.

Last 17 September, FFII published a press release announcing that Microsoft will trump EU competition ruling with patents. Now there is confirmation that this is the case, as reported by Reuters in their article Microsoft finally bows to EU antitrust measures:

First, open source software developers will be able to access and use the interoperability information. Microsoft will not assert patents against non-commercial open source software development projects.

Second, the royalties payable for this information will be reduced to a nominal one-off payment of 10,000 euros.

Third, the royalties for a worldwide license including patents will be reduced from 5.95 percent to 0.4 percent, far less than the 7 percent originally demanded by Microsoft.

This is Microsoft final victory over open source and free software competitors in Europe.

Associated Press also reports about the cut in royalties:

Cut in Royalties

The European Commission, the EU's antitrust authority in Brussels, said Microsoft offered to license information to open- source rivals on how Windows communicates over a network for a one-time payment of 10,000 euros ($14,000). It will also reduce the royalties on related patents to 0.4 percent from 5.95 percent, the commission said.

"The measures that the commission has insisted upon will benefit computer users by bringing competition and innovation back to the server market,'' Kroes said in a statement today. "I have always said that open source software developers must be able to take advantage of this remedy: now they can."

Well, I would say that "now they can't".

Under the 2004 decision, Microsoft had to pay a record 497 million-euro fine, disclose network data to rivals and sell a version of Windows without a built-in video and audio player.

Microsoft will continue working closely with the EU regulator and industry to ensure a “competitive environment for information technology in Europe and around the world,” the company said in an e-mailed statement.

Free Source

In the past, Microsoft has refused to license its technology to open-source software makers. Programs such as the free operating system Linux and a file and printing system called Samba are distributed under terms requiring access to the source code, or underlying operating instructions.

Carlo Piana, a lawyer for the Free Software Foundation Europe, which represents open-source developers, said the agreement may give free software makers access to the so-called protocol information.

"As soon as we've read the agreement, we'll have a final view,'' Piana said in a telephone interview.

Ongoing Obligation

The regulator won't appeal the trustee aspect of the ruling, commission spokesman Jonathan Todd said today. The EU's second- highest court in September said Microsoft shouldn't have to pay the cost of the trustee to monitor its compliance.

On March 1 this year, the commission threatened the company with millions of euros in daily fines backdated to December 2005 for charging "unreasonable'" fees for licensing the protocols.

Just for information, I recopy what we said one month ago:

Microsoft will trump EU competition ruling with patents

Brussels, 17 September 2007 — The Foundation for a Free Information Infrastructure (FFII) says that Microsoft was expecting the 17 September verdict of the EU's anti-trust case, and will exploit software patents to keep its monopoly grip on the global IT market.

FFII president Pieter Hintjens explains, "The decision seems positive but it is five years out of date. During that time, Microsoft has lobbied for software patents in Europe and bought patents on many trivial concepts. It has claimed patent violations against Linux, put patent timebombs into its formats and interfaces, and turned fear of patents into a core part of its business strategy. It will now open its formats, because that lets it extend its software patent franchise even further."

Microsoft recently published its MCPP (Microsoft Communications Protocol Program) patent licence which requires competitors to pay royalties for each copy of software distributed. For example, a free software project making a print server would have to pay USD$8 to Microsoft for each copy downloaded.

"The largest monopolist in history has faced down the largest economy in history," says Benjamin Henrion of the FFII's Brussels Office. "Microsoft will appeal, and the fines if ever paid are just a month or two of profits. Meanwhile Microsoft now has the time to crush its only real competition, the free and open source economy. We regret that the EU Commission and ECJ are blind to the real threat of software patents, while Microsoft cleverly exploits Europe's own patent system against EU businesses. This is a defeat for Europe's anti-trust, a defeat for the global economy, and I'm sure they're popping the champagne in Redmond."

Background information

In the proceedings of the EU antitrust trial, Microsoft states that its communication protocols are covered by at least 3 European patents or patent applications (namely patents 'EP 0661652', 'EP 0438571' and 'EP 0669020'). In addition, another 20 patent applications are pending in the United States, as are 2 in Europe (in its reply, Microsoft states that one of its two applications has since been granted, namely patent 'EP 1004193'). Moreover, Microsoft is planning to apply for 'some 130 European patents relating to Windows server operating systems'.

Jeremy Allison, leader of SAMBA, the open source project file and print services for Linux/Unix servers and Windows-based clients, mentioned recently in LinuxWorld that the MCPP patent licences will make impossible for open source to use them:

"We read the license, it’s impossible to release open source implementations of the product. You have to keep it secret. This defeats the whole idea of open source."

