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Microsoft can keep pacts
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February 17, 1998: 5:06 p.m. ET
Texas judge rules non-disclosure clauses don't hamper antitrust probe
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NEW YORK (CNNfn) - A Texas judge on Tuesday dismissed a lawsuit against Microsoft Corp. that sought to have the software maker's controversial non-disclosure agreement ruled invalid.
The lawsuit, filed in November, claimed that provisions of the pacts - known as non-disclosure agreements - could potentially hamper an antitrust probe the attorney general's office is conducting against Microsoft.
Texas Attorney General Dan Morales contended the agreements amounted to a legal roadblock since companies that signed the non-disclosure agreements (NDAs) could use them as a pretext to withhold evidence for fear of antagonizing Microsoft.
Under the agreements, companies must notify Microsoft when the government requests information from them about the software giant's business practices.
A spokesman in the Texas attorney general's office was not immediately available for comment.
Virtually all major high-tech companies, including Sun Microsystems, Novell and Netscape, use NDAs as a shield against the pilfering of their intellectual property.
In the Texas case, Microsoft argued that the attorney general's office had produced no evidence to corroborate its claim that NDAs had interfered with its antitrust probe. After the ruling, company officials hailed Texas State District Court Judge Joseph Hart's decision.
"We are pleased that the court recognized the important role non-disclosure agreements play in protecting Microsoft's intellectual property - our most valuable asset," Tom Burt, Microsoft's associate general counsel, said in a statement.
Adding that the agreements "do nothing to prevent the government from doing its job," Burt said Microsoft would continue to cooperate with the attorney general's investigation.
Microsoft is currently being investigated for alleged antitrust violations by the U.S. Justice Department and 11 states, including Texas.
Jim Cullinan, a company spokesman, said the Texas decision is "basically a mirror" of a December ruling by U.S. District Court Judge Thomas Penfield Jackson.
In that ruling, Jackson found that NDAs were nothing more than a mechanism for ensuring that Microsoft is notified and given a chance to object before being forced to disclose potentially valuable information to a competitor.
Microsoft is currently under investigation by the Justice Department for allegedly using its dominance in the software industry to compel computer makers to install its Internet browser along with other Microsoft operating software.
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Microsoft Corp.
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