Symantec-Microsoft Lawsuit Shows Vista Straining Business Ties

The case is about storage technology, but it shows how Vista will move Microsoft into competition in new areas.
It hasn't taken Microsoft long to make enemies in the IT security market.

Microsoft looks to be a much larger force in security software when it delivers Windows Vista and Longhorn Server next year. Symantec, which sold $2.6 billion worth of security products and services last year, has sued Microsoft, claiming Vista misuses data management technology Symantec owns through its Veritas acquisition. The debate is over storage technology, but the bigger question is who will Microsoft's allies and rivals be as Vista sets new boundaries of what a PC operating system does.

The dispute is over a 1996 agreement in which Veritas licensed to Microsoft its Volume Manager software, which lets data be stored and retrieved across different types of storage devices. Microsoft declined an interview for this story but says in a statement that it bought the rights in 2004 to related technology it's using in Vista and applied for patents of its own. But Symantec, which bought Veritas last year, claims Microsoft is wrongly using the technology to make competing products. "The idea was not to give Microsoft our IP so that it could be used against us," says Michael Schallop, director of legal affairs at Symantec.

Vista's At Stake
Symantec asked the court to prevent Microsoft from distributing Vista while the disputed technology is included. Microsoft CEO Steve Ballmer last week downplayed the risk, saying it wouldn't delay Vista.

Although the suit centers on storage technology, Vista does pose a threat to Symantec's desktop security business. Microsoft's designs on the security market are clear. "If you look at our investment in the next version of Windows, security would jump out as the thing we've spent the most time on," Microsoft chairman Bill Gates said in February. Vista includes new antivirus, anti-spyware, and other security features. "For Symantec, this is about survival as Microsoft threatens to move more into Symantec's space," says Bruce Sunstein, head of law firm Bromberg & Sunstein's patent practice.

10 Years To Court
1996 Microsoft licenses Veritas tech
1999 Amended agreement has Veritas working with Microsoft on technology for Windows 2000
2004 Microsoft pays Veritas for certain intellectual property. Microsoft previews Windows versions that Veritas says breaks agreement; negotiations start
2005 Symantec buys Veritas in July
2006 Symantec sues Microsoft

Symantec's suit alleges that, "over the course of nearly a decade, Microsoft has deliberately and surreptitiously misappropriated" Symantec's data storage technologies, misled the government into issuing patents to Microsoft based on technologies invented by Veritas, attempted to persuade Symantec to forgive Microsoft's "misdeeds" under the guise of expanding their business relationship, and built portions of its next-generation operating system "on this house of cards."

In the 1990s, Microsoft needed more sophisticated storage management capabilities for Windows, and it struck a deal for limited use of Veritas' Volume Manager in 1996. In 1999, the companies amended their agreement, obliging Veritas to teach Microsoft engineers about Volume Manager and help them test its storage management software embedded in Windows 2000. Symantec says after the release of Windows 2000, Microsoft became less willing to share information about its technology development and subsequently developed its own storage management products and applied for related patents. When the first previews of Vista and Longhorn were shown two years ago, Veritas concluded that Microsoft had included features in violation of the pact.

Will it blow over? Symantec plans to maintain partnerships with Microsoft in areas not related to the case. Microsoft has settled a number of long-simmering disputes, burying the hatchet with Sun Microsystems, for example, two years ago with a $1.9 billion settlement and agreement to work together on new projects. But Vista could rewrite the rules again about who's a friend to Microsoft and who's a rival.