European Commission Decision: Microsoft Outlines Changes to Interoperability Measures

REDMOND, Wash. — June 6, 2005 — Microsoft Corporation confirmed today that it has made a number of concessions to address concerns raised by the European Commission regarding the company’s compliance with the interoperability part of the Commission’s March 24, 2004 Decision. The concessions, outlined in a proposal the company submitted to the Commission last week, include an agreement to implement the interoperability measures on a worldwide basis. Microsoft also agreed to a new royalty structure for licensing its Windows protocols for use in non-Microsoft software products, with more offerings and greater customization.

“In order to resolve some complex issues over the past few weeks, we’ve made some tough concessions,” said Steve Ballmer, CEO, Microsoft Corporation. “We take our responsibilities in Europe very seriously, and will continue to focus on fulfilling all our obligations in every way we can.”

The European Commission has indicated that Microsoft’s measures and the company’s updated licensing program will now be subject to a market test among industry participants.

“We made important changes to address the Commission’s concerns,” said Brad Smith, Microsoft’s General Counsel. “These interoperability measures will now apply on a worldwide basis instead of in Europe only.”

Microsoft is now offering new ways for developers to distribute software code that implements its technology together with open source code, while ensuring that Microsoft technology is subject to a separate license agreement.

“We worked to be creative in enabling developers to work with our technology together with open source software, yet still protect our intellectual property. Our proposal addresses this objective,” said Smith. “While we have not reached agreement with the Commission on whether open source developers can go even farther and publish the source code that implements our technology, we are comfortable turning to the courts for guidance on this issue.”

A Trustee appointed by the Commission will review the reasonableness of the royalties established by Microsoft. Microsoft has agreed that royalties should be set at levels that enable use by other developers in a commercially practicable manner and that royalties should not reflect market power stemming from the widespread use of Windows. Royalty levels will further be assessed with reference to standard valuation techniques, including an assessment of whether the protocols are innovative and a review of market rates for comparable technologies.

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

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