$5m daily fine beckons for bad boy Microsoft

Punishment becomes profit


Although the European Commission's statements are diplomatic to the point of opacity, there's no mistaking what it thinks of the latest turn in the Microsoft antitrust saga. The Commission doesn't think Microsoft's trying hard enough, and it has canvassed widespread industry support to bolster its position. From a Microsoft document unearthed by ZDNet, and still available here [PDF 450kb], we can see why even long time Redmond partners are losing their patience.

Microsoft's answer to its punishment is typical: seeing it as an opportunity for a new revenue stream. It has a precedent: Microsoft's proposal to individual States, including California, would be an in-kind donation of PCs to schools, for which Microsoft could later collect royalties. Let's see how it's gone about charging for its punishment in Europe.

Suppose you create network software or hardware that needs to talk to a Microsoft file system. It could be a printer, of a storage device, or a piece of middleware. As a licensee you must agree to pay Microsoft $50,000 up front in Prepaid Royalties. Then depending on the number of users your product has, you pay on a per user basis depending on what's accessed. For the 'Print and File Server' portion you pay on a user basis up to $1900, but no less than $80 per server. For workgroup access (Domain Controllers command a higher royalty) you pay up to $600, but no less than $100 per server.

You'll need to keep accurate records, for Redmond auditor's can drop in at 14 days' notice. Failure to satisfy Microsoft auditors risks a fine of five per cent of the royalties, or $50,000 - or whichever is higher.

It's little wonder that some of the industry's biggest names, who need to deal with Windows as matter of practicality, don't want to play ball. For small vendors, it's out of the question: the margin for some network print appliances is less than the $80 minimum. EC antitrust spokesperson Jonathan Todd dropped a fairly clear hint that these terms had been rejected.

"Based on the market tests, it doesn't seem to be working at all," he told Reuters. "The Commission remains patient but there are limits to the patience we are prepared to show,'' Todd said. "The ball is now in Microsoft's court and I am sure they will come back to us shortly on these issues.''

In other words, you'd better have a Plan B ready. Microsoft first attempt to stall the EC's decision was to argue, on appeal, that its intellectual property was being violated. This was thrown out by Judge Bo Westerberg. Its second attempt has now been rejected. If the third fails, the EC hints, Microsoft faces a fine of around $5m a day. ®

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