Microsoft Sues EU Over Code Revelation Requirement

In the latest chapter of what’s become an epic legal battle, Microsoft has filed suit against the European Union, hoping to have a court provide guidance on what parts of its source code it must reveal.

Microsoft filed with the Court of First Instance for review of a provision of the sweeping anti-trust penalties levied against the software giant last year. The European Commission ordered Microsoft to pay a record US$621 million fine, to un-bundle the Media Player software from Windows and to provide a look at its source code to other software makers so they could create compatible products.

Sharing the Wealth

Even though the company has reportedly paid the fine already and has said it’s ready to deliver a stripped-down version of Windows — though the name and pricing of that product has been at issue — the provision to share code has long been a sticking point for the software maker.

While Microsoft attempted to strike a compromise to let parts of its code be licensed to server makers and others, open-source supporters in Europe wanted the code to become public, which would enable vast numbers of developers to work on products to work with it, much as happens with other types of open-source software.

Microsoft has objected to that approach, calling its source code one of its most valuable pieces of intellectual property. Microsoft instead favors strict licensing agreements that include non-disclosure rules. The suit asks a court to clarify whether Microsoft’s terms would be sufficient to comply with the anti-trust ruling.

Sensitive Issue

Though it has moved to comply, Microsoft is still fighting the overall ruling against it. That appeal will likely take months — if not years — to be heard, however, and courts have refused to stay the penalties in the meantime.

The opening of the code was immediately identified by analysts as the part of the sanctions that would most likely cause Microsoft to balk.

“Over the years, Microsoft has guarded its source code very carefully,” said Yankee Group senior analyst Laura DiDio. That’s understandable in some ways since the company spent years and millions of dollars developing the proprietary code. “It’s been very measured in how it’s approached complying with that particular part of the sanctions.”

The European Commission has left open the possibility of issuing fines against Microsoft for failing to comply fully with the penalty terms. The original ruling from March of 2004 gives the commission the power to fine Microsoft as much as $5 million per day if it is found to be out of compliance.

Drawing the Line

The exact scheme for revealing source code is not the only detail that’s still in dispute, with Microsoft and the EU still unable to agree on who should be appointed to monitor Microsoft for ongoing compliance.

Microsoft has moved to clear away as many of the outstanding legal actions pending against it in recent years, reaching huge settlements with the likes of AOL and Sun Microsystems as well as smaller deals with individual states. It still faces a private anti-trust suit from RealNetworks.

The effort to clear away long-dangling legal cases is as much about public relations and focus as about eliminating potential liabilities, said Enderle Group principal analyst Rob Enderle.

“Microsoft recognizes that its better off in the long run if it can focus on competing and innovating,” Enderle told the E-Commerce Times. “But it’s clear they have limits to how far they’re willing to go to make that happen.”