.

Some analysts agreed that RealNetworks could compete successfully against Microsoft, if it offers consumers a product better than Microsoft's Windows Media Player. RealNetworks's product can be downloaded for free from the company's web site, and easily installed on Windows.

"As long as it's better, than people are going to continue to use it," Martin Reynolds, analyst for market researcher Gartner, said.

Doherty, however, disagreed, saying RealNetworks is at an unfair disadvantage to Microsoft.

"We have PCs here, where installing Windows Media 9, not the Windows Media that ships with Windows, derails other multimedia programs, including Real," Doherty said. "Can Microsoft fix that? Yes, they have the resources to fix it. Have they chosen to? No."

As to whether Microsoft is obligated to make the technical changes needed in this example is a question that would need to be settled in court. "That's what Rob (Glaser, chief executive of RealNetworks) wants. He wants that day in court," Doherty said.

RealNetworks argues that despite the innovation of its product line that has helped placed the company on track for its sixth straight quarter of revenue growth, the company's business would be substantially larger if Microsoft played by the rules and did not unfairly leverage its Windows monopoly.

Microsoft conduct that RealNetworks claims is illegal includes failure to disclose interface information for Windows and imposing restrictions on PC makers. Both are the same actions that were found illegal in the federal government's suit against Microsoft. In that suit, a federal court found that Microsoft unfairly used its Windows monopoly during its browser war against Netscape Communications in the late 1990s.

"The chances of success (for RealNetworks) are actually dependent upon whether or not Microsoft has learned the lessons from its previous experience with the antitrust claims (by the government)," Matthew Furton, partner in the commercial litigation group in Chicago-based antitrust firm Gordon & Glickson, said.

RealNetworks has said its lawsuit complements the European Commission's antitrust investigation of Microsoft. RealNetworks has testified in that case.

Despite its struggles on the desktop, RealNetworks has been successful against Microsoft in getting its software in non-PC devices such as smart-phones, advanced cellular phones capable of playing music and video and running applications. RealNetworks earlier this year signed non-exclusive agreements with handset makers Telefon AB L.M. Ericsson and Nokia.

This story courtesy of TechWeb.