EU Document Revealed as West Virginia Sues Microsoft

Microsoft is using two interesting strategies to bypass its European antitrust case: The company says that its settlement with the US government also addresses the company's abuses in Europe and that demands from rivals that it compulsorily license its Windows source code would be a violation of international copyright law. AOL Time Warner, IBM, Novell, Oracle, and Sun Microsystems have asked the European Union (EU) to require that Microsoft provide its source code to its competitors so they can more easily make software that interacts with the dominant platform. And in a related story, to bypass the company's proposed class-action settlement, the state of West Virginia sued Microsoft this week for unspecified damages.

The company revealed its strategies for its European case in a confidential 102-page document sent to EU antitrust regulators. The document (which was subsequently leaked to the press) responds to charges of anticompetitive behavior and monopoly abuse. In the document, Microsoft says that the company's US settlement covers "all of the areas" of the EU antitrust case. Therefore, the company says, the EU should simply drop its case. "No other commercial software company operates under such strictures," Microsoft says in the document.

Microsoft's mention of source-code disclosure reveals for the first time that the EU is considering this requirement, which would result in a far more dramatic defeat for the company than its diluted US settlement. Microsoft argues strenuously against such a requirement, because it would give the company's competitors the blueprints to create "clones" of products now found in Windows at almost no cost. "Microsoft's competitors are supposed to innovate on their own, not simply copy the work that Microsoft has done," the document says.

The European case is also interesting because the EU can impose massive fines on Microsoft--up to 10 percent of the company's global yearly sales--if it's found guilty. The EU can also force Microsoft to make changes in the way the company does business, using conduct relief similar to that imposed on the company in its US settlement.

Microsoft refuses to comment about the leaked document. "I thought this was supposed to be a confidential document," a company spokesperson told the New York Times. "I don't think it helps anyone to have selected quotes leaked."

Meanwhile, the state of West Virginia announced this week that it has filed a lawsuit against Microsoft alleging that the company has violated state antitrust and consumer-protection laws. The suit requests unspecified damages as well as sanctions against the company. The state designed the suit to bypass the larger price-fixing class-action lawsuit that Microsoft is currently trying to settle. According to sources close to the case, West Virginia Attorney General Darrell McGraw believes that Microsoft's proposed settlement, which would provide a supposed $1 billion worth of refurbished computers and Microsoft software to more than 12,000 of the nation's poorest schools, is disappointing. West Virginia's antitrust laws prohibit "unfair and deceptive practices" and prevent companies from selling products below cost "with the intent to destroy competition." Microsoft was previously found guilty of overcharging consumers for Windows.