RSSEU Threatens to Fine Microsoft for Lack of Innovation
By Scott M. Fulton, III | Published March 1, 2007, 10:51 AM
In what could be an historic first, the European Commission's new statement of objections to Microsoft for alleged non-compliance with its March 2004 antitrust ruling forwards a novel theory: not that the interoperability information the EC demanded is incomplete, but instead that the communications protocols it describes are not innovative enough for Microsoft to deserve charging royalties for its use.
In Microsoft's draft copy of the royalties it proposes to charge for licensing its interoperability protocols, as the EC has directed, it divides its intellectual property in categories based on the degree of confidentiality of IP information licensees would be receiving. Certain protocols which may fall outside the realm of patentability are given a separate classification, and for those, Microsoft wants to charge a flat fee; but for technologies for which it claims patent rights, the company proposes either US dollar rates per server or percentages of revenue.
Some individual technologies within the premium tier, such as Kerberos authentication, are actually free of charge; though others, such as Base Authentication Services (used to grant authentication to clients accessing Windows Server resources) are relatively expensive - as high as $17.50 per server seat. (The complete proposed rate table is available in this PDF document.)
EC Commissioner for Competitiveness Neelie Kroes stated today she believes Microsoft's proposal constitutes charging a premium for protocols based on their relative innovativeness, by virtue of their having been patented. However, the analysis she's received thus far, she said, indicates to her that those protocols aren't innovative enough to warrant the premium charge.
"Microsoft has agreed that the main basis for pricing should be whether its protocols are innovative," Commissioner Kroes' statement reads this morning. "The Commission's current view is that there is no significant innovation in these protocols. I am therefore again obliged to take formal measures to ensure that Microsoft complies with its obligations."
This morning's statement from the EC acknowledges that certain "third parties" are objecting to the notion that they must receive a license to Microsoft's patents in order to be able to use the communications protocols for their own software to be able to interoperate with technology covered by those patents. It's a new take on the old argument that you don't need a license to Ford's or GM's intellectual property to be able to drive one of their vehicles.
But the EC is arguing two points simultaneously: that Microsoft's patented tier doesn't deserve a premium because its patents aren't innovative enough, and also that its non-patented tier shouldn't require charges at all because, by virtue of their not being patented, they obviously cannot be innovative anyway.
"The Commission's preliminary view is that there is virtually no innovation in the 51 protocols in the 'No Patent Agreement' where Microsoft has claimed non-patented innovation, and that Microsoft's current royalty rates for this agreement are therefore unreasonable," reads the EC statement. It goes on to acknowledge the work of its designated trustee, Dr. Neil Barrett, in having examined 160 Microsoft claims to patented technologies, and having concluded that among those, only four may only deserve to claim "a limited degree of innovation."
The ramifications of this claim go far beyond whether the EC would impose new fines on Microsoft - which, incidentally, would be at a rate of 3 million euro per day (nearly $4 million USD) retroactive to August 1 of last year, or $842.6 million USD if the fines were imposed today. The EC now appears to be accumulating the interoperability information Microsoft has given it, to perhaps mount a challenge to the very originality of Windows itself, disputing the company's rights to exclusivity over its own operating system.
For its part, Microsoft's senior vice president and general counsel Brad Smith defends the validity of his company's patents, by saying not only that the US Government seems to back them well enough, but that partner companies appear willing enough to pay royalty fees to use the technologies they cover.
"Other government agencies in both the United States and Europe have already found considerable innovation in Microsoft's protocol technology," Smith said. "US and European patent offices have awarded Microsoft more than 36 patents for the technology in these protocols, which took millions of dollars to develop, and another 37 patents are pending, so it's hard to see how the Commission can argue that even patented innovation must be made available for free."
Smith then went on to cast doubt on Kroes' contention that Microsoft already agreed that, because royalties would be set based on relative innovativeness, non-innovative protocols would be free of charge. "The proposed findings suggest that unless our intellectual property is innovative and patentable, it has to be made available royalty free. That has never been the standard for software or other intellectual property, and it misstates the test agreed to by the Commission and Microsoft in June 2005, which has been available on Microsoft's website since that time."
