RealNetworks has filed a lawsuit against Microsoft alleging that the software giant has illegally used its power as a monopoly to control the digital media market.

The lawsuit, filed in federal court in San Jose, California, claims that Microsoft has forced PC manufacturers to include Microsoft's media player while at the same time placing restrictions on how competing players may be installed, RealNetworks said in a statement released on Thursday.

"We're accusing Microsoft of engaging in a broad range of predatory practices to protect their operating system monopoly and to try to create a new monopoly in the digital media space," said David Stewart, deputy general counsel for RealNetworks, in an interview.

RealNetworks accuses Microsoft of unlawful tactics including product bundling, restrictive licensing, exclusive dealing, predatory pricing, refusing to sell unbundled operating systems and discriminatory disclosure and withholding of information needed to interoperate with the Windows operating system, according to a copy of the complaint.

The lawsuit seeks to recover damages lost because of "Microsoft's illegal conduct," according to a quote in the statement attributed to Rob Glaser, RealNetworks' chairman and chief executive officer.

These damages could exceed US$1 billion, the statement said.

"We're trying to stop Microsoft's conduct in the digital media space and we're seeking good compensation for the harm Microsoft has caused us," Stewart said.

The settlement Microsoft reached in November 2001 in the antitrust case brought against it by the U.S. Department of Justice (DOJ) and several U.S. states is flawed, Stewart said. The settlement orders Microsoft not to retaliate against PC makers who offer competing software products, such as RealNetworks' media player, with the PCs they sell.

"We cooperated extensively with the DOJ in the antitrust case, but it has become clear that government action wasn't enough," Stewart said. "The settlement is full of loopholes and Microsoft is using them all. Microsoft is still restricting how PC makers install media players on PCs and forcing PC makers to install Windows Media Player."

Furthermore, Microsoft is preventing consumers from removing Windows Media Player, Stewart said. "The settlement the DOJ entered into just isn't stopping Microsoft's predatory conduct, and we're also alleging a broader course of predatory conduct," Stewart said.

The IDG News Service is a Network World affiliate.