Wave Systems Corp. (fka WAVXQ)

[Countryboy]

Xerox and Microsoft.

Interesting past history.

http://www.contentguard.com/ip.asp

EU Wary of Microsoft DRM Purchase

In a move to prevent Microsoft from using its dominance in PC operating systems to control the burgeoning field of digital rights management, European regulators are considering blocking the company's acquisition of an influential DRM patent holder.

The European Commission announced in late August that it was launching an in-depth investigation into Microsoft's and Time Warner's acquisition of the digital rights management company ContentGuard. Its final decision is due Jan. 6, 2005.
The reason for the EC's concern is that ContentGuard owns key patents based on early 1990s work by Mark Stefik, a researcher at Xerox's Palo Alto Research Center, on DRM technologies. These include machine-readable markup languages to attach rights to content so that, for example, an article could be read but not printed, or a rights-holder could specify how many times a song could be played. The technologies also include the ability to attach fee-charging mechanisms, and other such basic DRM ideas.

In 2000, Xerox, with some investment from Microsoft, launched ContentGuard as an independent company; in April 2004, Microsoft and Time Warner announced they would acquire all of Xerox's ownership aside from a small equity stake.

The EC's focus is primarily on Microsoft, against which it has mounted a number of recent actions. According to the EC's press statement, "After a preliminary review, it appears to the commission that the transaction might create or strengthen a dominant position by Microsoft in the market for digital rights management (DRM) solutions."

Although the DRM market is still in flux, as it grows those patents could provide their owners significant control over all types of content. That control could arguably be even more significant if Microsoft is able to leverage its dominance in the desktop market so that its technology becomes the gateway through which all content must pass to reach consumers.

This is especially true since ContentGuard claims that its patents cover all rights-expression markup languages, the tags that establish what people can do with digital content. If that claim is upheld in court, it could block the development of alternatives intended to aid libraries and other public domain sources.

Gary Barnett, IT research director with London-based firm Ovum, believes that the ContentGuard case is in fact much more significant than the EC's recent Media Player action, in which it ordered Microsoft to unbundle its player from the Windows operating system.

"By obliging Microsoft to pull its Media Player out of Windows all you're doing is inconveniencing users, because if Microsoft owns the formats the consumer has to have the media player," he said. "Whereas, the formats are what's going to determine who really controls content on the internet, and fundamentally that's what all this is really about. I'm very encouraged by the fact that the EU is starting to look at what is potentially a gigantic issue for all of us."

Within the United States, federal antitrust regulators have taken no action. But because both Microsoft and Time Warner have substantial operations in Europe, they are required to report such acquisitions to the European Commission, which oversees antitrust actions in the European Union.

According to Mark Jones, a London-based antitrust lawyer with Norton Rose, the EC has 25 to 30 working days from the date of the initial report of such an acquisition to review it and decide whether to let it pass or to investigate further. Between its August announcement and the January deadline, said Jones, the EC will produce requests for further information, hold at least one hearing and at some point present its statement of objections. The deadline for its final decision can be extended if all parties agree or if the companies offer to make concessions and negotiations are underway.

The EC, for its part, can choose to apply sanctions or block the merger entirely -- as it did when General Electric wanted to merge with Honeywell even though the Federal Trade Commission had previously cleared it.

It may seem surprising that the EC can block an acquisition involving only American companies. But, said Jones, "The reality is that Time Warner and Microsoft won't ignore the EC. Because of the level of their business activities in Europe, they have a relationship with the regulator -- in the case of Microsoft, a pretty bad one."

In a separate action, last week a Luxembourg court heard Microsoft's appeal against the EC's March ruling fining it $612 million and requiring it to sell a version of Windows without Media Player.

On April 27, [2000] at WinHEC, Microsoft announced a joint venture with Xerox called ContentGuard, a startup Internet company that is a spin-off of Xerox. ContentGuard will provide digital rights management (DRM) software technology that protects and manages books and documents, music, software, and other valuable content for distribution over the Web. Microsoft will contribute future technology and startup money to this venture, and Xerox will contribute about 17 key patents to the new company. Xerox will own 75 percent of ContentGuard, and Microsoft will own the remaining 25 percent. ContentGuard will be based in McLean, Virginia, with offices in Palo Alto and El Segundo, California.

