Contentguard boss sues shareholders MS, Time Warner

Illegal enrichment

The DRM tollbooth is proving so expensive that even the tollbooth staff are unhappy. Contentguard founder and CEO Michael Miron has filed suit against the company's two majority shareholders, Microsoft and Time Warner, alleging that they "enrich themselves at the expense of the company and its employee shareholders." Both companies are customers, as well as owners of the company. Miron alleges that the majority shareholders are offering too low a price per share to the company's employee shareholders, and has filed suit in a Delaware court.

Contentguard and Intertrust are the two most influential DRM patent holders. Last year, after Microsoft paid $440 million in royalties to Intertrust, Redmond took a stake in ContentGuard which began life at Xerox. Time Warner followed suit, gaining an equal shareholding, and the two diluted their holdings to give Thomson a one third stake late last year. Contentguard's chief rival Intertrust is owned by Sony and Philips.

In January, the MPEG Licensing Authority set a royalty rate for mobile phones and handhelds that was compatible with the technical specifications set by the phone industry group the OMA (Open Mobile Alliance), using DRM based on technology from IPR Systems.

Manufacturers and network operators were dismayed by the levy - $1 per handset, or one per cent of the network transaction - having hoped that it would by royalty free.

Any hopes that Microsoft and Time Warner had of fending off an European antitrust investigation with the Thomson stake - Thomson is a French consumer electronics manufacturer - were dashed last month. The European Commission has resumed its antitrust review of the Microsoft and Time Warner investments in Contentguard, and has set itself until 7 April to come to a decision. The EC can demand modifications or block the deal altogether. ®

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