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EU threatens Microsoft with further antitrust fines - extended

European Union regulators threatened to fine Microsoft Corp. millions of euros for charging „unreasonable” fees for certain patent licenses on Windows operating system software.

Microsoft is charging competitors „unreasonable” rates for the information needed to make network-server software that can work with personal computers running Windows, EU Competition Commissioner Neelie Kroes said today. In its March 2004 decision, the European Commission said the charges for those licenses must be made on „reasonable and non-discriminatory terms.” „We're in somewhat unknown territory,” commission spokesman Jonathan Todd told reporters in Brussels, when asked whether daily fines are the best way to make companies comply. „It's the first time that we have been confronted with a company that has failed to follow an antitrust decision.” The commission accuses the company of abusing its dominance of Windows, which runs almost 95% of the world's personal computers, to crush competition in related markets. The EU levied a record €497 million($657 million) fine in March 2004. Microsoft is appealing the ruling and a judgment by the European Court of First Instance is expected by September.

Microsoft disputed the commission's finding that its patents aren't innovative. The US and European patent offices have granted Microsoft more than 36 patents on protocols, the company said in a statement. Those patents took „millions of dollars” to develop, it said. „It's hard to see how the commission can argue that even patented innovation must be made available for free,” Brad Smith, the company's general counsel, said in the statement. „We believe we have been fair in setting proposed protocol prices.” A study by PriceWaterhouseCoopers found that Microsoft's proposed prices were „at least 30%” lower than the market rate for comparable technology, the company said. In July 2006, the EU fined Redmond, Washington-based Microsoft €280.5 million for flouting the EU's 2004 ruling.

The July penalty was the first by the commission for failure to comply with an antitrust ruling. Microsoft has also appealed the additional fine. Under the EU ruling, Microsoft is allowed to charge for its interoperability information as long as the data is innovative. „The vast majority of the information is not innovative, at all,” Todd said. The commission can fine Microsoft as much as €0.5 million a day between December 16, 2005, and June 20, 2006, if it finds that Microsoft isn't charging „reasonable royalty rates.” The daily amount may rise after that date, the commission said. „Precisely where any eventual fines would be is very difficult to say at this time,” Todd said. Microsoft has four weeks to reply to the commission. (Bloomberg)