Microsoft Countersues Apple Computer : Technology: The action escalates a dispute between the rivals over multimedia software.

From Reuters

Microsoft Corp. said Monday it has filed a countersuit against Apple Computer Inc., escalating a dispute between the two longtime rivals over multimedia software.

Microsoft's countersuit, filed late Friday in U.S. District Court in San Jose, charges that Apple has conducted a "disinformation campaign" aimed at discrediting the software giant's efforts in the rapidly growing market segment.

In its suit, which seeks unspecified damages and legal fees, Microsoft charges that top-level Apple officials have participated in an "orchestrated campaign of false and deceptive information concerning Microsoft's technology."

Microsoft also denied Apple's claim that it misappropriated Apple code for use in Video for Windows, a program that allows developers to create multimedia applications for the Windows operating environment.

Apple has sued Microsoft, Intel Corp. and San Francisco Canyon Co. over the program. Apple officials said they were reviewing Microsoft's countersuit and had no immediate comment.

Microsoft officials say the disputed code is a relatively small and unimportant part of the program, but the legal battle has increased tensions between the two companies at the highest levels.

Last month, Microsoft Chairman and Chief Executive Bill Gates complained in a letter to Apple Chief Executive Michael Spindler of what he called Apple's "lack of candor and honesty" in dealings between the two companies.

Microsoft has taken pains to assure customers that, despite the growing dispute, it intends to continue producing word processing, spreadsheets and other software for Apple's Macintosh computer platform, a position reiterated by Gates last week at a gathering of computer engineers.

"Ultimately I think it comes down to the fact that they both need each other," said Tim Bajarin, president of Creative Strategies Consulting. "While this first round of volleys will be somewhat ugly, their relationship is too important to let the legal thing become a divisive issue between them."

The dispute over the Video for Windows code comes on the heels of the U.S. Supreme Court's refusal to hear Apple's copyright-infringement claim over Microsoft's Windows operating system, ending a seven-year legal battle.

"It seems Apple is just trying one more ploy to get compensation for something," said Dwight Davis, editor of Windows Watcher, a newsletter that focuses on Microsoft.

He said Apple has carefully chosen to target Microsoft's effort in the fast-growing area of consumer multimedia titles with its charges that Microsoft technology is inferior when it comes to displaying video.

Davis said Microsoft's countersuit is part of a campaign by the software giant to improve an image battered by a federal judge's rejection of a proposed settlement to a long-running federal antitrust probe conducted by the U.S. Justice Department.

"They are already tarred in the public's mind with being an unfair competitor," Davis said.

Apple shares fell 56 cents to $37.19 and Microsoft stock dipped 87.5 cents to $73.125 in Nasdaq trading Monday.

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