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News Releases
No. 19/07
March 1, 2007
EU COMMISSION WARNS MICROSOFT OF FURTHER PENALTIES OVER UNREASONABLE PRICING AS INTEROPERABILITY INFORMATION LACKS SIGNIFICANT INNOVATION
The European Commission has sent a Statement of
Objections (SO) to
Microsoft for failing to comply with
certain of its obligations under the
March 2004
Commission decision. Part of that decision found
Microsoft to have infringed the EC Treaty rules on abuse
of a dominant position (Article 82) by leveraging its
near monopoly in the market for PC operating systems
onto the market for work group server operating systems.
Microsoft therefore had to disclose complete and
accurate interface documentation on "reasonable and
non-discriminatory terms," allowing non-Microsoft work
group servers to interoperate with Windows PCs and
servers. The SO indicates the Commission’s preliminary
view that there is no significant innovation in the
interoperability information, rejecting as unfounded
1,500 pages of submissions by Microsoft from December
2005 onwards, and hence that the prices proposed by
Microsoft are unreasonable. Microsoft has four weeks to
reply to the SO, after which the Commission may impose a
daily penalty for failure to comply with the March 2004
decision. The issue of whether the interoperability
information is complete and accurate is still under
consideration by the Commission.
 Competition Commissioner
Neelie Kroes
said:
“Microsoft has agreed that the main basis for pricing
should be whether its protocols are innovative. The
Commission's current view is that there is no
significant innovation in these protocols. I am
therefore again obliged to take formal measures to
ensure that Microsoft complies with its obligations.”
Microsoft provides two separate licensing arrangements
to companies wishing to obtain the interoperability
information as foreseen by the 2004 Decision's remedy.
The first is a "No Patent Agreement," allowing licensees
to use the protocols which together comprise the
interoperability information, but without taking a
license for patents which Microsoft claims necessary, a
claim disputed by some third parties. The second (the
"All IP Agreement") combines this first license with a
license for these disputed patents. Companies therefore
have a choice of agreement, depending on whether they
consider they need a patent license. Both licenses
confirm that an assessment of the reasonableness of
Microsoft's prices depends on whether there is
innovation in the protocols, and, if there is, what is
charged for comparable technologies in the market.
For both licenses, Microsoft divided the protocols into
Gold, Silver and Bronze price categories based on the
claimed degree of innovation. Microsoft has already
agreed that there is a fourth category of protocols, not
necessarily innovative, for which there will be no
royalty.
The Commission's preliminary view is that there is
virtually no innovation in the fifty-one protocols in the "No
Patent Agreement" where Microsoft has claimed
non-patented innovation, and that Microsoft's current
royalty rates for this agreement are therefore
unreasonable. This takes into account the advice of both
the
Monitoring Trustee and the Commission's technical
advisors, TAEUS, who both consider that there is no
innovation in any protocol in the Gold and Silver
categories. These protocols represent more than 95% of
the price of the total Technical Documentation. The
Trustee considers that of the total of 160 claims, only
four, relating to relatively minor Bronze protocols,
represent even a limited degree of innovation.
As regards each of the other claims, the Trustee advised
that: "all of the described features were considered
either to have been Microsoft implementations of prior
developments by others, or to have been anticipated by
prior developments and to be immediately obvious minor
extensions to that prior work."
TAEUS, which examined the main Gold and Silver
protocols, reached the same conclusions as to lack of
innovation.
For the "All IP Agreement," the Commission has assumed
that the existence of patents indicates some associated
innovation, although third parties remain free to
challenge Microsoft's patent claims before an
appropriate court or to implement software that, in
their view, does not infringe the patented technology.
In any event, the Trustee's analysis is that most of the
information relates only to solving problems specific to
Windows, and will not improve the functionalities of the
licensee's own operating systems. The Trustee has also
provided evidence to the Commission that comparable
technologies to these were provided royalty-free.
In a very limited number of cases, the Trustee's
analysis suggests that patented technologies may go
beyond merely solving interoperability problems specific
to the Windows environment. But in such cases, he has
again provided evidence that comparable technologies,
including technologies offered by Microsoft itself, are
available royalty-free.
In light of these elements, the Commission takes the
preliminary view that Microsoft's current royalty rates
for its "All IP Agreement" are also unreasonable.
For further information please visit
http://www.eurunion.org/newsweb/HotTopics/Microsoft.htm
.
Further Contact Information
Press and Public Diplomacy
Delegation of the European Commission
2300 M Street, NW
Washington, DC 20037
http://www.eurunion.org/PressRoom
Tel: 202-862-9552
Fax: 202-429-1766
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