In an abject and uncharacteristic climb-down, Microsoft Corp has surrendered unconditionally to Carlsbad, California software compression king Stac Electronics Inc in the issue that began when Microsoft approached Stac to license its technology, strung the company along, and then told it that it would develop its own without any help from Stac. Yesterday the two companies signed a broad cross-licence agreement to end the patent dispute, and Microsoft agreed to invest $39.9m in Stac to provide a framework for future co-operation between the two companies, they said. Under the agreement, they will cross-license all their existing disk compression patents and future disk compression patents that either company receives in the next five years. Stac will also receive a licence to Microsoft’s pre-load technology in MS-DOS 6, and the right to license, for a royalty, all of Stac’s existing patents unrelated to disk compression, as well as any new patents Stac receives over the next five years. The agreement also calls for Microsoft to pay Stac licence royalties of $1m a month for 43 months, as well as paying $39.9m for 4.0% non-voting convertible preferred stock that matures in the year 2004. The conversion price is $9 a share and is convertible into 4.44m shares. Microsoft is invited to Stac’s board meetings and will identify areas for future co-operation. It is assumed that Microsoft surrendered because doubts had been raised that its new disk compression technology in the MS-DOS 6.22 release was safe from further patent litigation from Stac.
