I remember 1977 when Gates incorporated Microsoft and the Gates - MITS legal battle.
I worked for Pertec in 1977
firstly up in Chatsworth CA and a few years after that in Canoga Park CA. Pertec purchased MITS in May 1977 and Gates won his lawsuit four months later in September 1977. When Gates won the arbitration in September it saved Microsoft and right after that Microsoft's business skyrocketed.
The late 70s and 80s were very interesting times indeed in the nascent personal computer industry and I was very fortunate to be right in the middle of the action during that period.
Gates and Allen formally incorporate Microsoft, with Gates owning 64% of the company and Allen 36%
- Bill Gates and Paul Allen write to MITS complaining of overdue royalty payments on 8080 BASIC, and of MITS' failure to sub-license and promote the product to others. They state that if the situation is not remedied within ten days, the licensing agreement for 8080 BASIC would be terminated. [1149.114] [1299.109]
- An attorney for MITS denies Microsoft's charges, claiming MITS is up-to-date on royalty payments, and did not have to license 8080 BASIC to competitors. [1299.109]
- An attorney for MITS pays Microsoft US$14,526 to cover 8080 BASIC royalty payments since December 1, 1976. [1299.109]
- MITS files for arbitration to seek a decision on whether its 8080 BASIC contract with Microsoft is still valid. [1299.109]
- MITS files for a restraining order against Microsoft, to prevent Microsoft from licensing 8080 BASIC until the dispute with MITS is resolved. [1149.114] [1299.109]
- A judge grants MITS' restraining order against Microsoft licensing 8080 BASIC, until July 8 or until the arbiter's determination is made. [1299.109]
- Pertec buys MITS and the Altair line for US$6 million in stock. [233.194] [266.51] [346.44] [548.384] [1149.114]
MITS, which was in the process of being taken over by Pertec, refused to license the 8080 BASIC to potential customers. On 20 April 1977 Gates & Allen sent a letter to MITS protesting their lack of making "best efforts" to commercialize the program. MITS responded by getting a judge to restrain Microsoft from disclosing 8080 BASIC code to any 3rd party and taking Microsoft to arbitration to force them to abide by the contract. Microsoft's income begins drying up that summer. They get bailed out in August by a $10,500 payment for the 6502 BASIC from Apple Computer for the Apple II.
- At the beginning of September 1977 the arbitrator ruled that MITS had violated the contract with Microsoft and terminated the exclusive license. Microsoft was now free to sell its BASIC to all comers.
- The result was a flurry of deals to sell BASIC -- the most important was to Radio Shack. Gates left "hooks" in the BASIC code that went into ROM in the TRS-80. This allowed Microsoft to load extra functions from cassette or disk and gave it an advantage over other software writers. This became a standard practice at Microsoft for many years.