From there, Smith contends that the EC may be overstepping its bounds, from a geographical standpoint. Microsoft's proposed royalty fees apply to all customers, not just those in Europe. A European agency may not have the authority, he argued, to determine the global efficacy of royalty rates - a subtle implication that the company may be willing to argue this case before a higher court, with US evidence to back it up. "If other authorities all took similar views of their power," Smith said, "companies would be unable to comply with contradictory rulings."
An FAQ on the European Union Web site voices the Commissioner's contention that Microsoft's proposed royalty fees are unreasonable because they fail to "reflect the market valuation of comparable technologies." The statement did not go on to list any other companies who provide interoperability protocols for Windows. In Microsoft's response this morning, Brad Smith cited a PricewaterhouseCoopers analysis that concluded Microsoft's proposed fees were 30% lower than market rates.
12:15 pm ET March 1, 2007 - In response to BetaNews' inquiry, European Commission Spokesman on Competition Jonathan Todd reassured us that the EC "is not challenging the validity of the patents" (emphasis his).
Todd cited a paragraph in this morning's EC press release which acknowledges Microsoft's existing patents. With regard to the royalty licensing tier Microsoft proposes called "All IP Agreement," which bundles technologies Microsoft claims are either patented or otherwise confidential, the press statement reads:
"The Commission has assumed that the existence of patents indicates some associated innovation, although third parties remain free to challenge Microsoft's patent claims before an appropriate court or to implement software that, in their view, does not infringe the patented technology. In any event, the Trustee's analysis is that most of the information relates only to solving problems specific to Windows, and will not improve the functionalities of the licensee's own operating systems. The Trustee has also provided evidence to the Commission that comparable technologies to these were provided royalty-free."
The reference to "the information" in the above paragraph appears to relate to information that monitoring trustee Dr. Neil Barrett has ascertained in his analysis of whether anyone could effectively argue the innovativeness or originality of Microsoft's protocols. "It is on this basis that the Commission considers that the current royalty rates are unreasonable," Todd told BetaNews.
However, a paragraph preceding the one Todd cites quotes Dr. Barrett specifically as having concluded "the information" indicates little or no innovation on Microsoft's part. "All of the described features [in Microsoft's 160 patent claims] were considered either to have been Microsoft implementations of prior developments by others, or to have been anticipated by prior developments and to be immediately obvious minor extensions to that prior work," Dr. Barrett stated.
That particular conclusion appears to be an open dispute of Microsoft's claims of originality. So if the EC doesn't plan to directly challenge Microsoft's patents, it appears willing nonetheless to support the efforts of others who may make that challenge privately.
That is really insane. Microsoft negotiates like a Berber. It was ordered to comply. Got every chance. they got fined for continous non-compliance and still new tricks are tried.
What will happen next? Will Brad Smith take his shoes and throw them against the commissioner. Unbelievable.
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|Can I fine Microsoft too!
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|Sure, so long as you don't mind waiting in line.
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|Talk about a vague title for a charge! If they really apply that fairly, it would be applicable to almost every corporation on Earth.
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|You should really try to keep up. But it's not all your fault the Beta News headline is slanted. There is no fine for failure to innovate. The EU is just not going let Microsoft use trivial patents to evade their obligations. And it's not all Beta News' fault either, Microsoft has a big marketing budget and it knows how to use it.
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|Really...and I suppose Bush was behind the holocaust, too?
Don't give Microsoft more credit than they're due--Gates is only human. Money isn't power until you use it or threaten to use it. In fact, I'll bet if you followed the numbers, you'd quickley discover that most of the profit Microsoft makes is used for medical research, disaster relief, and charity donations--not bribery as you suggest.
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|Keep up? What in the world? I can't even begin to understand what that comment was about. In any case, I was indeed referring to the BN headline. The point being that it was an over simplification of the story details. Geez. Decaf man, Decaf.
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|The EU needs to be innovative. They're just jealous that America has a cash cow on their hands and the European companies are too stupid to compete.
