[Ip-health] THE WALL STREET JOURNAL EUROPE: Microsoft's Late Fee

[Thiru Balasubramaniam]

<SNIP>


By comparison, even anticorporate activists say a pharmaceutical
company should get around 4% of revenues when a government forces it
to hand over a drug patent to a generic maker.


<SNIP>

Software and lifesaving medicines aren't really comparable. Yet both
cases reflect the mindset that the state knows best when it comes to
the use and worth of private property. In both cases governments
overestimate their ability to intervene in the market without killing
the incentive for successful companies to keep creating the goods the
public wants or even needs.

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http://online.wsj.com/article_print/SB120417104972199193.html


Microsoft's Late Fee
THE WALL STREET JOURNAL EUROPE
February 28, 2008

Four months ago, Microsoft surrendered to Brussels. Yesterday came the
bill for not capitulating sooner: =80899 million, or $1.36 billion,
another record fine for the American software giant.

The latest penalty covers a 488-day period when the European
Commission says Microsoft wasn't complying with a 2004 order to share
certain software code with rivals on "reasonable" terms. The code
allows other firms' programs to work with Microsoft's ubiquitous
Windows software, which Brussels deems crucial to competition in the
industry.

Microsoft has already racked up some $1 billion in fines in the case,
and EU antitrust boss Neelie Kroes said yesterday that she took "no
pleasure" in issuing another levy after her demands were fully met.
She could have fooled us.

We have no brief with Microsoft. But the broader issue here, with
potential ramifications for other firms, is Ms. Kroes's belief that
she should determine the worth of private intellectual property.

In following up the 2004 case, Ms. Kroes has said Microsoft's code
wasn't really all that innovative -- contrary, in some cases, to what
patent offices in the U.S. and Europe decided -- and therefore wasn't
worth what Microsoft said it was worth.

When the case started, Microsoft's terms for sharing its code included
a 2.98% royalty from the revenues of products that used it. In May, it
lowered that price to 0.5% within Europe. But Ms. Kroes wasn't
satisfied until Microsoft dropped its price globally to a flat =8010,000
charge, which it did in October.

By comparison, even anticorporate activists say a pharmaceutical
company should get around 4% of revenues when a government forces it
to hand over a drug patent to a generic maker.

Software and lifesaving medicines aren't really comparable. Yet both
cases reflect the mindset that the state knows best when it comes to
the use and worth of private property. In both cases governments
overestimate their ability to intervene in the market without killing
the incentive for successful companies to keep creating the goods the
public wants or even needs.

"Talk is cheap. [Flouting] the law is expensive," Ms. Kroes admonished
Microsoft yesterday. The cost of her improvised lawmaking will be a
lot higher than this spectacular fine.

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Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru@keionline.org


Tel: +41 22 791 6727
Mobile: +41 76 508 0997