Microsoft asks EC for more details on licensing fees

Software giant says it wants to continue talks over royalty payments for its Work Group Server protocol technology.

Microsoft responded Monday to the European Commission's objections over licensing fees for a technology to aid interoperability, saying it seeks more clarity from the antitrust regulatory arm.

The software giant, in response to the Commission's statement of objections over pricing for licensing its Work Group Server protocol technology, said it will waive its right to a hearing on the matter and continue discussions with the antitrust agency.

"We need greater clarity on what prices the Commission wants us to charge, and we believe that is more likely to come from a constructive conversation than from a formal hearing," Brad Smith, Microsoft general counsel, said in a statement.

The issue centers on whether Microsoft is providing its Windows Server protocol technology under "reasonable and nondiscriminatory" terms.

A monitoring trustee hired by the Commission is recommending royalty payments of zero to 1 percent for the licenses, whereas Microsoft wants to charge 5.95 percent, according to a report in the Financial Times.

The Commission will review Microsoft's response and will ultimately make a formal decision on whether the company is adhering to its historic March 2004 order and whether to impose daily fines if needed, according to the Commission's statement.

Competitors, meanwhile, find Microsoft's 5.95 percent royalty too steep to make it feasible to use the software giant's technology to make their products interoperable with Microsoft's products.

"The Commission's preliminary conclusion is entirely correct: the licenses would provide no value to licensees other than that flowing from the ability to interoperate with Microsoft's dominant products, and that is something for which the (decision) does not allow Microsoft to charge licensees," Thomas Vinje, counsel to the European Committee for Interoperable Systems, said in an e-mail interview.

He added that protocol specifications designed to aid interoperability are typically licensed royalty-free in the software industry.

"It would be ironic for Microsoft to be allowed to charge for something in the context of an antitrust remedy that its competitors typically give away for free," Vinje said.

At an antitrust conference in Washington, D.C., on Friday, Neelie Kroes, who heads the European Commission, talked about lessons her agency has learned in dealing with Microsoft and remedies for companies that refuse to supply information.

The European Commissioner for Competition noted that companies may not always find it in their best interest to comply with a clear, positive behavioral remedy. As a result, the Commission needs to be ready and have resources lined up to enforce remedies to their full compliance, Kroes said. Also, the Commission may need to seek alternative and more effective remedies, she said during a panel at the American Bar Association's antitrust conference.

"We need to consider under which circumstances structural remedies would be more appropriate, or even necessary, to remedy certain competition problems," according to a recap of Kroes' comments by the Commission. "For example, there could be a situation in which a dominant company has repeatedly abused its dominant position, or where it has consistently failed to comply with a behavioral remedy despite repeated enforcement action."

She added that in such cases it would be reasonable to draw the conclusion that behavioral remedies are ineffective and that a structural remedy is warranted.

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