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|Here is the recipe.
Take a standard protocol and make some minor changes, but keep them secret to prevent your competitors from competing.
Make money from users with no choices until convicted.
Appeal, delay, appeal again, delay some more, while you continue to make money off users with no choices.
Now claim your trivial changes are Intellectual Property and worth silly money.
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|Nice recipe Scotch.
Is iT patented?
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|Damn, that analysis is so on target its scary.
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|"Take a standard protocol and make some minor changes, but keep them secret to prevent your competitors from competing. "
and then you say....
"...make money off users with no choices."
If it's a standard protocol with minor changes, then there should be tons of choices for the user. If there's only one, then it doesn't sound like it'd be a standard protocol. If it is standard then there are a lot of dumb companies out there not capitalizing on the exorbitant pricing by Microsoft and a standardized protocol.
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|"there should be tons of choices for the user"
Yes, I forgot the first step: Begin with a monopoly on desktop workstations, so you can leverage that to force the use of your protocols.
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|Make money from users with no choices...
Please tell me you were just joking.
...no choices indeed. *rolls eyes*
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|You only get a monopoly if you produce a better product that people actually buy. And it isn't a legal monopoly anyway, just a very popular program. That is not something the Europeans have tried yet.
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|ROFLMAO!
I am no MS fan, but the idea that you have no choices and that you HAVE to use Windows is ludicrous!
If the entire European continent is too stupid to develop an ethical 'free' progressive and enlightened OS, then get your head out of your @ss and chose another platform!
But then remember that this is a place where 10,000 people die in France because the temperature reaches a heinous 100 degrees F and the morgues overflow because the relatives AND the Fr Prime Minister are too involved and too lazy to return from their vacations - pardon moi - 'holiday' - to claim the bodies! Never mind that all people had to do was run a tub full of water and lie in it to cool off! ...As if 100 degrees F is too hot!
These are the lemmings blaming MS for not being "innovative" enough!
Next they will sue Coca Cola for not shipping coke chilled, as the Euros are too stupid to figure out the radical concept called ICE!
And $85 USD for a freaking EuroDisney T s***! That is when the farmers aren't blockading it with their tractors complaining that their protective tariffs and price supports aren't high enough!
If you don't like it, don't use it! But then again, we have to remember that these are the same socialists who thing they are entitled to others' music as well.
And if money is "so silly", why are you complaining! It doesn't matter! Don't buy it! And get a window installed in your stomach so that you can see where you are going. No wonder they drive on the sidewalks!
Euros have no choices! Right! The correct answer is that they are too stupid to assume responsibility and make choices without blaming the rest of the world!
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|It's so sad that you sacrifice any credibility you might have to go on a heinous bigotry rant.
Was it worth it?
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|This is a battle between US (not only MS) and EU. However EU guys acting a bit stupid.
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|MS != US
Please do not make that mistake again.
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|You don't get what I mean. I was think why EU ask MS do things which everyone know it unacceptable? One reason for it: They want to kick MS ass. MS in a US company. EU make thier own currency EURO to get out of USD. Its economy battle between US and EU.
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|No one is forcing Microsoft to sell their wares within the EU. They're free to pull up and go home. Besides, they don't seem to want to sell Vista there with the astronomical prices they're charging. Wish all these Microsuckers would quit their crying.
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|well we are all paying exactly for such buroqratic actions EU does.. contraproductive.. some EU stuff apparently doesnt have anything productive/inovative to do so they listen to lobying and invite tasks to do.
I am European and i DO think our Brusell's buroqrats are too much out of reality sitting on their warm chairs thinking what they should do next day... ppl always keep in mind bussiness whats usefull for other ppl simplyfy stuff do not make it recursivly more difficult..
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|Besides, they don't seem to want to sell Vista there with the astronomical prices they're charging.
LOL You can thank your beloved EC for the high prices.
That's MS's way of saying: "You pay for the fines."
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|"No one is forcing Microsoft to sell their wares within the EU. They're free to pull up and go home."
