EU Fines Microsoft $1.35 Billion

Updated from 8:57 a.m. EST

SAN FRANCISCO -- Not content with having won on all fronts against its biggest antitrust target, the European Commission levied its largest-ever single-company fine against MicrosoftMSFT Wednesday.

Intent upon hitting Microsoft's bottom line, the EC imposed a penalty of 899 million euros, or $1.35 billion, on the Redmond, Wash., software company for charging its rivals "unreasonable prices" for interoperability information about its server software.

That brings Microsoft's total EC fines to $2.52 billion.

The market shrugged off the news: Microsoft shares were up 5 cents, or 0.2%, to $28.43 in recent trading.

The latest fine is comparable to 7.3% of Microsoft's expected earnings of $17.7 billion for fiscal 2008, which ends in June.

The announcement comes less than a week after Microsoft did an about-face on decades of policies that protected its software from competitive encroachments by starting to publish on its Web site the interoperability documentation to all of its major Windows software, a process that it promises to complete by June.

But Microsoft's actions came too late to save it from the EC's Wednesday finding that the company had charged competitors too much for such information, which the EC ordered it to make available in 2004.

And the commission is not yet finished with Microsoft: In January, the EC opened two new cases against the company for anticompetitive behavior.

In Wednesday's decision, the EC said the company had charged competitors seeking compatibility with Microsoft software a royalty rate of 3.87% on their product revenue for Microsoft patent licenses and 2.98% for interoperability information, according to the EC. After the EC objected to the pricing, Microsoft reduced royalty rates May 21, 2007 to 0.7% for a patent license and 0.5% for the interoperability license within the EC, while leaving worldwide rates unchanged.

Microsoft again reduced the rate on interoperability coding Oct. 22 to a flat fee of 10,000 euros, or $15,000, and offered an optional worldwide patent license for a royalty of 0.4% of a licensee's product revenue.

The EC concluded that Microsoft's royalty charges prior to Oct. 22 were too high.