All eyes on Luxembourg as court prepares Microsoft verdict

The eyes of the corporate world turned to Luxembourg this week as an EU court prepared a crucial judgement in the European Commission's (EC) case against software titan Microsoft.

All eyes on Luxembourg as court prepares Microsoft verdict
The eyes of the corporate world turned to Luxembourg this week as an EU court prepared a crucial judgement in the European Commission's (EC) case against software titan Microsoft.

It is the biggest, most complex and highest-stake competition case in EU history. Launched in 1998, it has already cost Microsoft around 780 million euro (1.074 billion dollars) in fines.

It hinges on two issues. The first concerns the question of inter-operability, or the extent to which servers created by different companies can communicate with one another's operating systems.

The second concerns Microsoft's inclusion of its own media player as an integral part of its Windows operating system.

But behind both issues is the question of whether Microsoft, whose Windows operating system is run on some 95 per cent of the world's personal computers, abused that dominance to shut other players out of the global market.

"The case is really about whether the EC has, as a fundamental obligation, to address (corporate) behaviour when it demonstrably eliminates competition," Thomas Vinje, legal counsel to the European Committee for Interoperability Systems, which intervened in the case on the side of the Commission, told Deutsche Presse-Agentur dpa.

"It's about companies' ability to integrate new (features) into products which have a leading market position, and what environment is being created for intellectual property in Europe," retorted Jonathan Zuck, president of the US-based Association for Competitive Technology, which supports Microsoft's arguments.

The case began in 1998, when IT firm Sun Microsystems complained to the EC that Microsoft was refusing it access to codes which would allow Sun servers to work effectively with computers running Windows, thereby shutting it out of the market for server systems.

Microsoft argued that releasing such codes would allow competitors to copy its products, thereby benefiting from its own research and innovations and infringing its copyright.

"A (European) competition policy that requires companies to offer up their intellectual property to direct competitors is very concerning," said Erich Andersen, Vice-President of Microsoft Europe.

But Microsoft's opponents say that the company's refusal to release the codes would not have infringed copyright, but rather limited free competition, and thus innovation and consumer standards.

"Microsoft has a 95-per-cent monopoly on personal computer systems. You have to be able to interoperate - if not, you can't compete," Vinje said.

The second issue concerned Microsoft's addition of its media player to the Windows system - a move which it said offered consumers a better system, and was therefore a standard business practice.

Microsoft's opponents say that it forced computer makers to choose the Microsoft player if they wanted to run Windows on their machines - shutting Microsoft's competitors out of the global market.

"The media player market is gone ... The bundling (of Microsoft's media player) eliminated competition," Vinje said.

In a landmark decision in 2004, the European Commission ruled that Microsoft had abused its dominant market position on both issues.

It ordered the firm to disclose information allowing software produced by its competitors to interact with Windows, to release a Windows version without the Microsoft media player, and to pay a fine of 497.2 million euro.

Microsoft appealed the decision to the EU's Court of First Instance, and asked a judge to suspend sentence pending the appeal.

That request was rejected, and in July 2006 the EC fined Microsoft a further 280.5 million euro for failing to disclose the critical information fully and at a reasonable price.

On Monday, the CFI is set to rule on Microsoft's appeal. Either part of the EC's decision could in theory be overturned or upheld, and the billion-dollar fine could be reduced or enlarged.

Microsoft is hoping for the former course, saying that an adverse decision could chill IT firms' appetite for innovation in the future.

And it wants a judgement which will establish clear rules on both issues, so that further conflicts can be avoided, officials said.

But its opponents say that a ruling against Microsoft would be a crucial precedent which would both boost competition and innovation and make it easier for regulators to intervene in any future cases of suspected anti-competitive behaviour.

One thing seems clear: with principles of intellectual property clashing with those of competition, the billion-dollar fine is likely to be the smallest issue at stake when the judge reads his decision.

DPA
Last Mod: 11 Eylül 2007, 18:54
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