You really should stop and think for a minute before making a really stupid comment like that. You may not like Windows or Microsoft, but you don't get to make that choice for several hundred million other people living in Europe. I'm sure you would suggest something like "everyone switch to Linux or MacOS" too. Let's keep in mind that Windows and other Microsoft products play an enormous role in European business and economy. Like it or not, Microsoft and their "wares" are a necessary evil. So no, they can't "pull up and go home" as you put it.
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|I wish they would. MS should give the EU the proverbial finger, pull all their licenses from everyone in an EU member state, then start suiing them when they are still using the software after the cease and decist letters start flying.
Then they can use that money to pay the EU retards their "fines", and leave the country in shambles.
Monitor the situation for years and years, catching all the users using the now illegal software, and keep suiing, continuing ot make money.
That would solve that problem real quick.
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|Just who the heck does the EU think they are? The mob. I'm not the biggest microsoft fan in the world, but some of these stupid coments made by the EU and by these nutcase people claiming copyright infridgement on almost everything they do is just bs.
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|Microsoft I have a solution, kill all licenses bought/purchased within the region EU controls. Discontinue all product support for the EU region, don't sell any Microsoft product.
At this point you won't be throwing money at an organization thats clearly worst then the RIAA, in a few months, your costs I am sure will go down.
Any country that is not in the EU clearly can continue to use your products, you could even make deals with those regions that are not part of the EU for greater products and give customers what they want ( whatever that might be ).
The free market is the best system, since the EU cannot control Microsoft, they just fine Microsoft over dumb s*** like this. If Microsoft products are not Innovation enough for the EU, then Microsoft should just pull those products. They could then go to courts with the regions controlled by the EU and asked to be paid damages for anyone who uses their Innovation products.
Its so lame, its not even, Microsoft boycott the EU, before they Boycott you at least do it on your own terms.
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|"Microsoft I have a solution, kill all licenses bought/purchased within the region EU controls. Discontinue all product support for the EU region, don't sell any Microsoft product."
Again, another stupid comment. Pulling out of the European market is not an option for Microsoft, period. Europe has a total population of around 728 million, or 11% of the world's population. Not to mention a very large chunk of the global economy. It is not something Microsoft can afford to side step. Even if Microsoft were to get fined $4 million a day, they would probably still make a healthy profit in Europe. Besides, even if Microsoft *tried* to pull out of the EU market, I'm sure there are laws preventing them from doing it.
People complain about Microsoft abusing their powers of monopoly. How would pulling out of the EU *not* be abusing said powers?
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|*** Besides, even if Microsoft *tried* to pull out of the EU market, I'm sure there are laws preventing them from doing it. ***
Betcha you would be wrong :) The only recourse that the end-users could do is go to their reselelrs and try and get refunds...But since the software is opened, they can't get that either.
The license you agree to when you open the package and install the software is a right-to-use. You do not own. You are basically perpetually "renting" the software until the license is no longer valid (via whatever means provided in the licensing).
The EU could try and stop MS, but really, there's nothing they could do.
**** the EU.
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|MS might as well dump their operations in the EU now, before they decide to fine MS because the new login sound on Vista is not musical enough.
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|No joke.
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|"MS might as well dump their operations in the EU now, before they decide to fine MS because the new login sound on Vista is not musical enough."
ROFLMAO!
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|Intersting the American cuss the UK, sorry to tell you that the UK is NOT a member of the EU yet, nor is it likely to be.
So before you say how up the EU bottom the UK is get the facts hill billys
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|Dude, what are you smoking? United Kingdom IS a member of the EU. Also, you spell it like this: Hillbilly
Get your derogatory words right ya limey.
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|lmao...
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|The EU is Pathetic
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|"The EU is Pathetic"
If the EU is Pathetic, then the UK is Pathetic since they're part of the union.
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|This just in, the EU has announced it is fining Santa Clause for not being generous enough.
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|Yea if i could put everyone in the EU who is this greedy, to death ... i would
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|Take care of the rest of the world while you're at it.
Thanks. =p
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|"Take care of the rest of the world while you're at it."
I think the world's population would be cut by 75% if he did that.
