Microsoft signs up first licencee for code

Under threat of new multi-million pound fines, Microsoft today said it had signed up its first licensee for a programme EU regulators told it to set up three years ago to share code that helps servers work with the Windows operating platform.

The European Commission threatened the software giant with new daily fines of €3m last week for not obeying its March 2004 antitrust order, claiming Microsoft was overcharging rivals for “complete and accurate” documentation.

Microsoft said signing up Quest Software – a company based in Aliso Viejo, California that helps businesses manage the different IT systems they run – was an important part of its efforts to comply with regulators’ demands. The company is still talking to other potential licensees, it said.

But a spokesman for a group of Microsoft’s rivals – the European Committee for Interoperable Systems – said the licenses did not help rivals in the work group server market make software that worked smoothly with Windows desktops, as the EU wants, although they might be useful to companies that made complementary products.

“It’s window-dressing arranged by Microsoft to cover up its refusal to comply with the Commission decision,” said ECIS’ Thomas Vinje.

“Quest is not a competitor of Microsoft. It is a partner of Microsoft’s,” he said.

Microsoft said the agreement showed that Quest believes the royalty rate is reasonable.

“Quest chose to sign their license the same day the Commission issued its statement of objections on protocol royalties, even though we had agreed on terms with Quest some weeks ago,” Microsoft said.

Vinje said the license programme charged “utterly unreasonable” fees designed to be economically unfeasible, not least because Microsoft’s terms shut out the only real rival left in the work group server market – vendors such as RedHat - that base their products on the open source Linux software.

The Microsoft license gives Quest access to communications protocols used by Windows work group servers – which control office tasks such as printing or sharing documents.

Microsoft will get royalties of 5.25% of new revenues from the Quest products that use the protocols – effectively a recognition of Microsoft’s view that the protocols are valuable intellectual property.

EU regulators, after hearing from independent advisers, said last week they believed there was “no significant innovation” in the communications code.

The companies that triggered EU regulatory action by complaining that Microsoft was trying to squeeze them out of the server market – IBM, Novell, Sun and Oracle – have never joined Microsoft’s European scheme. A similar US programme has 27 members.

Microsoft has four weeks to respond to the EU’s March 1 charges, after which regulators could impose daily fines.

Microsoft is challenging the EU’s original 2004 decision at the EU’s Court of First Instance. The ruling found the company broke competition laws for abuse of a dominant position and fined the software maker a record €440m.

EU regulators fined Microsoft another €300m last July for failing to supply the full interoperability information required.