Microsoft sends revised proposal to European Commission

PARIS - Microsoft has sent a revised proposal to the European Commission for the terms under which it will license Windows protocols to competitors to comply with last year's antitrust ruling against the company, a Microsoft spokesman said Monday.

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Microsoft believes it has addressed most of the concerns raised by European regulators, but the two sides continue to wrangle over half a dozen remaining issues, said Microsoft spokesman Tom Brookes. They relate partly to how Microsoft's protocols can be distributed with open source products, he said.

A Commission spokesman confirmed that Microsoft submitted its revisions in a letter last Thursday. The Commission is studying it closely to determine whether it meets its demands, said Commission spokesman Jonathan Todd. He did not rule out the possibility that Microsoft could still be fined $5 million per day for noncompliance.

The licensing request stems from the Commission's antitrust ruling against Microsoft last year, when it determined the software maker had abused its dominance in desktop operating systems to gain an unfair advantage in related markets. Among the sanctions imposed against the company, Microsoft was ordered to license certain workgroup server protocols to competing vendors to allow them to develop products that work well with Windows.

The idea is to prevent Microsoft from unfairly wielding its desktop monopoly to dominate the server market. It was also ordered to offer a version of Windows without its media player software and fined $662 million.

Last month the Commission rejected Microsoft's initial licensing terms for the protocols, prompted by complaints from the Free Software Foundation Europe that the terms were unfair to open-source developers. On March 21 the Commission gave Microsoft an informal two-week deadline to come up with better terms before it decided whether to fine it for noncompliance.

The Commission detailed 26 concerns with Microsoft's initial licensing proposal, Brookes said Monday. Microsoft has "accepted or offered proposals to address" 20 of those concerns, but the two sides continue to debate the remaining issues, he said.

Among the sticking points: The Commission had complained that the licensing terms did not allow Microsoft's protocols to be distributed in open source products because of potential violations of Microsoft's intellectual property. The two sides have yet to resolve that issue, Brookes said.

"They are striving to find a way to distribute the protocols with open source products, but in a way that the source code for the protocols themselves would not be published," Brookes said, declining to offer further details. "It's a complex issue because it revolves around striking a balance between protecting intellectual property and making the [protocols] as broadly available as possible."

Another remaining issue has to do with whether developers who license Microsoft's protocols in Europe can develop and sell their products outside of the E.U., according to a Microsoft spokeswoman in the U.S. Microsoft opposes that freedom.

The Commission had also complained that the terms for evaluating whether to license the protocols were too strict. Microsoft has satisfied that concern by lowering the evaluation fees to $644 a day per reviewer, from $5,000 for one day and $7,000 for two days. Fees are credited if a license is signed, Microsoft said.

It has also proposed a more flexible structure and lower rates for royalties, and vendors would be able to license a subset of the protocols rather than having to license all of them, which had been another of the Commission's concerns, Brookes said.

"Since receiving the feedback from the Commission [last month] we've worked basically around the clock. We feel we've made significant progress," Brookes said.

Some Microsoft rivals, notably RealNetworks Inc., have accused the Redmond, Washington, company of delaying its compliance efforts intentionally. Last week Microsoft responded to complaints about the version of Windows without its media player software. The company accepted a name, Windows XP Home Edition N or Windows XP Professional Edition N, instead of its own proposal, Windows XP Reduced Media Edition, which was rejected by European regulators as unappealing.

It also agreed to change various registry settings that rivals had charged made the unbundled version of Windows dysfunctional.