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|Nuke the EU we don't need them anymore. Europeans smell awful too.
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|Negative score in 3...2...1...
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|The end result is already well known (in that there won't be any end result).. MS will keep fighting, will only do the minimum to "appear" complying (on any sane standard/review of a higher court) and thus will eventually get the fine trimmed, but new fines will keep coming in (and then again trimmed for "some" compliance). Obviously MS will NEVER bend over to the EU.
Eventually I envision MS paying the supreme court in the US some insane amount of money to review the findings of the EU courts just to clarify the EU is basically inherently UNAMERICAN in its demands. Clearly this will push the EU courts to some level of sanity if they wish the EU to continue to compete with the US (in any industry) in the global marketplace... If THEY screw US in the technology sector, WE will screw THEM in other sectors (once it's clear they are NOT playing fair)...
So in the bottom line, the average American will NOT suffer AT ALL from EU's actions in this matter. Whatever "damage" they cause to the IT world, will be caused unto them in other fashions... Wait and see. And we all know MS will be heavily into other businesses such as marketing/entertainment/telecom/HARDWARE in 10-15 years. By forcing you to use certain motherboards/stand-alone media players, for example, they can force you to pay for every intellectual property item (uncrackable DRM with hardware assistance). We're talking about the INABILITY to pirate software and extreme difficulty in pirating entertainment content (every data stream uniquely encrypted AND watermarked).
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|OMG there is a black helicopter above you and watching your every move I bet he sees you watching that dirty movie!
Now, turn the tin foil cap just a little to the right as it appears to be quite tight...
Aww... look the men in clean, white coats are coming.
BTW did you even bother RTFA
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|The NSA doesn't need to waste expensive fuel on monitoring your/my adult content consumption. They already have "data eating" nodes all over the f'king internet. You must be the dumbest person in the world not to acknowledge that... Everything about everyone is stored somewhere, legally. Once you become a suspect, they can then also legally query that dbase for your individual activities. Until such point they are NOT "spying on Americans".
The NSA doesn't care if you're a pedophile, a drug dealer, or even a mass murderer. They will not be allowed to use above-said dbase for ANYTHING but NATIONAL SECURITY = terrorists and spies. People who have the potential to cause damange in the billions of dollars and tens of thousands of lives.
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|By forcing you to use certain motherboards/stand-alone media players, for example,
This doesn't sound anything like another hardware/software/trinket company out there does it?
But hey, so long as they aren't MS.
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|The UK once again shows their "special" wit, their love for the absurd, and their complete lack of ability to comprehend free-market.
Hats off to 'em. I haven't laughed this hard in a while.
Whoever came up with this should have his own show on the BBC.
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|Did it mention the UK on its own in that article?
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|The UK may be a part of the EC as a country, but it's citizens are certainly not represented by the unelected-EC. The UK is closer to the USA in many respects than Europe, so your comments are not only false, they show your ignorance.
And just for your further education - the idea of "free market" and capitalism in general was championed initially, not by an American, but by a Brit... you might have heard of Adam Smith... but then again they don't teach you much in American schools do they (I should know - I spent three years in HS there).
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|Well said Jmark
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|You spent 3 years in our public schools? ... you have my pity.
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|UK^H^HEC
There.
Man...ya make one little typo...
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|I would laugh, but it's too sad.
To think: I actually share oxygen with people this dumb. =(
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|lol
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|I think their oxygen is laced...
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|Hey... maybe the EU has a point. I'm not keeping up that closely. HOWEVER, the EU sure could use some PR training. They sound like grifting fools.
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|If it looks like a duck, sounds like a duck, and smells like a duck...
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|.... It's the A380 airbus duck built EU . No orders, 10 years late on Delivery and overbudget. Sound Like the EU trying to recoup losses any way they can.
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|The Free Enterprise system works, folks. Sure, there are plenty of companies that abuse the system, and since nobody is perfect, there will never ever be a perfect system, but this system always seems to endure through the end...that is until the government tries to "fix" it.
