EU threatens Microsoft with $1.3 billion fine

Brussels (Belgium) - The European Commission today released a "Statement of Objections" in which the organization indicates that Microsoft potentially has not complied with previous rulings and has charged "unreasonable" royalties for Windows Vista as well as server protocols.

The memo-style document does not provide any details, but mentions that the Commission has not yet come to a final decision on whether or not Microsoft has failed to comply with a 2004 decision in regards to "pricing of the interoperability information." However, today’s statement indicates that the Commission apparently has doubts if Microsoft has fully delivered on its promises to provide comprehensive information about Windows and server protocols.

"The Commission has not yet taken any final decision on whether or not Microsoft has failed to comply with the 2004 Decision as regards pricing of the interoperability information, and will only decide once it has examined any response (in writing and/or at an oral hearing) Microsoft may make to the Statement of Objections," the Commission wrote.

If the organization concludes that Microsoft has not complied with certain requirements, the Commission could impose fines in addition to the 497.2 million Euro penalty the company has received in march 2004. According to December 2005 ruling, the Commission could fine Microsoft for each day the company is not in compliance - 2 million Euro for each day between December 16, 2005 and July 31, 2006 and 3 million Euro per day beginning August 1, 2006. The maximum fine covering 439 days would amount to about 1.09 billion Euros or $1.31 billion.

Microsoft already reacted to the Statement of Objections and appeared to be surprised by the move of the Commission. "Microsoft has spent three years and many millions of dollars to comply with the European Commission’s decision," said senior vice president and general counsel Brad Smith. "We submitted a pricing proposal to the Commission last August and have been asking for feedback on it since that time. We’re disappointed that this feedback is coming six months later and in its present form, but we’re committed to working hard to address the Commission’s Statement of Objections as soon as we receive it."

Smith said that Microsoft has a different perspective on the EU’s findings and explained that Microsoft’s "proposed prices were at least 30 percent below the market rate for comparable technology," that "other government agencies in both the United States and Europe have already found considerable innovation in Microsoft’s protocol technology," that "proposed findings [unfairly] suggest that unless our intellectual property is innovative and patentable, it has to be made available royalty free," that "the findings appear to attempt to regulate the pricing of our intellectual property on a global basis and not just within the EU" and that "[Microsoft] always said [it is] willing to entertain any reasonable price offer from any potential licensee, and that [it is] willing to be flexible to meet any unique business needs of potential licensees."

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