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Microsoft Capitulates to EU Ruling

In a surprising move, software giant Microsoft has decided not to appeal last month’s decision by the European Court of First Instance, which upheld the terms of the European Commission’s antitrust ruling against Microsoft. By capitulating the to the decision, Micosoft obligates itself to provide information to third party developers—including open source developers—so they can create products which interoperate with Microsoft’s server operating systems.

Microsoft lost its appeal against the terms of the EU antitrust ruling in September. Under the ruling, Microsoft is also obligated to pay 80 percent off the EC’s legal costs. In 2006, Microsoft was ordered to pay fines totaling some $280 million a day over a six-month period for failing to live up to terms of the 2004 antitrust ruling.

"I welcome that Microsoft has finally undertaken concrete steps to ensure full compliance with the 2004 Decision," said Commissioner Neelie Kroes. "It is regrettable that Microsoft has only complied after a considerable delay, two court decisions, and the imposition of daily penalty payments. However, the measures that the Commission has insisted upon will benefit computer users by bringing competition and innovation back to the server market."

Microsoft has agreed to three main points to bring them into compliance with the 2004 decision:

  • Open source developers will be able to access and interoperability information to tie into Microsoft’s workgroup server products. Microsoft had previously refused to license its technology to open source developers at any price, claiming doing so would reveal their trade secrets;
  • Royalty fees for this interoperability information will be reduced to a one-time payment of €10,000;
  • Royalities for a worldwide license (including patents) will be reduced to less than 7 percent of the original royalty Microsoft demanded of developers (from 5.95 percent of sales to to 0.4 percent).

In choosing not to appeal the Court of First Instance ruling, Microsoft has effectively established the EC’s tough stance on monopoly abuses as European law. It has also validated the EU’s power to compel even the world’s most powerful enterprises to share their intellectual property with competitors without attaching onerous terms.

Several ancillary issues remain to be worked out, including how much Microsoft will have to pay the EU to resolve its obligations in regard to daily fines and two fixed penalties. Microsoft’s total obligation to the EU currently totals over €1 billion, although the EU has now stopped assessing the daily fines. Similarly, complaints about Microsoft’s dominance of the office productivity software arena are not addressed at all by Microsoft’s decision not to appeal the Court of First Instance’s decision.

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