A striking example of the need for this new DRM technology involves Stephen King's online release of his e-book novella, Riding the Bullet. With downloads of the e-book exceeding 500,000 in the first 48 hours, it didn't take long for hackers to break the book's encryption code and illegally distribute the book worldwide.

Steve Ballmer, Microsoft president and CEO, said, "People love getting content delivered to them wherever and whenever they choose, and we want to ensure that they continue to have many opportunities to do so. The secure and safe delivery of digital media is of primary importance to not only everyone in the business of content distribution, but consumers of this information as well." Rick Thorman, Xerox president and CEO, added, "ContentGuard will offer a safe and secure e-commerce environment for publishing and distributing any high-value or copyrighted material."

Industry analysts anticipate that future word processing documents, spreadsheets, email messages, media players, and e-book readers will all have built-in DRM features, and that these features will be almost transparent to the document publishers and readers. High-value digital content, such as market research, business reports, books, periodicals, sheet music, patent applications, and academic course packs, have all been early adopters of this technology. Xerox and Microsoft jointly announced plans to extend ContentGuard's technology to audio and video content.

Xerox developed ContentGuard's DRM technology at its Palo Alto Research Center and augmented it with contributions from Microsoft. ContentGuard will provide software, consulting services, and Internet-based solutions to help content distributors disseminate digital content over the Internet in a way that's protected but still easily accessible to consumers.

ContentGuard's Internet content protection software locks digital content, preventing unauthorized users from forwarding it or copying it unless they have paid or registered with the content owner. A reader must obtain a digitally-signed license to unlock the content. When users attempt to access a ContentGuard-enabled document, they are sent to a DRM Web site where they make a payment as they would in any standard e-commerce transaction. The user can then download the digital content and see or hear it by employing a standard viewer or player. Although the user can distribute the work, subsequent readers or viewers will also require a registration. ContentGuard currently has competition from other companies offering DRM technology in the market.

ContentGuard uses Extensible Rights Markup Language (XrML). To work broadly, this technology requires a standard for DRM on the Internet. In the WinHEC announcement, Microsoft and Xerox noted that Microsoft and ContentGuard will collaborate on the development of a common DRM standard for the digital content. ContentGuard will deliver its DRM XrML code royalty-free to developers and content providers to make this standard widely available.

ContentGuard will continue to collaborate with Microsoft and Xerox on future development of DRM technology. Microsoft announced that it will support ContentGuard's licensing and rights labeling format in its own DRM solutions. Microsoft Reader, which displays books on screen, will be the first product to incorporate the new ContentGuard technology when it appears this summer. ContentGuard will also extend its technology to support future versions of Windows Media Player and Windows Digital Rights Manager.

Microsoft Collaborates with Xerox and ContentGuard to Facilitate Secure Distribution of Electronic Content

ContentGuard, Inc., a Xerox spin-off company augmented by Microsoft investments, will offer an easy way to protect digital material distributed over the Internet and expand consumer choice.

PALO ALTO, Calif., April 27, 2000 — When Stephen King's novella, "Riding the Bullet," was released over the Internet last month, the publishing world heralded it as a glimpse into the future of electronic book distribution. Its release proved two major points about eBooks. First, it proved there was real demand for premium digital content -- there were 500,000 downloads of the book in its first 48 hours of availability, and some servers shut down trying to keep up with the demand. It also proved that digital content is subject to piracy. Hackers managed to break the book's encryption code, and pirated copies were distributed illegally to a number of Web sites and chat groups.

The distribution of books and other digital media over the Internet has opened up enormous possibilities for consumers in how they can sample, experience and purchase electronic materials. At the same time, suppliers are working to create a distribution system known as "digital rights management (DRM) technology" that ensures protection for copyrighted material while making it easy for consumers to buy and enjoy these forms of digital entertainment.

"People love getting content delivered to them wherever and whenever they chose, and we want to ensure that they continue to have many opportunities to do so," said Microsoft President and CEO Steve Ballmer as he announced today's launch of ContentGuard, Inc., a spin-off of the Xerox Corp.

