Microsoft's top lawyer: Relations with Europe improving

Microsoft's top lawyer said that a tentative agreement with Brussels announced earlier Wednesday could potentially allow the software maker to move out of the regulatory crosshairs, perhaps paving the way for regulators to shift their attention elsewhere.

"It's important for us to get closure in Europe on issues that have obviously been controversial for over a decade," General Counsel Brad Smith said in an interview. "Today's decision takes us an important step closer to doing that."

Microsoft initially took a much different approach to the European Commission's assertion that the inclusion of a browser in Windows violated antitrust law. The company had initially proposed just stripping out the browser from Windows 7 entirely, leaving users the prospect of trying to get a browser on their own. The software maker eventually backed down after indications that that approach was unlikely to fly.

While not final, Microsoft's moves would appear to resolve all of its outstanding regulatory issues with the Commission and were greeted warmly by regulators on Wednesday.

Although most of the early attention focused on the agreement around a browser "ballot screen," Microsoft also announced on Wednesday an agreement around product interoperability. Under that deal, a 10-year commitment by Microsoft, the software maker agrees to publish communication protocols and adopt certain standards as part of Windows, Windows Server, Office and other high market share products. Companies could also purchase for 5,000 euros a warranty that would subject Microsoft to court oversight and monetary penalties if it doesn't live up to its commitments.

Smith said that the approach Microsoft took with regard to interoperability was designed to adopt methods that Nellie Kroes, commissioner for competition, had outlined in a speech last year for how companies with high market share products should behave.

"I actually think this in effect implements the model that the Commission has been advocating," Smith said. Moreover, he said it is a model that other software companies should pay attention to, he said, noting that there are lots of companies that have high market share. He noted that Google has 78 percent of the paid search market and IBM has 100 percent of the mainframe market, while Adobe also has dominant positions in certain areas, such as Photoshop.

"It is important we believe to create a level legal and regulatory playing field," Smith said. "Everyone that has a high market share needs to respect the same set of rules. I think a number of these rules are likely to be applicable to other companies and other products."

Settling now with Brussels also could help Microsoft in its effort to win approval for its search deal with Yahoo, Smith said.

"This certainly isn't going to hurt when it comes to the Yahoo-Microsoft agreement," he said. "It's not necessarily going to make a huge difference. We didn't feel a particular step was needed to help it along."

Microsoft is in the process of trying to ascertain whether the deal needs approval from Brussels or from individual European antitrust authorities. It also needs approval from U.S. regulators, who have asked for more information on the deal.