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Federal antitrust regulators and Microsoft issued a joint status report Tuesday on the software giant's compliance with the 2003 final judgment on interoperability with third parties.

In the interim report, the parties focus on efforts by the U.S. Department of Justice to enforce the final judgments of the 2003 order and Microsoft's work on complying with those judgments.

The final settlement stems from a 2002 consent decree, which the court, in a ruling earlier this year, extended by two years. Under the settlement, Microsoft agreed to be subject to antitrust review for compliance of the consent decree, which calls for Microsoft to share its interoperability information with rivals and other third parties.

Microsoft and the Justice Department give their respective assessments in the status report, and the parties currently have a status conference scheduled for next Tuesday. (Here is a PDF of the report).

In the interim report, the Justice Department claims three issues have arisen that affect Microsoft's progress in improving the documentation it supplies to third parties. The documents relate to its Milestone schedule, including the last group of documents designed to cover an update to Windows Server 2008, or Longhorn, product.

Here are excerpts of those three issues raised by the Justice Department:

First, the TC (Technical Committee) determined that in the process of revising the technical documentation, Microsoft removed a number of protocol elements that were included in previous versions of the documentation. When this same issue arose last year, Microsoft and the TC discussed that Microsoft would not remove protocol elements from the documentation without first discussing it with the TC in order to ensure that there was no substantive disagreement. Plaintiffs are concerned that the same problem has occurred again. In some cases there may be perfectly valid and sufficient reasons for removing certain protocol elements (2), but it is important for the stability of the documentation that the TC review the proposed deletions before they occur, as Microsoft and the TC previously agreed.

Second, and on a related note, the TC has suggested to Microsoft that it would be extremely beneficial to the TC and licensees to create a mechanism for detailing changes between versions of the documentation. Currently, it is difficult to tell exactly what has changed when Microsoft releases a new version of the documentation. This slows down the TC in its work by making it difficult to evaluate revisions to the documentation and causes issues such as the one discussed in the previous paragraph, where it is difficult for the TC (and Microsoft itself) to determine whether protocol elements have been removed from the documentation. Licensees have also informed the TC that the absence of version-to-version change information complicates product development. Microsoft was receptive to the TC's suggestion and will work with the TC to develop an effective mechanism to track changes to the documentation.

Finally, at the beginning of the year Microsoft changed the schedule for publishing updated technical documentation from monthly to quarterly. The TC's experience with this change has not been positive, as it creates a longer lag time between the identification of issues in the documentation and the publication of fixes to those issues. Licensees have expressed similar concerns to the TC. The TC therefore raised this issue with Microsoft in a recent meeting, and Microsoft agreed to increase the frequency of publishing updates to the documentation.

And here is footnote (2) for the first issue of concern raised by the technical committee, which deals with the "valid and sufficient reasons for removing certain protocol elements":

2 For example, Microsoft or the TC might have discovered that a particular protocol element does not actually pass over the wire between a Windows server and a Windows client, but rather is merely internal within the Windows server and therefore does not need to be documented as part of the MCPP (Microsoft Communications Protocol Program).

The Justice Department further notes that as part of the original documentation plan Microsoft said it would produce to give an overview to third parties on how the MCPP protocols work together, the software giant developed a template for the system documents and will discuss potential modifications to the template with the technical committee.

To date, Microsoft has developed a list of 19 system documents it plans to create and an approximate schedule for producing the paperwork. Microsoft expects to publish drafts of the 19 documents by the end of March and a final version by late June 2009.

Microsoft's licensing policy for the interoperability information will be further tweaked, after the Justice Department raised several issues over the software giant's new patent license. The Justice Department wanted to ensure that future licensees had the "same legal rights under the license that existing licensees possess."

And in the issue of Vista's successor, Microsoft recently authorized the technical committee to review another early build of the Windows 7 operating system. And as the Windows 7 builds progress, the technical committee will conduct middleware-related tests to ensure Vista bugs don't reappear in Windows 7.

Microsoft, meanwhile, notes it's made progress in complying with the final judgment order of 2003. The software giant stated that although it has received seven complaints or inquiries since the last joint status report in late February, none of these issues is related to Microsoft's compliance obligations under the 2003 final judgment.

Since making its communications protocols available for free on its Web site, users pulled 146,000 downloads of the documents since the first of this month, Microsoft noted.

Also, 49 companies have licensed patents for the communications protocols since the final judgment, with 36 of the companies signing aboard for a royalty bearing license.

The software giant also noted it is working toward providing additional information on its protocol documentation.

Microsoft stated in the report on its progress in communications protocol licensing:

While Microsoft firmly believes that the current protocol documentation available to implementers enables interoperability with Windows and fully complies with the Final Judgments, in response to the Technical Committee's ("TC") request, Microsoft is undertaking a new effort to supplement the existing protocol documentation with additional "System" documents.

And on its progress in modifying the technical documentation, Microsoft notes it is currently examining ways to present changes to its various document versions in an efficient fashion, as well as working on ramping up the frequency of publishing protocol documentation from a quarterly cycle. Microsoft anticipates presenting its revised schedule in the coming weeks.

The software giant also addressed its progress in resolving technical documentation issues via protocol test suites, which tests newly rewritten protocol documentation; as well as its interoperability labs, which offers direct access to the software giant's product development teams and engineering staffs for technical support to test licensees' implementations of MCPP protocols.

To date the interoperability labs, which are offered free to MCPP licensees at its Microsoft Engineering Center, Microsoft completed an interoperability lab with one licensee in March and another in May.

"Microsoft received very positive feedback from licensees on both events," Microsoft stated in its status report.

Microsoft announced Friday it's appealing the $1.39 billion fine the European Commission imposed for failure to comply with its historic 2004 antitrust order against the Redmond giant.

Microsoft filed an application with the Court of First Instance in Luxembourg, seeking to annul the Commission's decision from late February, in which it imposed a fine of 899 million Euros, or $1.39 billion, against Microsoft.

"We are filing this appeal in a constructive effort to seek clarity from the court. We will not be saying anything further," Microsoft said in a statement.

When the Commission imposed the fine, it was specifically designed to address sanctions over the pricing structure Microsoft had set for licensing of its interoperability protocols and patents.

The pricing issue was the last of three parts of the Commission's March 2004 order, which called for the software giant to provide accurate and complete interoperability information to rivals. The purpose was to allow rivals' software to work with the Windows operating system and to provide that license information under "reasonable and nondiscriminatory" terms."

Two years ago, the Commission hit Microsoft with a fine of 280.5 million euros, or $434 million, for failing to comply with the other two parts of its sanctions related to providing complete and accurate interoperability protocol information to rivals. Microsoft initially appealed that 2006 fine, but withdrew it last fall.

Microsoft sought to overturn the Commission's March 2004 order, but last fall the Court of First Instance upheld the Commission's order, which found the software giant had abused its market dominance in the operating system market.

The European Commission said it remains steadfast in its decision to issue its historic fine against the software giant.

"The Commission is confident that the decision to impose the fine is legally sound," said Jonathan Todd, a spokesman for the European Commission.

The fine levied in February marked the largest penalty the Commission had ever imposed on a single company. To date, the Commission has imposed roughly $2.6 billion in its long-running antitrust dispute with Microsoft.

That figure also includes the original fine of 497 million euros, or $769 million, that the Commission imposed in 2004, when it first issued its order against the software giant.