Japan says Microsoft violated its fair trade rules

The Japan Fair Trade Commission (JFTC) has said that some provisions of Microsoft licence agreements with Japanese PC suppliers...

The Japan Fair Trade Commission (JFTC) has said that some provisions of Microsoft licence agreements with Japanese PC suppliers violate Japan's anti-monopoly code.

The JFTC said that the provisions in question restrict possible legal action should licencees believe Microsoft is infringing their patents.

The JFTC decided such a provision unjustly restricts the business activities of the licencees and thus violates section 19 of the Antimonopoly Act.

In a 13-page recommendation it detailed the basis for its finding and recommended that the provisions be terminated in both current and previous agreements.

However, the JFTC did not spell out any potential fines that may be imposed on Microsoft for violating JFTC rules.

Microsoft had been given until 26 July to either accept or reject the JFTC recommendation, although the software maker said it plans to reject the finding.

"We respectfully disagree with the conclusions reached by the JFTC at this stage of the process, and will avail ourselves of the mechanism set out in the law and regulations to seek a review of this decision," a company statement said.

"We look forward to explaining the operation of this provision in more detail during the next stage of this process before the JFTC."

"We believe that the provision at issue fairly balances IP protection and the need to create a stable environment for the development of the IT industry by avoiding disruptive IP disputes," the statement said.

"The industry and consumers have benefited from this stability, and IP owners have always been empowered to raise and exercise their rights in a reasonable manner."

Because the recommendation concerns Microsoft in the US rather than the Japanese unit, the rejection will not be made until appropriate consultation has taken place with both sides, said to Aki Araki, a spokeswoman for Microsoft's Japan unit.

If, as expected, Microsoft rejects the decision a hearing process will begin that is likely to take between two and three years to complete, said Takujiro Kono, deputy director of the JFTC's First Special Investigation Division.

"Normally, we issue an announcement about the commencement of hearings about one month after receiving the rejection," Kono said. "Another month later the first hearing takes place in the JTFC."

The hearing, which Kono likened to a court hearing, will see Microsoft lawyers and experts, along with their counterparts from the JFTC, submit arguments and supporting documents to an examiner, he said.

Regular hearings are likely to take place at intervals of around one month as part of the process, which usually takes at least one year to complete and averages two or three years, he said.

This week's JFTC ruling follows a raid on Microsoft's Japan headquarters in February.

Microsoft dropped the provisions from new licences from February this year, based on feedback from Microsoft's OEM customers, but they continue to remain in effect for previous licences, said a company spokesman in the US.

Microsoft could not state whether or not it would reinstate the provisions should the JFTC decision be reversed on review, the spokesman said, although he said, "The removal was independent from this investigation."

Microsoft has come under much more stringent scrutiny from other countries for anti competitive business practices.

Microsoft is currently appealing a ruling by the European Union's executive branch that it violated competition law through the use of its dominance in the PC operating system market to gain advantage in the markets for work group server operating systems and media players.

In the US Microsoft appears to be nearing an end to its long-running antitrust battle with the US Department of Justice (DOJ) and individual states, which found that the company had used its monopoly in the PC operating systems market to overcharge customers for software.

Martyn Williams and Laura Rhode write for IDG News Service

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