Microsoft, EU Clash Over Antitrust Order (Z)source: http://www.crn.com/showArticle.jhtml?articleID=48800329

10:23 AM EDT Thu. Sep. 30, 2004

Microsoft told a European Union court Thursday that it would suffer irreparable harm if forced to reveal more of its software code to rivals, while the EU said such information was "indispensable" to keep competitors alive.

The U.S. software giant and its allies sought to get the Luxembourg-based Court of First Instance to suspend the EU's far-reaching antitrust order, which would force dramatic changes in Microsoft's business strategy.

Court president Bo Vesterdorf must decide whether to grant the stay while Microsoft's appeal is being heard -- a process that could take years -- or allow it to take effect immediately.

The European Commission found Microsoft guilty in March of abusing its dominant position with the Windows operating system -- which runs some 90 percent of computers worldwide -- to push into new markets like servers, which connect desktop computers into networks.

Microsoft was ordered to hand over more technical specifications to rivals in the workgroup server market so that competitors' products could communicate better with Microsoft products.

Such communication protocols allow servers to recognize individual users wherever they log on to the network, transfer files and share printers.

Microsoft insisted it already provides enough information to the market to allow that "interoperability," citing the rise of the rival Linux system in recent years as a case in point.

"Without the [additional] protocols, a new product has been able to come from nowhere and get one-sixth of the market in just a few years," Microsoft lawyer Ian Forrester told the court.

Rejecting the claim that urgent action was needed, Forrester noted that those Microsoft rivals that originally launched complaints, such as Sun Microsystems and Novell, are "still around and still viable five years later."

He also argued that the information released could not be recovered if Microsoft's appeal is ultimately successful, saying "The bell once rung cannot be un-rung."

"If the marketplace is going to change as a result of the decision, better the legality or lack of legality be determined first," he said in arguing for a stay.

But the EU's executive Commission and its allies were just as insistent that the order be implemented now to prevent Microsoft from consolidating its grip on new markets and driving competitors out of business.

"The interoperability information withheld is indispensable for rivals to compete in a meaningful manner," said commission lawyer Walter Moells.

He cited research showing Linux's increase in market share amounted to little more than "reshuffling of the fringe," with Microsoft remaining the dominant player.

"There is simply no case on the part of Microsoft saying it would irreversibly lose market share" if forced to comply with the order, he argued.

Christopher Thomas, representing Novell, spoke of a "clear and urgent threat to survival of competition." He also argued that Microsoft had offered to provide the same information during aborted settlement talks early this year.

Those talks collapsed largely over the other half of the commission's order: for Microsoft to offer a version of Windows minus its digital media software, Media Player, to allow rivals like RealNetworks a better shot at reaching consumers.

It also fined the company a record 497 million euros ($600 million).

Moells said Microsoft's argument about irreparable harm was "directly contradicted" by its April 2 settlement and cooperation agreement with longtime rival Sun, signed little more than a week after the EU order.

Outside the courtroom, Microsoft's top lawyer in Europe, Horacio Gutierrez, explained that there was a "big difference" between a voluntary agreement negotiated under "well-defined terms" and a "broad mandate to license" under conditions and prices dictated by the commission.

"What they want to do is take away our ability to negotiate these kinds of deals," he told The Associated Press.

A lawyer representing the Association for Competitive Technology, Laurent Rusman, told the court that some his group's 3,000 members, which include household names like Oracle, Orbitz and eBay, would like to see Microsoft "beaten up."

But he said they opposed the commission's order because it would undermine the protection of intellectual property rights -- the patents, copyrights and trade secrets vital to the software industry.

Microsoft argues that threat will hamper the drive to innovate and produce new products.

But the commission rejected that argument. "A monopolist hardly ever has incentive to innovate," Moells told the court. "The incentive comes from the fact that others challenge its position."

Forrester also warned the EU orders represented a divergence from U.S. standards, which Microsoft and its allies warn will sow confusion for global commerce.

Microsoft's 2002 settlement with the U.S. Justice Department, which covered similar matters, was unanimously approved in June by a federal appeals court in Washington despite being derided as insufficient by Microsoft critics.

Three officials from the U.S. Justice Department were attending Thursday's hearing as observers.

After lunch, the hearing was to resume with questions from the judge. Friday's session was to focus on the Media Player aspect of the case, and the judge has already warned the hearing could drag on until Saturday.

Once a ruling is made on the stay, the decision can be appealed to the president of the highest EU court, the European Court of Justice.

Microsoft has sought, meanwhile, to keep hopes of a settlement alive. On Monday, Microsoft said it had spent millions of dollars preparing to comply with the EU's order if it loses the request for a stay.


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