The company will acquire the FileLine digital rights management division of Navisware, a provider of product lifecycle management (PLM) software for the manufacturing industry, for an undisclosed sum.

As part of the transactions, an undisclosed number of employees will be moving from NavisWare’s Research Triangle Park, North Carolina offices to Macromedia in San Jose.

The deal enables Adobe to expand file security protection from PDF to CAD (computer-aided design) and Microsoft Office formats. The move heightens competition with Microsoft, which already provides its own file protection features natively with Office.

The capabilities will be integrated into Adobe’s LiveCycle Policy Server, a year-old product that regulates access control, read/write privileges, and version control for documents once they are deployed.

Over the past year, Adobe and recently acquired Macromedia have been playing a bit of a cat and mouse game with Microsoft. For instance, with Macromedia morphing Flash into the broader rich Internet client Flex framework, it is now competing head to head with Microsoft, which previously packaged Flash as the only official sanctioned Internet Explorer plug in.

Yet, Microsoft recently bit the bullet, adding support of PDF to its new Office 12 suite as a result of customer demand.

The broader question regarding document security is whether Adobe is inching into the content management market. According to John Landwehr, director of security solutions and strategy for Adobe, LiveCycle supplements rather than competes with content or document management systems.

Content management systems do great job of creating virtual file cabinet on server to control which users have access to which drawers and which files, he said, adding that’s where content and document management systems leave off. He says that LiveCycle picks up by adding security to each document.

Until now, these capabilities were only available on PDF. Users downloading documents routinely on the web probably have no idea that PDFs can be encrypted. According to Landwehr, this capability is turned on primarily inside the firewall, during the document authoring cycle.

Obviously, releasing capability for Microsoft Office documents is tops on Adobe’s priority list. While FileLine has capabilities for securing files from different CAD vendors, Adobe will decide which ones to support on a case-by-case basis.