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7/13/2006
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Microsoft Pledges To Appeal $357 Million EU Fine

The company's general counsel insists the issue is clarity, not compliance, as claimed by the European Union. Microsoft's appeal will be based on a claim that it was never clearly told what to do.

Microsoft will appeal the $357 million fine levied Wednesday by the European Commission, its lead lawyer said, and will argue that it was not given clear directions on what it needed to do.

"In our view, this issue has never been about compliance, it's about clarity," said Brad Smith, Microsoft's general counsel, Wednesday during a news conference. "We do not believe that 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.

"We are appealing the decision."

Earlier Wednesday, European Competition Commissioner Neelie Kroes repeatedly said Microsoft had dragged its feet in complying with the 2004 decision that required the company to provide technical documentation on Windows communications protocols. A clear understanding of those protocols was necessary if rivals were to write server software that would smoothly interact with Windows.

Even Microsoft's recent efforts, which she categorized as "an extremely good job" of delivering documents since June 20, don't excuse its previous lackadaisical behavior, said Kroes. "It is of great pity that they did not do so 2 years ago," she said.

Smith said that Microsoft would appeal the fine within two months and ten days of receiving formal notification of the penalty from the Commission. He laid out a three-pronged argument to reporters.

"Before the governmental authority imposes a fine on someone for failing to do something, they have an obligation to be clear about what it is they want done," said Smith, "and this decision did not have the kind of clarity that would justify this type of fine."

Microsoft will also argue that even before it revised the documentation at the Commissions order, several licensees of the protocols had found the guides useful enough to write interoperable software. Finally, the Redmond, Wash. developer will try to convince a court that it's acted in good faith, and made adjustments every time the Commission asked for changes.

"The purpose of a fine or the threat of a fine is to encourage companies to go get something done, and every time we were told to do something we went out and got it done. We didn't need a fine in order to get us to agree to do things."

Even though it will appeal -- a process that could take as long as two years to work its way through the EU courts -- Microsoft will pay the $357 million fine, Smith said. The fine would be refunded if Microsoft later wins on appeal.

In 2004, Microsoft paid a 497 million euro ($610 million at the time) fine to the EU after the original antitrust ruling went against the American company. That decision, and fine, is currently on appeal. In late April, Microsoft presented its case to the Court of First Instance in closed hearings.

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