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Microsoft has agreed to make 'substantial' changes to its .Net Passport system, thus avoiding a possible fine for breaking EU data protection laws.

The European Union's working party on data protection said on Thursday that Microsoft had promised to implement a "comprehensive package" of data protection measures, which will mean major alterations to its on-line authentication system. The EU declined to reveal exactly what those adjustments would be, but said they would involve, among other things, a "radical change" of Passport's information flow.

Microsoft's Passport system stores personal data such as e-mail addresses, passwords, credit card numbers and billing addresses to make entering participating sites, like e-commerce stores, easier and faster because users do not have to continually enter the same data.

However, the working party had felt that users of such systems may not have been properly informed about what was being done with their details and, as such, their personal data privacy may have been violated. EU rules allow companies to collect and use information when they can prove a legitimate purpose and verify that the subjects were told.

In June 2002, the working party began examining whether Passport and other on-line authentication systems such as Liberty Alliance, which involves companies such as Sun Microsystems, American Express and France Telecom, where in breach of its regulations. If found guilty of this charge, the firms involved could have been fined.

According to the working party, the result of its investigation and discussions with the parties concerned is that users will get much more information and choice as to which data they want to provide and under which conditions these data will be processed by Microsoft or the participating Web sites.

"The bottom line is that users' data will now be better protected," said Internal Market Commissioner, Frits Bolkestein, in a statement. "The industry is general now needs to take on board the working party's guidelines when developing new systems."

In relation to Liberty Alliance, the working party said that the project was based on a different approach that does not involve a centralised database. However, it issued guidelines and considerations for any present or future on-line authentication systems to follow to comply with EU regulations.

It also said it would continue to monitor developments in the area, particularly current electronic advertisement communications within Hotmail and the use of identifiers by .Net Passport and the Liberty Alliance project.

Microsoft settled a similar case in regard to Passport and consumers' data privacy with the US Federal Trade Commission in August of last year.

© ENN

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