Microsoft Settles Suit With AOL

Updated from 4:51 p.m. EDT

Microsoft (MSFT Quote) and AOL Time Warner (AOL Quote) settled a high-profile antitrust suit, taking the opportunity to say they were working together on development of digital media distribution systems.

The companies said late Thursday that Microsoft would pay AOL $750 million to settle an antitrust lawsuit that America Online had brought in January 2002. The suit, which claimed Microsoft acted anticompetitively in harming its onetime Net browser rival Netscape, was filed just six months after an appeals court affirmed the software giant had broken federal antitrust statutes.

But rather than talking about the litigation, the chairmen of the two companies spent a Thursday evening conference call with reporters talking about their planned cooperation in developing and popularizing technology for securely disseminating entertainment and information in various digital forms.

With Microsoft's software and AOL Time Warner's content, "We can begin to make a real positive statement and step in the direction of creating a world where content can be distributed digitally to consumers," AOL Time Warner Chairman and CEO Dick Parsons said Thursday.

The agreement marks a victory of sorts for both sides at a time when each company could use a bit of good news. For Microsoft, the deal removes the potential overhang of defending a costly and time-consuming lawsuit. It also gives the software colossus a high-profile media industry ally as it seeks to develop systems that companies might use to distribute music, video and documents in digital media.

"This is the broadest and most comprehensive license we've ever done with our rights management software and our media software," Microsoft Chairman Bill Gates said on Thursday.

For AOL Time Warner, besieged by a long stock market slide, the fresh cash will help Parsons in his push to slash debt and open up new revenue sources for the company's content.