Adobe Systems Inc. has threatened legal action against Microsoft Corp. in Europe over Microsoft’s use of Adobe’s PDF (Portable Document Format) software, but it’s unclear whether it will be in the form of a complaint to the European Union or a formal antitrust suit, sources close to Microsoft said Friday.

The dispute between the companies began in February when Adobe raised concerns over Microsoft’s plans to offer a “Save as PDF” feature in its Office 2007 suite. Beta versions of the software with this feature are already available. According to Microsoft, Adobe wants its software to be removed and offered for a fee, and the companies have been trying to work out a compromise. The widely used PDF software allows users to create electronic documents.

“We have taken a number of significant steps to accommodate Adobe, and offered many proposals in an effort to avoid a dispute,” Microsoft spokesman Jack Evans said on Friday. “But we have now reached a point where we feel what they are asking for is not in the best interest of our customers.”

Adobe spokeswoman Jodi Warner said the company will not comment what action it will take to resolve the matter based on discussions it has had with Microsoft and regulatory agencies. She acknowledged that Microsoft is an important partner for Adobe, but the company remains concerned about Microsoft’s monopolistic practices.

“As our CEO Bruce Chizen has stated publicly numerous times in the past, Microsoft has a monopoly and we are always concerned about the possibility that they might abuse that monopoly,” she said.

Evans said Microsoft has offered to make changes to its software and even to ship Adobe products with Windows in an effort to resolve the disagreement. The company also plans to remove the options to save documents as PDF and XML Paper Specification (XPS) from Office, and make both of those options available only as a separate download. XPS is Microsoft’s own rival file format to PDF.

In addition, Microsoft has offered to ship Adobe’s Flash and Shockwave software with every copy of Windows Vista and give OEMs (original equipment manufacturers) the option to remove XPS from Windows, Evans said. Still, Adobe wants Microsoft to take even stronger moves to “charge customers a price for using what everyone else in the world can use for free,” he said.

News of possible legal action by Adobe in the E.U. was first reported Friday in the Wall Street Journal.

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