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(photo credit: Bloomberg)
The European Commission reported on Monday that it has ensured that Microsoft will take the necessary steps to comply with its obligations under the Commission's 2004 Decision regarding work group server operating systems, including the making available to "open source" software developers of the interoperability information that Microsoft is obliged to disclose.
Microsoft has agreed to three substantial changes to bring them into compliance with the decision. First, "open source" software developers will be able to access and use the interoperability information. Second, the royalties payable for this information will be reduced to a nominal one-off payment of â‚¬10,000. Third, the royalties for a worldwide license including patents will be reduced from 5.95% to 0.4% - less than 7% of the royalty originally claimed. In these agreements between Microsoft and the third party developers, Microsoft will guarantee the completeness and accuracy of the information provided.
The agreements will be enforceable before the High Court in London and will provide for effective remedies, including damages, for third-party developers in the event that Microsoft breaches those agreements. Effective private enforcement, therefore, will complement the Commission's public enforcement powers. These changes mean that open source competitors to Microsoft will be able to provide businesses with competitive, innovative alternatives to Microsoft work group server products, knowing that they are fully interoperable with Microsoft's Windows desktop operating system. The Commission is supposed to now adopt a decision as soon as possible on the pending non-compliance case regarding past unreasonable pricing for the interoperability information, on which the Commission sent a Statement of Objections on March 1, 2007.
Microsoft also has ongoing obligations to continue to comply with the Commission's 2004 Decision: should Microsoft fail to comply with those obligations in the future the Commission can issue a new decision to impose daily penalties.
Microsoft's compliance with the 2004 Decision is hoped to finally allow the development of interoperable work group server operating systems. This should lead to more innovation and give consumers more choices and better-priced products.
European Union officials claim that this is not a "settlement." The Commission, they insist firmly, has ensured that Microsoft complies in full with the requirements of the 2004 Decision. Thus, the Commission retains its full powers to ensure continued compliance with the 2004 Decision. The Commission can, if it observes a compliance problem in the future, once again impose daily penalty payments on Microsoft.
The license agreement will establish a binding contractual relationship between Microsoft and the licensees. Litigation on contractual disputes is within the competence of national courts and it is quite normal for contracting parties to specify the applicable law and judicial forum in their agreements.
Work group server operating systems are operating systems running on central network computers that provide services to office workers around the world in their day-to-day work such as file and printer sharing, security and user identity management. The Commission decision ordered Microsoft to disclose to competitors interoperability information which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers - that is to say for their servers to be able to seamlessly "communicate" with the ubiquitous Windows operating system.
In the 2004 decision, Microsoft was fined â‚¬497 million for infringing the EC Treaty rules on abuse of a dominant market position (Article 82) by leveraging its near monopolyin the market for PC operating systems onto the market for work group server operating systems. To put an end to this, the Commission ordered Microsoft to disclose on reasonable and non-discriminatory terms interoperability information which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers. The 2004 decision was recently upheld by the Court of First Instance.
The open source (business) model is based on the freedom of every recipient of a computer program to copy, modify and redistribute it. Revenues are derived from services offered with the software. Open source vendors are Microsoft's main competitors in the work group server operating system market. Why is it so important that open source software developers can use the interoperability information?
Open source software is software that can be freely copied, modified and distributed by its recipients. Some software companies derive revenue from offering services together with this freely available software.
Software developers that follow the open source business model and develop work group server software for the open source Linux operating system are Microsoft's main competitors in this market. Access to the interoperability information allows them to compete on the merits of their products with Microsoft.
Open source software developers use various "open source" licenses to distribute their software. Some of these licenses are incompatible with the patent license offered by Microsoft. It is up to the commercial open source distributors to ensure that their software products do not infringe upon Microsoft's patents. If they consider that one or more of Microsoft's patents would apply to their software product, they can either design around these patents, challenge their validity or take a patent license from Microsoft.
The author is head of the International Department at the Joseph Shem-Tov law firm.
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