EU threatens Microsoft with $4M-a-day fines

BRUSSELS, Belgium — The European Union today threatened Microsoft Corp. with fines of up to $4 million a day, claiming the software giant had failed to live up to promises for providing affordable and useful information that could help rivals make software for workgroup servers compatible with its Windows system.

Microsoft said the EU Commission's demands were not reasonable. "It is hard to see how the Commission can argue that even patented innovation must be made available for free," the U.S.-based company said in a statement.

The EU complained that three years after a landmark antitrust ruling to open up the market, Microsoft still refused to cooperate.

"This is a company which apparently does not like to have to conform with antitrust decisions," said EU Commission spokesman Jonathan Todd.

Microsoft Senior Vice President and General Counsel Brad Smith said the company "has spent three years and many millions of dollars to comply with the European Commission's decision. We submitted a pricing proposal to the Commission last August and have been asking for feedback on it since that time."

Smith's statement indicated he was particularly concerned that the EU findings "suggest that unless our intellectual property is innovative and patentable, it has to be made available royalty free. That has never been the standard for software or other intellectual property."

In addition, Smith said, "the findings appear to attempt to regulate the pricing of our intellectual property on a global basis and not just within the EU."

Under a 2004 antitrust ruling by the European Union, Microsoft had to disclose complete and accurate interface documentation on reasonable and non-discriminatory terms, allowing its competitors to interoperate with Windows PCs and servers.

Under a so-called "statement of objections" released today, the EU's executive Commission said there was "no significant innovation" in the requested information. It also rejected 1,500 pages of submissions by Microsoft over the past three months and said Microsoft's price proposals were unreasonable.

"I am therefore again obliged to take formal measures to ensure that Microsoft complies with its obligations," EU Antitrust Commissioner Neelie Kroes said in a statement.

Microsoft said "the findings appear to be an attempt to regulate the pricing of our intellectual property rights on a global basis" something which would go beyond the jurisdiction of the European Commission.

Microsoft has four weeks to reply to the Commission after which the EU could impose fines going as high as 3 million euros ($4 million) a day, Todd said.

Work group servers are designed to let numerous users share and exchange information on projects so that groups of workers located near or far from their offices can collaborate on joint projects.

Microsoft is challenging the EU's original 2004 antitrust order at the EU's Court of First Instance. The 2004 antitrust order found the company broke competition law for abuse of a dominant position and fined the software maker a record 497 million euros ($613 million).

"It is the first time we have been confronted by a company which has failed to comply with an antitrust decision," said Todd. "We are in unknown territory."

"We don't want to be in a situation where ten years after an antitrust decision, they still are not in compliance," said Todd, adding the "vast majority of the information" provided to the software competitors, was "not innovative."

To remedy Microsoft's antitrust abuse, the EU ordered the company to sell a copy of Windows without its media player software and told it to share communications code and information with rivals to help them develop server software that worked smoothly with Microsoft's ubiquitous Windows desktop operating system.

EU regulators fined Microsoft another 280.5 million euros ($371 million) last July for failing to supply the "complete and accurate" interoperability required.