Microsoft Appeals $1.3 Billion European Commission Penalty

• By Kurt Mackie
• 05/12/08

Microsoft Friday appealed a $1.3 billion (899 million euro) penalty for noncompliance with an earlier European Commission (EC) antitrust ruling against the company. The EC had slapped the penalty on Microsoft in February of this year for failing to meet the terms of a March 2004 EC antitrust ruling. The $1.3 billion penalty comes on top of the ECs' existing $1.5 billion in fines against the company.

In the March 2004 ruling, Microsoft was found liable for charging its server business competitors excessive royalties for the protocols needed to interoperate with Windows PCs. Companies making the complaint included Sun Microsystems and Novell, among others.

Microsoft released protocol information  October 22, 2007, positioning it to be in compliance with the March 2004 decision. However, the $1.3 billion penalty is a charge for the nearly three-year span between those dates in which Microsoft reaped "the benefits of its illegal refusal to disclose interoperability information," according to an EC FAQ.

The EC announcement of the $1.3 billion penalty described it as further confined to a period of noncompliance "starting on 21 June 2006 and ending on 21 October 2007."

The record $1.3 billion penalty marked the first time in 50 years that a company had failed to comply with a European Union antitrust decision, according to European Competition Commissioner Neelie Kroes, in a February statement, who hoped at the time that the decision would help close "a dark chapter in Microsoft's record of non-compliance...."

Microsoft had issued its "interoperability principles" a week before the $1.3 billion penalty was announced, where Microsoft promised to provide access to some of its application protocol interfaces and documentation needed for competitors to develop interoperable products. The timing made it seem like Microsoft was opening up its protocols of its own accord as part of strategy by Microsoft's Chief Software Architect Ray Ozzie. However, the timing may have also been a response to the EC's penalties, as well as an attempt to cultivate the good will needed for Microsoft to shepherd its Office Open XML document format as an international standard. OOXML was approved as standard by the ISO/IEC body in April.

Microsoft has two legal programs to achieve compliance with the EC's antitrust complaints. The company promised a licensing program associated with its work group server protocols and also stated it would comply with the EC by separating Windows Media Player from the Windows XP operating system.

Microsoft's licensing program was deemed acceptable by the EC  October 22, 2007, in which Microsoft provides interoperability information for 10,000 euros (a flat fee), as well as an option for worldwide patent licensing at a royalty rate that taps 0.4 percent of the licensees' product revenues.