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I hate to support Microsoft on this one - I was actually checking the rules to see if they forbid you from dual-licensing it - but you pulled this out of context. The license only allows them to use your code to evaluate who won the contest, and use it in promotional materials. Now, the latter part is a bit murky, it seems they have a license to publish a screenshot of your solution. But nevertheless, they are not claiming ownership of your work.

The full text is below:

Other than what is set forth below, we are not claiming any ownership rights to your entry. However, by submitting your entry, you are granting us an irrevocable, royalty-free, worldwide right and license to: (i) use, review, assess, test and otherwise analyze your entry and all its content in connection with this Contest; and (ii) feature your entry and all content in connection with the marketing, sale, or promotion of this Contest (including but not limited to internal and external sales meetings, conference presentations, tradeshows, and screen shots of the Contest entry in press releases) in all media (now known or later developed)

http://web-ngram.research.microsoft.com/spellerchallenge/Doc...

He said he stopped reading.

Which is a very good reason not to make a post on HN afterwards.

I was being facetious. I didn't really stop reading until I read this:

  understand that we cannot control the incoming information you will 
  disclose to our representatives in the course of entering, or what our
  representatives will remember about your entry. You also understand that we will 
  not restrict work assignments of representatives who have had access to your entry.
  By entering this Contest, you agree that use of informationin our representatives’
  unaided memories in the development or deployment of our products or services does
  not create liability for us under this agreement or copyright or trade secret law;
Sounds like a filthy, under-handed way of saying "we won't copy your code verbatim, but we reserve the right to copy your algorithm and not even give you credit for it".

This seems much worse that the original excerpt you posted.

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