Links

• Microsoft: Pricing Overview for patented protocols
• IDSC: Hearing report of Microsoft antitrust case (PDF, 7.5MB)
• Microsoft EP661652: Distributed file system
• Microsoft EP438571: Method and system for open file caching in a networked computer system
• Microsoft EP669020: A method and system for marshalling interface pointers for remote procedure calls
• LinuxWorld: Open source proponents denounce Microsoft licensing program

Reuters just updated their article:

Commercial developers such as IBM or Red Hat must pay a licence fee of 0.4 percent of revenues to Microsoft when they redistribute that software, to protect against patent challenges.

That is far less than the 5.95 percent Microsoft had demanded, but it was unclear whether it would meet Samba's General Public License prohibiting any royalties.

Here is also the Kroes press release:

Reference: SPEECH/07/647 Date: 22/10/2007

Neelie Kroes

European Commissioner for Competition Policy
Introductory remarks on Microsoft's compliance with March 2004 antitrust decision

Press conference
Brussels, 22nd October 2007

Ladies and Gentlemen

I want to report to you today that Microsoft has finally agreed to comply with its obligations under the 2004 Commission decision, which was upheld last month by the Court of First Instance.

I have been in almost daily contact with Steve Ballmer over the last two or three weeks. As a result of final contacts that took place early this morning, I am now in a position to present to you the results of those highly constructive conversations.

Under the 2004 decision, Microsoft is obliged to provide information allowing third party developers of work group server operating systems to develop products that interoperate with the Windows desktop operating system. Microsoft has previously offered to license this information to developers on terms that the Commission thought wholly unreasonable.

Following our intensive discussions, Microsoft has now made substantial changes to its provision of this information, introducing the changes that I asked for.

I told Microsoft that its royalty rates were too high for the patents they claim are applicable to the interoperability information. In response, Microsoft has slashed its requested royalties for a worldwide licence, including patents from 5.95% to 0.4% - less than 7% of the royalty originally claimed.

I told Microsoft that the royalties for access to its secret interoperability information were unreasonable and had to be reduced. Microsoft has now abandoned its demand for a royalty of 2.98 % of revenues from software developed using licensed information. That percentage royalty has become a nominal, one-off payment of €10 000. This is all that has to be paid by companies that dispute the validity or relevance of Microsoft's patents.

The Commission will now adopt a decision as soon as possible on the pending non-compliance case regarding past unreasonable pricing for the interoperability information, on which the Commission sent a Statement of Objections on 1 March 2007.

I told Microsoft that it had to make interoperability information available to open source developers. Microsoft will now do so, with licensing terms that allow every recipient of the resulting software to copy, modify and redistribute it in accordance with the open source business model.

I told Microsoft that it should give legal security to programmers who help to develop open source software and confine its patent disputes to commercial software distributors and end users. Microsoft will now pledge to do so.

I told Microsoft that developers who sign licensing agreements with them should have the means to ensure respect for the 2004 decision. Microsoft has now accepted that it must give legally binding guarantees to licensees about the completeness and accuracy of the information it provides and that the licensee can obtain effective remedies, including damages, from the High Court in London. These private enforcement tools come on top of the Commission’s powers and continued vigilance to ensure that Microsoft complies with its obligations in this area as in others.

I also said that Microsoft had to provide complete and accurate technical documentation – and backed that demand with additional fines last year. I can now say that Microsoft has substantially respected this obligation. That said, Microsoft’s obligation to document its protocols is an ongoing one – the documentation needs to be maintained as its products evolve, and new issues may arise once it is being used by developers. But as of today, the major issues concerning compliance have been resolved.

Put together, these changes in Microsoft's business practices, in particular towards open source software developers, will profoundly affect the software industry. The repercussions of these changes will start now and will continue for years to come.

The Commission's 2004 decision set a clear precedent against which Microsoft's anti-competitive behaviour could be judged. Now that Microsoft has agreed to comply with the 2004 Decision, the company can no longer use the market power derived from its 95% share of the PC operating system market and 80% profit margin to harm consumers by killing competition on any market it wishes.

Today's changes to the implementation of that decision set a second clear precedent. When Microsoft illegally uses its market power to destroy competition on a market, the onus is on Microsoft to change its business practices to allow competition and innovation to be restored to the market, so consumers are given the choices to which they are entitled.

Microsoft has finally taken steps to comply with the 2004 Decision. However, I want to stress two points.

First, Microsoft has ongoing obligations to continue to comply with the 2004 Decision. If new issues arise in relation, for example, to the completeness and accuracy of the interoperability information, then Microsoft must address those issues immediately.

Second, the March 2004 Decision, as confirmed by the Court of First Instance last month, also sets a precedent with regard to Microsoft's future market behaviour in this and other areas. Microsoft must bear this in mind.