If they charge too much, customers will stop buying from them. This argument is stupid because if they lacked innovation, why do so many people buy from them? To the EU, one of the following MUST be true:
1. The 90% (or whatever the hell MS's market share is, I don't keep up lol) figure indicates that the individuals that make up 90% of the market aren't intelligent enough to make their own purchasing decisions, so EU has to make decisions for them on what product they really want. (that's probably the best example of the difference between socialism and capitalism, by the way)
2. Innovation is really failure, because MS's apparent lack of innovation makes them billions.
3. They (the EU) have no clue of what they are talking about logically--only educated fools look so deepley into law that they lose all of their ability to use logic, reason, and sound arguments.
The only question I have for the EU is this: Which of the above is true?
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|"2. Innovation is really failure, because MS's apparent lack of innovation makes them billions."
If it's not the innovation, then maybe it's the illegal activity that made them billions?
You were waiting for that, huh?
Seriously, the EU is going overboard to the extreme now.
heh
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|XP N was such a hot seller... =)
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|XP N was what the EU wanted. Worked splendidly, didn't it?
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|If it's not the innovation, then maybe it's the illegal activity that made them billions?
...but what have they done illegally for me lately? :p
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|All the Above? LOL
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|heh!
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|You know, in a twisted way, I want to get my hands on an unopened box -- like a stamp printed upside down, ya know?
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|None of the above. Microsoft is one of the greatest innovators in all of history. Just not in server protocols. The textbooks of the future will have whole chapters devoted to Microsoft's innovations in legal maneuvering, anti-competitive product features, nonsense marketing speak, and using a monopoly to leverage market share for other products.
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|ROFL
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|Nah...because Apple will get all mad because MS wrote the books that you could pull "Microsoft" out of and replace with "Apple" and have it work the same way. (i.e. think iPod/ITMS)
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|Here come the Grifters.
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|“perhaps mount a challenge to the very originality of Windows itself” From what dark smelly place did you pull out that idea?
Before the readers get all dizzy from bizarre speculations they should understand a few things.
Secrets cannot be patented. Patents are granted in exchange for disclosure.
Microsoft's secret extensions to standard protocols for competitive advantages have been found, in criminal legal proceedings, to be an abuse of monopoly. Full disclosure is the remedy.
Microsoft has been doing everything it can to evade meeting its obligations to disclose its server protocols. What it had been calling trade secrets it now wants to call patented intellectual property so it can make any competitive product economically pointless.
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|And this has to do with the accusations of "lack of innovation" how?
If Microsoft should be fined for the reasons you just gave, then fine them. However, using the argument in question in this article just seems to be a desparate witch hunt to me.
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|The EU is calling the patented intellectual property claim invalid because the "innovations" are trivial.
It's like taking a standard component, painting it red and calling that an innovation.
Typical Microsoft puffery. But in this case they are again tying to evade the judgment that would restore competition to the server market.
The EU is certainly within its authority to demand fair competition for servers. Trivial and arbitrary anti-competitive obstacles erected by a workstation monopoly will be removed.
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|*** The EU is certainly within its authority to demand fair competition for servers. Trivial and arbitrary anti-competitive obstacles erected by a workstation monopoly will be removed. ***
And MS is certainly within it's own rights, and the licenses every end-user agrees to, to pull it's licenses out from the EU member states and all it's businesses and citizens, and start suing the bejeebus out of those people, businesses, and governments, and telling the EU to fvck off.
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|"it describes are not innovative enough for Microsoft to deserve charging royalties for its use."
nice.
That's just unreal.
heh
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|If you have a patent on a particular technology you have every right to charge people as much as you want to use the technology. If Microsoft wanted to, they could start charging people millions of dollars to use their FAT file system.
It will be interesting to see how many more illegal fines the EU can get out of Microsoft.
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|The EU has become a pack of crack wh***s willing to get anything for free.
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|Unbelievable. Yup, this is exactly why Thomas Jefferson so strongley emphasized the need to have a form of government where the people decide what goods and services to produce and sell. The people may be far from perfect, but they certainly have more brains than the EU it would seem.
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|