MS ANTITRUST - 'Profound' effect seen from EU compliance

A European Commission leader said the group's 2004 antitrust ruling against Microsoft will greatly influence the software industry.

Changes Microsoft will make to its business practices to comply with the 2004 European Commission antitrust ruling will "profoundly affect the software industry," European competition commissioner Neelie Kroes said this week.

For three and a half years Microsoft dragged its feet and used every legal avenue available to delay complying with the 2004 ruling. But after its appeal of the ruling to Europe's second highest court failed last month, the company decided to cooperate.

"At the time the Court of First Instance issued its judgment in September, Microsoft committed to taking any further steps necessary to achieve full compliance with the Commission's decision. We have undertaken a constructive discussion with the Commission and have now agreed on those additional steps," Microsoft said.

Open-source software developers will be given access to the interoperability protocols inside Windows that Microsoft was ordered to reveal. Until recently the software giant had steadfastly refused to allow that. The protocols will be available for a fraction of the license fee Microsoft intended to charge and they will be valid worldwide, the Commission said.

These concessions were agreed to between Microsoft CEO Steve Ballmer and Kroes in a recent meeting at a restaurant near Kroes' home town of Rotterdam in the Netherlands. The final details were agreed to in a transatlantic phone call Monday morning Brussels time, Sunday evening in the US, from where Ballmer made the call.

Kroes was visibly delighted at Microsoft's decision to respect the Commission's authority. "I hope we can close this dark chapter in our relationship," she told journalists at a news conference at the Commission's headquarters in Brussels.

However, she also made clear that while Microsoft's latest efforts substantially respect its obligations under the 2004 ruling, other points of conflict could occur.

"New issues may arise," she warned, pointing to "a couple of other cases on our desks" concerning the company.

One of those cases was sparked by a complaint from the trade group ECIS (European Committee for Interoperable Systems), whose members include IBM, Oracle and Red Hat. The Commission declined to comment on other cases.

Besides complying with the 2004 ruling, Microsoft also said that it wouldn't appeal last month's defeat at the Court of First Instance, ending the legal uncertainty that continued to face software and hardware developers long after the 2004 ruling.

While doubts remained about the validity of the Commission's 2004 antitrust ruling, the computer industry was unable to plan future product development with full confidence. Now they know, for example, that open-source software developers will be able to compete for a share of the market for workgroup server operating systems -- the computers that run networks of PCs.

Microsoft has a 95 percent market share on the desktop operating system market and over 70 percent of the market for workgroup server operating systems. Open-source workgroup server products are virtually the only alternative for users and are thus the main surviving competitive constraint on Microsoft, the Commission said.

"More competition on this market should offer consumers more innovative products, with improved functionality at better prices. For that reason, it is vital to the effectiveness of the 2004 decision that Microsoft also complies by giving access to open-source developers access to the interoperability information," the Commission said.

While failing up to now to provide all the information demanded by the Commission, Microsoft has been providing two separate licensing arrangements to companies. The first is a "No Patent Agreement" allowing licensees access to the interoperability information, but without taking a license for patents that Microsoft claims is necessary, a contention disputed by some third parties.

Microsoft Monday confirmed it has made three changes to this license. Besides granting access to it to open-source developers, it has reduced royalty fees to a single flat rate payment of US$14,308, based on Monday's exchange rate. It has also agreed to allow licensees to dispute the accuracy or completeness of the interoperability information and seek damages in private enforcement claims at the High Court in London.

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