Microsoft offers fresh concessions in attempt to avoid heavy EU fines

Microsoft sought to head off the threat of fines of €2m (£1.4m) a day from EU regulators by offering to release some of its most closely guarded software secrets to potential rivals.

In an attempt to regain the initiative in a long-running legal battle with the European Commission, the software giant said it would license some source codes, which act as programming instructions to computers.

Microsoft's senior vice-president, Brad Smith, said: "We are putting our most valuable intellectual property on the table. The Windows source code is the ultimate documentation of Windows server technologies. With this step our goal is to resolve all questions about the sufficiency of our technical documentation."

Although the offer went beyond what was demanded of Microsoft in terms of the detail of material to be disclosed, it remained unclear whether it would be of practical help to competitors developing products that can be used with Windows personal computers and servers.

Yesterday's development came after months of disagreement on whether the American software maker has complied with the terms of a court judgment in 2004 which ruled Microsoft abused its dominant market position. The European Commission said it will "study carefully" the offer about which it was informed minutes before Microsoft's press conference yesterday. The Commission statement stressed it was pursuing the case because Microsoft has failed to provide information to "allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers".

The Commission said last month it was not requesting the release of source codes, restricting its demand to protocols. Mr Smith said yesterday all source codes related to the technologies covered by the 2004 decision would be made available.

Microsoft does not plan to levy any extra fee for the information beyond what it was already planning to charge for the protocol licences.

But that raises a moot point, because the royalties Microsoft wants others to pay for its licences is the second, outstanding, issue before the Commission.

Only after more detailed examination will European regulators decide whether there has been a real breakthrough or whether the new offer is a red herring.

The Commission said last month Microsoft had not complied with the terms of the 2004 judg-ment, giving the company until 15 February to prove that it was making enough information available to rivals. Microsoft accused the regulators of moving the goalposts, saying it had provided 12,000 pages of documentation and also offered 500 hours of technical support.

Fines totalling €2m a day hang over the US company, although that figure could be reached only if it is found to have breached rules on royalties. Mr Smith said the decision will affect not only Europe but the global marketplace.

The next step is for Microsoft to explain formally, by 15 February, how it has complied and to request an oral hearing, which is likely to be in March.

Microsoft is under pressure on several fronts, and the US Department of Justice recently criticised it for being late in providing documentation required under a settlement in 2002.