This Day In Market History: Microsoft And Apple Sign Secret Licensing Agreement

Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.

What Happened? On Nov. 22, 1985, Microsoft Corporation MSFT and Apple Inc AAPL signed a secret licensing agreement.

Where The Market Was: The Dow Jones Industrial Average traded at 1,464.33, and the S&P 500 traded at 201.52.

What Else Was Going On In The World? In 1985, Nintendo Co., Ltd NTDOY released the Nintendo Entertainment System. The film “The Color Purple” premiered. The fed funds interest rate was 10.75%.

Microsoft And Apple’s Secret Deal: At the time, Apple had been concerned that Microsoft had been stealing Macintosh’s ideas to use in its Windows interface. Unfortunately for Apple, Microsoft software was critical for the Macintosh platform at the time. Removing Microsoft software would significantly limit Macintosh’s functionality.

When Apple threatened Microsoft with legal action in 1985, Microsoft founder Bill Gates threatened to remove all Microsoft software from Apple devices.

Since Apple simply could not afford to lose Microsoft software at the time, the two companies signed a secret licensing deal in November 1985. The deal gave Microsoft royalty-free rights to certain elements of Macintosh’s graphical display technology in exchange or Apple’s continued access to Microsoft software. The agreement was signed by Gates and Apple chairman John Sculley, who had recently forced out co-founder Steve Jobs from the company.

The secret 1985 agreement managed to keep the peace between Apple and Microsoft for less than three years. Apple filed a copyright infringement lawsuit against Microsoft in 1988 alleging Microsoft was copying Macintosh’s graphical interface in a future version of Windows. Microsoft argued the 1985 agreement applied to all future versions of Windows, while Apple said the agreement applied only to Windows 1.0.

After a series of rulings and appeals, the lawsuit was finally resolved in 1994, mostly in Microsoft's favor.

Today, Apple and Microsoft are the two most valuable public companies in the world, each with market caps of more than $2.5 trillion.

Photo: Dnllo, Flickr