April 5, 2007 6:18 AM PDT

EU eyes royalties squeeze for Microsoft

Microsoft could be forced to give rivals vital technical information in exchange for little or no royalties, according to a newspaper report.

The software company originally wanted 5.95 percent in royalty payments on software that uses certain Microsoft-patented routines that are sold by the company to its rivals as part of the settlement with the European Commission.

According to the Financial Times, which claims to have seen a confidential internal European Commission document, Microsoft was told it could have zero or 1 percent of the disputed royalty payments.

The document was written by Neil Barrett, the expert agreed on by Microsoft and the Commission. According to Barrett, at a 5.95 percent royalty rate, Microsoft's rivals would recoup their development costs within seven years. Barrett said in the document that this would be unacceptable, and that even a royalty of 1 percent was too much.

Microsoft's suggested remedy would be "prohibitively high...and should be reduced in line with this analysis," Barrett said, according to the Financial Times report.

Microsoft disagrees.

"We firmly believe the prices we proposed are fair," Microsoft spokesman Jack Evans said Friday in a statement to CNET News.com. According to Evans, analysis conducted for Microsoft by PriceWaterhouseCoopers found that Microsoft's "pricing is at least 30 percent below that of comparable technology in the marketplace." Evans added, "We also believe that this technology is innovative because it includes 36 patents issued by U.S. and European patent offices, with another 37 patents pending."

The Commission maintained that neither Microsoft's proposed solution nor the 1 percent figure is acceptable.

According to the Financial Times, the Commission believes that prices proposed by Microsoft would not "allow (rivals IBM, Sun Microsystems and Oracle) to develop products that would be viable from a business perspective."

All three of those companies have made no secret of their belief that Microsoft acts in an uncompetitive way and has consistently made it difficult for them to produce applications that are fully interactive with Microsoft software.

This phase of the antitrust dispute between Microsoft and the European Commission has been raging for three years now, since the Commission first fined Microsoft 497 million euros ($664 million). Since then, the Commission has continued to fine the software giant, hitting it with a fine of 280 million euros ($374 million) last year for failing to comply with the first fine.

Microsoft has until April 23 to formally respond to the latest royalty proposals.

Colin Barker of ZDNet UK reported from London.

See more CNET content tagged:
commission, rival, royalty, European Union, antitrust

6 comments

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Who Said The CONCORDE Cannot Fly!
That this article states in part; "According to the Financial Times, the Commission understands that prices proposed by Microsoft would not "allow (rivals IBM, Sun Microsystems and Oracle) to develop products that would be viable from a business perspective..." What the EU needed most to be concerned about was to concentrate on their skills set and not try to influence the international playing field that is the software industry. Geez... It's not that the U.S. based Microsoft Corporation's behavior is anything but stellar; but, come on now--after almost three decades Microsoft's competitors--"IBM, Sun Microsystems and Oracle..." had enough time to enter the "international boxing ring" and this is not the time to run and hide behind "mummy and daddy" these companies need to stand up and throw back punches like prepared boxers would in a contest and not seek changes in the rules of the fight in the middle of it if things seems not to be going their way! Similarly, if the EU builds "quieter" CONCORDE (their skills set) then it will fly with the LINUX and OS/2 Operating Systems along with the Productivity Applications to show them the (EU) how!
Posted by Commander_Spock (3123 comments )
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Hmmm...
I wonder what having a beer with Commander Spock would be like...
Posted by KTLA_knew (385 comments )
Link Flag
Rubber baby buggy bumpers
Quote, Dave Barry: "Haha on that. Booger."
Posted by Christopher Hall (1205 comments )
Link Flag
You get what you pay for!!!
EU is such a lost cause, history, its sad in a way EU is turning into USSR soon after it helped disintegrate it. There is not even one EU company that outstanding, even Airbus is now seems on the verge of collapse.
If MS technology is not worth 5.95% of the cost of the product then don't license it as simple as that, if the cost of reverse engineering the protocols is less then 6% then why even complain just do that, you bunch of Moro*s (IBM, Sun and Oracle).
Posted by FutureGuy (742 comments )
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Outrageous
Incredible...I wish MS would offer a deal like that to me.... I'd make money the first day. I seem to recall that in our trade agreements, that we are not to abuse each others law. It is clearly a violation of law here to force a company to give up it's trade secrets for FREE!!!
I don't know what world the EU is living in. If the situation was reversed, say Mercedes forced to give up its designs and patents for free to say Ford. I bet we'd hear alot of europeans scream. Americans, call your congressman! I truly believe that we would be alot better off if MS and this country just didn't have anything to do with those knot-heads.
Posted by suyts (824 comments )
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