The new Internet company, created with the help of an investment from Microsoft, will offer a comprehensive software system to protect and manage books, documents, music, software and other valuable content that is distributed over the Web. "The secure and safe delivery of digital media is of primary importance to not only everyone in the business of content distribution, but consumers of this information as well," Ballmer said.

ContentGuard's DRM technology, originally developed at the Xerox Palo Alto Research Center and augmented with contributions from Microsoft , provides products such as software and consulting services as well as Internet-based solutions to help content distributors disseminate digital content over the Internet in a way that is protected but still easily accessible to consumers.

Microsoft and ContentGuard will also collaborate on future development of DRM technology. Microsoft will support ContentGuard's licensing and rights labeling format in its own DRM solutions. Microsoft Reader, a new software product for displaying books on screen, will be the first product to incorporate the new ContentGuard technology when it debuts this summer. The technology will also be extended to support future versions of Windows Media Player and Windows Digital Rights Manager.

"ContentGuard will offer a safe and secure e-commerce environment for publishing and distributing any high-value or copyrighted material," said Xerox President and CEO Rick Thoman.

ContentGuard's Internet content protection software is designed to "lock" digital content, preventing unauthorized users from forwarding it or copying it unless they have paid or registered with the content owner.

Once content owners such as publishers or authors establish specifications for how customers will access their publications, ContentGuard will incorporate those specifications into the content and use encryption technology to "lock" the content. Anyone who wants access to the material must obtain a digitally signed "license" to unlock the content. When users attempt to access a ContentGuard-enabled document, they are sent to a digital rights management Web site where they make a payment as they would in any standard e-commerce transaction. The user can then download the digital content and see or hear it by employing a standard viewer or player.

While users can redistribute the content, new recipients will have to acquire their own "license" before gaining access to the content. In other words, if someone enjoyed reading, "Riding the Bullet," and wanted to send it to a friend, he or she could do so, but the recipient would have to pay for the right to read it.

While DRM technology has been available from many sources, the benefit of the ContentGuard approach is that it is flexible enough so that publishers can use marketing initiatives such as single chapter preview programs or one-time usage scenarios to promote their products. Such promotions will let consumers sample content before actually having to pay for it.

"Content wants to be free, but content creators want to get paid," said Dick Brass, vice president for technology development at Microsoft. "ContentGuard's ease of use for publishers and for consumers certainly ensures it an immediate presence in the eBook industry." Brass and Xerox Internet Business Group president, Michael Miron, will be co-chairmen of ContentGuard's board of directors.
Microsoft and ContentGuard will also collaborate on the development of a common digital rights management standard for the many emerging digital content categories. This will assure that content developers such as publishers and authors receive payment and retain control over how their materials are used.

ContentGuard will work to establish one of its core technologies, XrML (eXtensible rights Markup Language) as a standard for digital rights management on the Internet. It has agreed to provide the XrML code to the industry royalty-free to stimulate its use among software developers and content providers. By freely licensing XrML, ContentGuard is promoting the use of digital rights specifications among authors, artists, publishers, distributors and retailers who may use software products from different vendors.

"The creation of common standards among these varied groups will be critical to making the most of the Internet as a way of distributing published materials," Miron said.
Although ContentGuard's current focus is on the publishing and eBook markets, creating a standard way for applications to support digital rights management opens doors for many markets. It will allow developers to create a new generation of common products such as word processing applications, spread sheets, email, media players and eBook readers, with built-in digital rights management features. The ContentGuard technology will be integrated into commonly used technology so as to create minimal intrusion for the consumer.

"Digital rights management will become a ubiquitous element of all content exchange eventually, whether for secure ecommerce or for ensuring the persistent protection of high-value sensitive material," Brass said. "ContentGuard's mission is to drive this evolution."

Currently, the ContentGuard software suite can protect the distribution of digital content such as market research, business reports, books, periodicals, sheet music, patent applications and academic course packs. Plans are under way to enable ContentGuard for audio and video material.
"Ultimately, as ContentGuard and other digital rights management software is widely adopted, consumers will be able to access a far greater range of digital content over the Internet than ever before-whether it's music, software or eBooks," Brass said. "Since they won't need to download special software, this process will be simple and fast."