BRUSSELS - The European Commission today fined Microsoft €280.5 million ($356.35 million) for failing to comply with a 2004 Commission request to provide documents that would make it easier for other companies to develop products that would be interoperable with Microsoft’s products.

This is the first time in the European Union’s 49-year-long history that it has imposed a penalty payment on a company for failure to comply with an antitrust decision, and at a press conference in Brussels today, European Competition Commissioner Neelie Kroes said, “I sincerely hope this is the last time.â€

“No company is above the law,†Kroes added. The case refers to a March 2004 Commission decision (IP/04/382) in which Microsoft was found to have abused its dominant market position under Article 82 EC.

Microsoft was fined a record €497 million at that time and was asked to “supply complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers.â€

The €280.5 million fine was imposed because of Microsoft’s “continued non-compliance†with this decision, Kroes said.

Microsoft General Counsel Brad Smith said today that the company has done its best to comply with the EU, that the instructions were unclear, and that the fine exceeds even penalties for the most serious competition cases such as price-fixing. Microsoft plans to challenge the decision, he said.

“We have great respect for the Commission and this process, but we do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the Commission’s original decision and our good-faith efforts over the past two years,†Smith said in a statement. “We will ask the European courts to determine whether our compliance efforts have been sufficient and whether the Commission’s unprecedented fine is justified.

Earlier in the case, Microsoft showed concern for its intellectual property rights in sharing its software code, but had said it intended to comply with the decision.

The Commission-imposed fine amounts to €1.5 million per day over the period from 15 December 2005 to 20 June 2006. Since that time, Microsoft has done an “extremely good job†in providing the necessary documents, Kroes said, adding that she is optimistic about Microsoft’s efforts at the moment, which involves 300 people working on the case.

Kroes said that before 20 June, experts had looked at the documents provided by Microsoft, and they “did not even come close†to providing complete and accurate information as requested by the 2004 decision.

The Commission did not have any other choice than to issue the fine, she said, but has not issued as high a fine as it could, which would be up to 5 percent of the company’s average daily turnover. This would have amounted to €4.28 million a day, said Kroes.

If Microsoft’s additional documentation, which is expected to be ready in two weeks, still is not sufficient, the potential liability as of 31 July 2006 could rise to €3 million per day, she said. The Commission anticipates spending a month examining the documents.

Kroes said that Microsoft is now “devoting resources to the case,†which she welcomes, but added that it was a pity that the company did not do this two years ago. She said Microsoft’s argument that it did not know about the requirements is fallacious.

“I don’t buy Microsoft’s line that they did not know what was being asked of them because the March 2004 decision is crystal clear,†she said.

Today’s decision was adopted under Article 24(2) of Regulation 1/2003, the Commission said.

The Software and Information Industry Association, which supports the EU case, noted that 18 months ago, the European Court of First Instance rejected Microsoft’s appeal to have the Commission decision suspended, and that today’s action recognises that the delay in implementation of remedies has been “unjustified and inexcusable.â€

SIIA also said that the EU action follows Microsoft’s lost appeal in Korea, and changes in the United States as a result of frustration with Microsoft’s implementation of the settlement of the antitrust case there.

Santo Caruso, an intern with Intellectual Property Watch, and William New, contributed to this story.

Comments on this story may be sent to info@ip-watch.ch.

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