May 9, 2008 11:02 AM PDT

Microsoft to appeal EC's $1.39 billion fine

Posted by Dawn Kawamoto

Microsoft announced Friday it's appealing the $1.39 billion fine the European Commission imposed for failure to comply with its historic 2004 antitrust order against the Redmond giant.

Microsoft filed an application with the Court of First Instance in Luxembourg, seeking to annul the Commission's decision from late February, in which it imposed a fine of 899 million Euros, or $1.39 billion, against Microsoft.

"We are filing this appeal in a constructive effort to seek clarity from the court. We will not be saying anything further," Microsoft said in a statement.

When the Commission imposed the fine, it was specifically designed to address sanctions over the pricing structure Microsoft had set for licensing of its interoperability protocols and patents.

The pricing issue was the last of three parts of the Commission's March 2004 order, which called for the software giant to provide accurate and complete interoperability information to rivals. The purpose was to allow rivals' software to work with the Windows operating system and to provide that license information under "reasonable and nondiscriminatory" terms."

Two years ago, the Commission hit Microsoft with a fine of 280.5 million euros, or $434 million, for failing to comply with the other two parts of its sanctions related to providing complete and accurate interoperability protocol information to rivals. Microsoft initially appealed that 2006 fine, but withdrew it last fall.

Microsoft sought to overturn the Commission's March 2004 order, but last fall the Court of First Instance upheld the Commission's order, which found the software giant had abused its market dominance in the operating system market.

The European Commission said it remains steadfast in its decision to issue its historic fine against the software giant.

"The Commission is confident that the decision to impose the fine is legally sound," said Jonathan Todd, a spokesman for the European Commission.

The fine levied in February marked the largest penalty the Commission had ever imposed on a single company. To date, the Commission has imposed roughly $2.6 billion in its long-running antitrust dispute with Microsoft.

That figure also includes the original fine of 497 million euros, or $769 million, that the Commission imposed in 2004, when it first issued its order against the software giant.