Should European governments favor open-source software when they hold tenders for public contracts? Economists and policy makers appear to think so but industry giants including Microsoft argue that this would be discriminatory and are considering legal action to prevent this from happening.

A public consultation on a new set of guidelines regarding software interoperability in the public sector in Europe closed this week, sparking submissions from 50 lobby groups and firms from all corners of the software industry.

The draft guidelines, known as the revised European Interoperability Framework (EIF), were drawn up by the European Commission in close consultation with national governments from theEuropean Union's 27 member states, many of which have already drafted their own guidelines based on what has been agreed at the E.U. level.

The revision of the EIF, dubbed EIF V2.0, calls for open standards but stops short of requiring public offices to buy open-source software. National governments, including most recently the Netherlands, go a step further by instructing software purchasers in public offices always to pick open standards and open-source software when possible.

Open source accounts for around 5 percent of public sector software contracts in Europe, said Laurent Lachal, a senior analyst at the research firm Ovum. "In the past there were rules that excluded open-source software vendors from public contracts," he said.

Now governments are increasingly taking the opposite view by favoring open source. Government see it as a way of boosting their indigenous software industry, they don't like being locked into working with one software provider and open-source networks are easier to connect together, both at a national level and at a pan-European level, Lachal said. Open-source software's cheaper price compared to proprietary applications is another often cited reason.

Proprietary software makers laud many of these aims but argue open-source software isn't the only way of achieving them.

"The objective of stimulating the local software industry in Holland is a good one," said Hans Bos, national technical officer for Microsoft in the Netherlands, referring to the Dutch guidelines, which are due to come into force later this year.

However, he added that Microsoft's products also stimulate the local market by providing others with a platform to build on.

"The Dutch government wants to create a level playing field by giving an advantage to open source. We think this is discrimination and it is short sighted: what will they do in the future when a different business model comes along? Why give a leg up to one business model in such a dynamic market," he asked.

The Business Software Alliance (BSA), a trade group that lists most of the world's biggest software companies -- including Microsoft -- as members, fully supports efforts to make public-sector software systems interoperable. But it argues that the approach adopted by the Commission in EIF V2.0 and in countries including the Netherlands and Denmark could actually have the opposite effect.

"The revised EIF is jeopardizing its very objective of promoting interoperability across Europe. Instead, it causes greater confusion among both public administrations and the marketplace," said Benoît Müller, BSA's Director Software Policy in Europe.

Some BSA members are planning to legally challenge the Dutch guidelines, according to an executive from one member company who asked not to be identified.

Microsoft's Bos said it is premature to talk about legal action. "There are no plans yet. We still think it is possible to discuss this. There are other companies affected, not just Microsoft," he said, naming Apple and Philips. "It's a generic issue to the industry," Bos said.

Earlier this year the Dutch government submitted its public procurement guidelines to the European Commission. The Commission replied saying it broadly supported the approach adopted in the guidelines but asked Holland to give a better definition of an open standard.

The problem is that the Dutch were using the definition used in the Commission's draft EIF document. Karel de Vriendt, the Commission official in charge of redrafting the EIF, admitted there is a problem with this definition.

"There is no general definition of open standards, which makes this issue difficult," de Vriendt said. "We are trying to give a definition in the revised EIF but it's unlikely we'll find one that is acceptable to all," he added.

The BSA has already told de Vriendt what it thinks of the revised EIF in June, but it submitted comments during the consultation too.

It argues that the definition of open standards in the document is so narrow that it would exclude many common technology standards such as MP3 and USB, standards for music files and port interfaces on computers respectively.

It also argues that this narrow definition excludes standards that have been recognized by respected standards bodies around Europe.

"The BSA has serious concerns that if the current EIF definition of 'open standards' is adopted, policies of most leading international standards bodies would not qualify as open, and numerous standards that have been developed by these and other bodies and widely deployed in the marketplace could be rejected by European governments," the BSA wrote in an open letter to the Commission.

Microsoft earlier this year won its battle to get its Office Open XML document format recognized as an industry standard by the International Organization for Standardization, a leading standards body. If the EIF defined open standards the way the BSA wants, OOXML, with its ISO stamp of approval, would have to be considered open enough to compete for public sector contracts.

The problem is that the ISO's decision was highly controversial, with many ISO officials claiming foul play in the voting procedure. The European Commission is examining these claims in an ongoing antitrust investigation.