The suit, filed in federal court in San Jose, California, alleges that Microsoft has "pursued a broad course of predatory conduct over a period of years...resulting in substantial lost revenue and business for RealNetworks," according to a statement from RealNetworks.
The lawsuit alleges that Microsoft has wielded its "monopoly power to restrict how PC makers install competing media players while forcing every Windows user to take Microsoft's media player, whether they want it or not."
According to Bob Kimball, RealNetworks vice president and general counsel, "Our case is based on many of the same types of Microsoft conduct that have already (been) declared to be illegal--such as failure to disclose interface information and imposing restrictions on PC makers--as well as a broad course of additional predatory conduct."
In a conference call with reporters, Kimball said RealNetworks would seek as much as US$1 billion in damages due to lost business stemming from Microsoft's actions. The suit also seeks injunctive relief to prevent "further illegal conduct" by Microsoft.
Microsoft had no immediate comment.
Real said its lawsuit is complementary to the European Commission's ongoing investigation of Microsoft business practices, which Real is cooperating with.
In the late 1990s, the U.S. Department of Justice reviewed Microsoft's activity in the streaming media market, paying particular attention to the software giant's investments in Progressive Networks (now called RealNetworks), VDOnet and VXtreme, a recent acquisition. But no action was taken at that time.
In 1998, RealNetworks Chief Executive Rob Glaser, a former Microsoft executive, told members of the Senate Judiciary Committee that Microsoft's Windows Media Player "breaks" Real's RealPlayer software. A few months later, Apple Computer Senior Vice President Avadis Tevanian testified at the Justice Department's antitrust lawsuit against Microsoft that the company tried to "sabotage" QuickTime by causing misleading error messages to appear when it ran on Windows-based machines.
Beyond the charges that Microsoft tried to trip its competitors, Tevanian also testified that Microsoft executives tried to encourage their Apple counterparts not to market a version of QuickTime that would run on the Windows operating system. He quoted Microsoft executive Christopher Phillips as telling Apple colleagues, "We are talking about knifing the baby," a reference to Microsoft's wish that Apple kill QuickTime for Windows.
The outcome of the Justice Department trial has been criticised for not doing enough to rein in Microsoft's market power. Netscape filed a private antitrust suit against Microsoft, leading to a US$750 million settlement.
As part of the deal, Netscape parent Time Warner agreed to license Microsoft's Windows Media 9 product and work with the software giant to develop media services.
Microsoft's efforts to rule streaming date back to 1996, when the software giant took an undisclosed stake in VDOnet, an early player in the market, and landed a seat on its board of directors.
Less than a year later, Microsoft acquired an earlier player, VXtreme. The companies declined to release financial details, but a June 1997 e-mail message introduced during the Justice Department's antitrust suit showed that Microsoft was prepared to pay US$65 million.
Microsoft's push also included investments in a handful of other companies, including a US$30 million stake in RealNetworks that was later divested after the two companies had a widely publicised falling out.
Richard Grossman, a lawyer for the San Francisco-based law firm that negotiated one of the biggest class-action settlements against Microsoft, said RealNetworks' case is likely to be combined with suits by Sun Microsystems and other competitors pursuing private antitrust claims against the software giant.
"I would expect it will be made part of the same proceeding that is now going forward in the U.S. District Court in Maryland, so all the competitor cases are heard together," Grossman said.
Grossman added that the outcome of Microsoft's investigation by European regulators is likely to play into RealNetworks' strategy. "If the European authorities go against Microsoft, I imagine that would have a detrimental effect on this case," he said.
Jonathan Zuck, president of the Association for Competitive Technology, a pro-Microsoft trade group, said RealNetworks' suit was most likely a reaction to recent financial losses posted by the company.
"I think RealNetworks is trying to hide their red ink by blaming their problems on Microsoft," Zuck said. "They learned from Sun and (America Online) that if you have a tough quarterly report to put out, why not blame Microsoft?"
Jeff Pelline contributed to this report.
