updated 4/12/2004 1:25:41 PM ET 2004-04-12T17:25:41

Microsoft and Time Warner on Monday moved to exert greater influence over some of the key technology behind digital media and entertainment, taking joint control of a private company that claims important technology patents in the area.

The deal echoes a similar step by Sony and Philips Electronics, which two years ago bought control of InterTrust, a rival company which owns some of the main technology patents in the field.

The latest deal points to the rivalry between some of the world's biggest technology, consumer electronics and entertainment giants, all of which are seeking a say in how the nascent digital media business develops. It is also the first concrete result of last year's peace accord between Microsoft and Time Warner, which ended the antitrust complaints over Netscape, the internet browser company that had been bought by the entertainment group. The former rivals agreed at the time to co-operate on future initiatives in digital media.

On Monday, Microsoft and Time Warner said they had paid an undisclosed amount to buy a majority stake in Contentguard, which specialises in digital rights management (DRM) technology.

This is used to control how digital entertainment and other "content" is used, making it central to efforts to build profitable businesses around the digital distribution of media.

The company was created by a spin-out from Xerox's renowned Parc research labs. Xerox said it would keep a minority stake in the company.

Contentguard's patents cover "fundamental, foundational" technology that is common in all DRM systems, said Michael Miron, chief executive. It has already licensed its technology to Microsoft and Time Warner, as well as Sony.

InterTrust has made similar claims for the centrality of its technology. It has sued Microsoft, alleging that the company's software infringes its patents.

Ron Grant, senior vice-president at Time Warner, said it had invested in Contentguard to encourage development of more stable, broadly accepted technology that could form the basis for mass-market digital entertainment services.

Copyright The Financial Times Ltd. All rights reserved.


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