Microsoft says EU court's fine "excessive"

BRUSSELS (Reuters) - Microsoft MSFT.O has told a European Union court that an antitrust fine of 899 million euros ($1.4 billion) against it is both excessive and disproportionate, the Court of First Instance said on Monday.

A worker fixes a spotlight at the Microsoft exhibit of the upcoming CeBIT fair in Hanover March 3, 2008.REUTERS/Hannibal Hanschke

On February 27 the European Commission found that Microsoft used high prices to discourage competition, failing to carry out sanctions imposed against it as part of a long-running case. Microsoft is appealing against the fine imposed in February.

“The Commission failed to take due account of the fact that the contested decision only concludes that the royalties allegedly established by Microsoft under one particular license ... were unreasonable,” the court said in summarizing Microsoft’s arguments, published in the EU’s Official Journal.

A Commission spokesman disagreed.

“The Commission is confident that its decision to impose the fine was legally sound,” Jonathan Todd said.

The company argued that the Commission made a “manifest error” by labeling its rates as unreasonable without considering that they were “intended to facilitate negotiations between Microsoft and the prospective licensees.”

As well, Microsoft and the Commission had agreed to have a trustee review the rates if need be, in a mechanism that had been used in another case, Microsoft argued.

The Commission also erred by the yardstick that it used in requiring Microsoft to establish its trade secrets were innovative, ignoring many arguments prepared by patent experts, the company said.

“The Commission also denied Microsoft’s right to be heard,” because it failed to give the company a chance to give its views at the end of the period for which it was fined, Microsoft said.

The Commission has said it imposed the fine because the U.S. software group had defied a 2004 order from Brussels to provide information to competitors on reasonable terms.

Microsoft has been fined a total of 1.68 billion euros by the EU for abusing its 95 percent dominance of PC operating systems through its Windows operating system.

The 899 million euro fine was the biggest ever imposed on a company by the EU executive.

The Commission initially fined Microsoft 497 million euros in March 2004 for withholding interoperability information for “work group server” software and for deliberately damaging rivals by tying its Windows Media Player to its Windows system.

Microsoft unsuccessfully appealed against that penalty and was also later fined 280.5 million euros by the Commission for non-compliance.

The latest fine picked up from where the 280.5 million euro penalty left off, covering the period from June 21, 2006 until October 21, 2007.

The company announced its appeal of the latest fine in May.

Reporting by David Lawsky