Microsoft is bracing for a legal battle in Europe with Adobe Systems, following a breakdown in negotiations last week over the use of Adobe's PDF technology in Microsoft's Office applications suite.
Microsoft, which last October announced it would support Adobe's PDF format in its upcoming Office upgrade, has reached an impasse after four months of talks, a Microsoft attorney said on Friday. Adobe wants the software giant to remove the PDF "save as" feature from its beta version of Office 2007 or to charge a fee for it, whereas Microsoft wants to offer that feature for free, said Dave Heiner, the deputy general counsel who oversees Microsoft's antitrust cases.
"The 'save as PDF' feature is the second most popular request we get from customers," Heiner said, adding, "Adobe has told the world that PDF is an open format... and (rival) products OpenOffice, WordPerfect Office and Apple (Computer's applications) already support PDF and tout it as a selling feature. Microsoft should be able to support PDF as well."
Adobe has threatened to file an antitrust complaint against Microsoft with the European Commission if the software giant includes the PDF "save as" feature in its Office 2007, Heiner added.
Adobe, which acknowledges it has had discussions with regulatory agencies worldwide about Microsoft's use of its PDF format, contends it has not violated any antitrust or price-fixing regulations.
"The regulators we talk to are the same regulators that cover antitrust and price regulatory issues," said Holly Campbell, an Adobe spokeswoman. "So we believe we are well within the bounds of the law."
Microsoft first learned of Adobe's concerns in a February letter from Adobe chief executive Bruce Chizen to Microsoft chief executive Steve Ballmer, according to a source close to Microsoft.
In the past, the software maker has raised objections to Microsoft's plans to put its own XML Paper Specification (XPS) format, developed under the code name Metro, into the upcoming Windows Vista update.
As a result, Microsoft plans to remove from Office 2007 the ability to save documents as either PDF or XPS formats. Those capabilities can be added back in by customers via a free download from Microsoft's site.
Also, Microsoft said Friday that it will give computer makers the option to remove some of the XPS features from Windows Vista. Vista will still use XPS technology under the hood to handle printing duties, but user options such as viewing and creating XPS documents will be omitted if PC makers choose that option.
Microsoft, which last week released a test version of its Office 2007 package, now plans to remove the PDF feature from that beta as soon as feasible. The company does not expect that effort to lead to a delay in the scheduled release of Office 2007, which has already been postponed.
One reason Microsoft is taking these steps is to avoid further clashes with the European Commission, which is reviewing whether to level a massive fine against the software maker, Heiner said. European regulators found that Microsoft engaged in antitrust behavior by bundling in its Media Player with its operating system. They also found that the company had put up hindrances to competitors that wanted to design enterprise software that would interoperate with Windows.
The European Commission is already taking a look at Vista, and it voiced its concerns in March over such issues as the possible bundling of PDF-like formatting capabilities in its operating system.
Another area of concern for European regulators is the possible bundling of Internet search technologies into Vista. However, the US Department of Justice recently shrugged off antitrust worries over a search box in the Internet Explorer 7 browser update in Vista.
Microsoft contends that Adobe is seeking to avoid competition, by wanting the software giant to charge for its own XPS technology and also for Adobe's PDF format.
Adobe's desire to hold pricing discussions on these matters may violate antitrust laws surrounding price fixing, Heiner said. He added that antitrust laws prohibit competitors from working together to lower or raise prices and, as a result, Microsoft has refused to enter into such discussions.
Microsoft said it offered to include Adobe's PDF software in Vista but was told by Adobe that it does not want the software giant to use its PDF creation software in Vista. However, the parties remain in licensing negotiations over Microsoft using Adobe Reader to view PDFs in Vista, Heiner said.
Though talks have stalled on the "save as PDF" feature in Office 2007, Heiner said Microsoft is still open to renewing such discussions.
Microsoft has moved to resolve a number of its legal disputes over the past several years, settling with, among others, the US Justice Department, Sun Microsystems, Time Warner and others. However, the company has seen new disputes crop up in recent months. In addition to the ongoing EU spat, Symantec has hit Microsoft with an antitrust suit over storage technology it inherited as part of its Veritas Software acquisition.