Microsoft to Appeal $1.3 Billion EU Fine

Updated: 5/9/08--1:15 p.m. PDT

Microsoft is appealing the $1.3 billion (€899 million) fine imposed on it by the European Union for failing to honor a 2004 antitrust agreement, the company said Friday.

Microsoft spokesman Jack Evans said via e-mail Friday that the company has filed an application with the Court of First Instance in Luxembourg to annul the European Commission (EC) decision of Feb. 27, which imposed the fine against Microsoft.

"We are filing this appeal in a constructive effort to seek clarity from the Court," the company said in an e-mailed statement. Microsoft is not commenting further.

The Commission could not be reached immediately for comment Friday.

According to the Wall Street Journal, Microsoft's appeal only covers the imposition of the fine, not the underlying conduct. Since the company won't comment, it's impossible right now to know its reasons for filing an appeal.

Historically, Microsoft has resisted compliance with its EU antitrust ruling and has been reluctant to acknowledge its guilt in the case. However, some recent moves by the company to be more open about its technology practices and to release documentation for proprietary protocols to third parties seemed to indicate it has become more willing to comply with the ruling.

Thomas Vinje, a partner specializing in competition and intellectual property at Clifford Chance in Brussels, said he finds Microsoft's legal action surprising at a time when the company is trying to repair its "strained" relationship with EU antitrust officials.

"Especially in light of its effective admission that it was seeking unreasonable fees for the information required to be disclosed by the European Commission, there really can be no doubt that Microsoft was refusing to comply with the European decision and that the Commission was correct to fine it for that refusal," he said in an e-mail.

Vinje added that it would be better for market competition and the industry overall if instead of initiating another court battle, Microsoft would focus its attention on complying with the EU agreement. "Only then will Microsoft -- and the industry and software consumers -- be able to move on from this sorry saga," he wrote.

Microsoft finally came into compliance with its EU antitrust ruling -- which originally surrounded Microsoft's bundling of Windows Media Player into the Windows client OS -- in late October 2007. Microsoft had fought for several years to overturn the original ruling and imposed fine of then around $600 million (€497 million), but lost its appeal in September 2007.

When the EU imposed the latest fine, which was for noncompliance up to Oct. 22, 2007, Microsoft said it would review the action. The February fine punished Microsoft for failing to license protocols for communicating with its software -- primarily its Windows OS -- to open-source developers at what the EC considered a fair price.

The latest fine came less than a week after Microsoft tried to appease the commission by unveiling sweeping changes in the way it will give third parties access to technology protocols for its Windows and Office products. The plan, which Microsoft CEO Steve Ballmer hailed as a "significant change" in how the company shares information, called for publishing, on its Web site, documentation for APIs (application programming interfaces) and communications protocols that are used by high-volume products such as Windows client and server OSes, Office and other business software.

Since February, Microsoft has published tens of thousands of pages of documentation for protocols online and made them openly available to developers. It has said it will continue on this path to promote more interoperability between its products and those of third parties.

To date, Microsoft has faced nearly $2.6 billion (€1.7 billion) in antitrust fines in the EU.