[Ecommerce] Financial Times: Microsoft licence fees attacked

[Thiru Balasubramaniam]

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Microsoft licence fees attacked
By Tobias Buck in Brussels
Published: June 22 2005 21:57 | Last updated: June 22 2005 21:57

Technology groups have attacked Microsoft
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for demanding excessive licensing fees from companies that wish to make
their products work more smoothly with computers and servers driven by
Windows, the US software group's operating system.

In an antitrust ruling by the European Commission last year, Microsoft
was forced to license sensitive information about Windows to its rivals.
The regulator hoped that by forcing Microsoft to disclose a string of
so-called communication protocols, it would enable rival companies
better to compete.

However, opponents of the group now say Microsoft's proposed terms are
unfair, claiming they would have to pay Microsoft up to 8.5 per cent of
the revenues they make on the products they developed.

Thomas Vinje, a Brussels-based lawyer for Clifford Chance who represents
a business association that includes IBM, Nokia and Oracle, said the
royalties demanded by the group were untenable. He said they would
destroy the desired effect of the Commission's antitrust sanction, and
could constitute a new breach of EU antitrust law.

He said =93The royalties demanded by Microsoft thus are clearly not at a
commercial rate, let alone fair, reasonable and non-discriminatory=94.
Microsoft strongly denied this, arguing that the protocols contained
=93some of Microsoft's most valuable server technology innovations=94. Ther=
e
was no danger of excessive fees, because an independent monitor would
guarantee that prices remained =93commercially practicable.=94

An official said: =93There is a price list, and if people feel it doesn't
work, then we can sit down and talk and if that doesn't work they can
turn to the monitoring trustee.=94

Details of the draft licensing agreement were published on Microsoft's
website on Monday, and in spite of the hostile reception, represent an
improvement on terms outlined earlier. According to the group's =93pricing
summary=94, companies wishing to license all protocols would have to give
8.5 per cent of their revenues on a new product to Microsoft. That drops
to 7.5 per cent and 4.5 per cent if companies chose to license only some
of the protocols. In any case, Microsoft's royalties will not exceed
$950 for an individual server.

Mr Vinje said: =93The royalties demanded by Microsoft reflect not any
innovative value of the protocols, but rather the strategic value
flowing from the ability to prevent interoperability.=94

Microsoft's proposals on implementing the Commission's antitrust ruling
are being tested with market participants. Neelie Kroes the competition
commissioner, will then decide whether to accept Microsoft's plan.