RealNetworks announced that it has sold 1 million songs in the week since beginning its half-price music promotion. Real dropped song pricing to 49-cents from 99-cents, in part to highlight its Harmony technology, which allows purchased songs to be played on over 70 digital media players including Apple's iPod. But Apple has chastised Real for what it calls "tactics and ethics of a hacker," and says future iPod software updates will likely break compatibility with Harmony.

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Mercury News is reporting that Microsoft is set to quietly launch its MSN online music store as part of Windows Media Player 10. According to analysts given a peek at the store, Microsoft's offering closely matches Apple's iTunes Music Store in design. 130 million Windows users will be prompted to update Media Player, and a button in the upper right corner of the software will lead them to MSN Music. Downloads from the store will be compatible with almost 60 portable music players, according to Microsoft.

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Microsoft has confirmed that it will deliver Windows XP Service Pack 2 to users via Automatic Update starting tomorrow. The company previously delayed including SP2 as an automatic update due to concerns from businesses that their infrastructures were not prepared for the significant operating system changes. Users who cannot download the hefty 100MB service pack will be able to find the update on CD bundled with numerous computer magazines, according to Microsoft. An official SP2 end-user Web site will also launch tomorrow.

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Security firm Secunia has detailed a new flaw in Internet Explorer that affects users running Windows XP Service Pack 2. The vulnerability involves drag-and-drop, which can be used within a Web page to place a malicious program in the Windows startup folder.

Secunia has branded the issue "highly critical" and says it comes from "insufficient validation of drag and drop events issued from the 'Internet' zone." Users are advised to disable Active Scripting, or use a Web browser other than Internet Explorer.

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A federal appeals court has struck a blow to the entertainment industry's quest to shut down file sharing networks, affirming a lower court's decision that companies are not violating copyright laws simply because users are trading music and movies.

The ruling, which comes from the same court that helped shut down Napster, means defendants Grokster, StreamCast and Sharman Networks will be allowed to continue distributing their software. The court said Grokster and Morpheus had legitimate uses, even if the majority of users are trading illegal content.

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Version 8 of Microsoft Works, the company's low-cost productivity suite, has been released and will ship this month. Works includes a word processor, spreadsheet and database applications, along with e-mail tools. The new release adds an improved calendar, PowerPoint viewer and a new stand-alone dictionary. Works 8 will retail for $49.95 USD, with a $10 rebate available to some customers. But Microsoft's academic version of Office remains a better deal for most households.

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Cerulean Studios is preparing a beta test for the next iteration of its multi-network instant messaging application, Trillian. Both Pro and Basic users may apply for the Trillian 3 early adopter program, and a public beta is likely to follow. "Once we are ready to send out a beta, chosen applicants will receive an e-mail from us," reads the beta notice. "We do not have a date or a deadline; the beta will be sent out as soon as it's done."

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A new specification dubbed WS-Addressing that facilitates communication between Web applications has been submitted to the World Wide Web Consortium (W3C) for standards review and eventual publication. Aiming to improve interoperability between Web services, WS-Addressing was developed by a group that includes Microsoft, Sun, IBM, BEA and SAP. Sun was originally hesitant in backing the proposal, but opted to do what it says is best for the industry.

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The X.Org Foundation, backed by industry heavyweights such as Hewlett-Packard and Sun, has announced it will name its upcoming X Window System "X11R6.8" and is encouraging beta testers to hunt for bugs. A release plan has been created to list new features and changes, along with detailed test instructions. Downloads of X11R6.8 are availabe via CVS.

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The iTunes Music Store now offers more than 1 million songs to US customers, cementing its position as the largest online music service. Apple announced the milestone Tuesday, claiming it holds over 70 percent market share for legal music downloads. iTunes features songs from the five major record labels, along with 600 independent labels, and is available in the US, UK, France and Germany.

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Roxio has announced intentions to sell off its software division and focus its efforts entirely on the company's Napster music service.

Rival Sonic Solutions will take ownership of Roxio's consumer lines, which include the once market-leading Easy CD Creator, for $80 million. To complete the identity change, Roxio will change its name to Napster.

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Apple late Monday released Mac OS X 10.3.5, which users can download via Software Update. The latest refresh of Panther brings improved NTFS support, updated ATI and NVIDIA graphics drivers, additional Bluetooth and FireWire compatibility, along with updates to core Mac OS X applications such as Apple Mail. A security fix involving a graphics vulnerability was also issued concurrently with 10.3.5.

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In an effort to increase its subscriber base, TiVo has announced it will offer a $100 USD rebate on its 40-hour digital video recorder. The low-end unit normally sells for $199 USD, along with a $12.95 per month or $299 USD lifetime subscription. TiVo also recently received approval by the FCC for subscribers to send digital copies of television shows to a limited number of friends via the Internet.

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Ahead of its upcoming IPO, Google has settled a patent lawsuit brought on by Yahoo! over advertisements in search results. Google will issue to Yahoo! 2.7 million shares, which could be worth over $300 million USD, in exchange for a license to use the technology patented by Yahoo!'s Overture unit. As part of the settlement, the two companies have also resolved an earlier dispute over an agreement that gave Yahoo! warrants to purchase Google shares.

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Microsoft's Virtual PC 7, which will include Windows XP in the box, is now scheduled for a release to manufacturing in September and public debut in early October. VPC 7 was originally delayed until late summer while Microsoft completed work on Service Pack 2 for Windows XP, ensuring users a secure Windows experience. Now customers will have to wait even longer due to problems in the development of SP2, which is currently set for a September release.

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