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  Texas Sues Microsoft Over Investigation

By Elizabeth Corcoran
Washington Post Staff Writer
Saturday, November 8, 1997; Page D02

The Texas attorney general yesterday sued Microsoft Corp., alleging that the software giant has tried to "chill" the state's investigation of its business practices.

In a filing made in state district court, Attorney General Dan Morales contended that Microsoft "improperly binds" companies that license its software by requiring that they inform Microsoft "before providing information to state and federal antitrust investigators." That clause means that some people and organizations that the state wants to interview have become "apprehensive about fully cooperating" with the investigation, according to the suit.

Investigators in Texas are not alone in complaining about Microsoft's nondisclosure agreements (NDAs), which Microsoft requires those who license its software to sign.

On Oct. 20, the Justice Department filed suit against Microsoft, alleging that it has violated a 1995 consent decree in which it pledged to change certain business practices that the government had said inhibited competition. As part of the remedy for such practices, the government asked the court to strike down portions of Microsoft's NDAs.

Microsoft representatives have contended that such agreements are standard fare in the industry. This past week, at a Senate Judiciary Committee hearing that centered on testimony critical of the software maker's business practices, Microsoft supplied copies of other companies' NDAs to illustrate its point.

In a statement about the Texas suit yesterday, William H. Neukom, Microsoft's senior vice president for law, denied wrongdoing and called the NDA issue a "red herring."

Microsoft also has tried to smooth over the NDA issue with federal investigators. In a letter to Justice Department officials in early September, Microsoft said it wouldn't insist that its licensees inform the company before answering government queries.

According to the Texas suit, Morales asked Microsoft for a similar pledge but was turned down because the company was concerned that confidential information might become public. Microsoft said yesterday it has offered to talk with Texas officials about an arrangement similar to the one it made with federal investigators.

Texas began investigating Microsoft's business practices early this year. Since then, attorneys general in five other states have begun looking into Microsoft's business practices.

Also, consumer advocate Ralph Nader is heading a two-day symposium next week on Microsoft. "We want to demystify" issues about the computer industry and Microsoft, Nader said.

© Copyright 1998 The Washington Post Company

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