Microsoft Loses EU Antitrust Appeal

A European Union court on Monday squashed Microsoft Corp.'s legal challenge to a landmark antitrust ruling and record fine, a resounding victory for the EU that confirms its role as a major global regulator.

The European Court of First Instance dismissed the software giant's appeal of the EU order that ordered it to share communications code with rivals and sell a copy of Windows without Media Player.

Soon after the ruling, EU Competition Commissioner Neelie Kroes urged Microsoft to "comply fully" with the 2004 antitrust ruling.

"The court upheld a landmark Commission decision to give consumers more choice in software markets," Kroes said in a statement. "Microsoft must now comply fully with its legal obligations to desist from engaging in anticompetitive conduct. The Commission will do its utmost to ensure that Microsoft complies swiftly.''

The court upheld a $613 million fine against Microsoft - the largest ever levied by EU regulators.

Microsoft Corp. said losing its legal challenge meant it may "need to take additional steps" to comply with European Commission requirements that it share communications code with rivals.

Microsoft general counsel Brad Smith said the company had not yet made a decision whether to appeal the ruling to the EU's highest court but stressed that Microsoft had tried to absorb the central message from the 2004 ruling that found it guilty of monopoly abuse. He said the court ruling was "not what we would have hoped for" but provided the company with some new clarity.

The court ruled against Microsoft on both parts of the case, saying the European Commission was correct in concluding that Microsoft was guilty of monopoly abuse in trying to use its power over desktop computers to muscle into server software.

Redmond, Washington-based Microsoft said it would withhold any comment on the decision or whether it would appeal the EU's highest court, the European Court of Justice - it has two months to do so - until it had gone through the 248-page ruling.

"I don't want to talk about what will come next," said Microsoft lawyer Brad Smith about the possibility of an appeal. "We need to read the ruling before we make any decision."

Speaking outside the room where the ruling was issued, Smith sounded conciliatory, however, saying, "we look forward to complying with today's decision."

He reiterated that Microsoft "will remain committed to Europe," saying it has more than tripled its number of employees here since the late 1990s and increased its research and development efforts from US$3 million to almost US$500 million (euro360.8 million)

The Commission immediately said it welcomed the ruling, without giving details.

The EU court also said regulators had clearly demonstrated that Microsoft's selling of media software with Windows had hurt rivals.

"The court observes that it is beyond dispute that in consequence of the tying consumers are unable to acquire the Windows operating system without simultaneously acquiring Windows Media Player," it said.

"In that regard, the court considers that neither the fact that Microsoft does not charge a separate price for Windows Media Player nor the fact that consumers are not obliged to use that Media Player is irrelevant."

Thomas Vinje, a lawyer for the European Committee for Interoperable Systems - an industry group that includes Microsoft rivals Sun Microsystems Inc., IBM Corp. and Oracle Corp. - heralded the decision as a door opener for "dynamic competition in the software industry."

"No more blaming the Commission for lack of clarity nor more excuses about complexity," Vinje said. "The provision of interoperability information is common software industry practice. Microsoft knows full well what is required and how to provide it and now just needs to do it."

Microsoft supporters, however, hinted that the decision would hamper software and technology development among European nations.

"This is an unfortunate day for consumers," said Lars Liebeler, a lawyer for CompTIA, an association of information technology companies that supports Microsoft.

"The EU will now be operating under a different legal rule," he told The Associated Press. "This causes great confusion to the marketplace."

He said Microsoft's extraordinary commercial success resulted from providing consumers with good products. "It should not be penalized for that."

Jonathan Zuck, president of Association for Competitive Technology, said the ruling could be seen as threatening to companies in other fields.

"The decision on the Media Player opens a dangerous precedent for other companies and sectors," he said. "Airbus should start worrying about adding new features to its planes. This decision marks the start of a dark period for ICT companies - large or small - with a high degree of uncertainty around the protection of their intellectual property. The precedent will threaten the ability of any successful company to protect its innovations."

Microsoft did get a small victory, as the court overturned the regulators' decision to appoint a monitoring trustee to watch how the company had complied with the ruling. The court said the Commission had exceeded its powers by ordering Microsoft to pay for all the costs of the trustee.

In its ruling, the court upheld both the Commission's argument and its order for Microsoft to hand over information on server protocols to rivals. Microsoft had claimed these were protected by patents and the Commission was forcing it to give away valuable intellectual property at little or no cost.

The court confirmed "that the necessary degree of interoperability required by the Commission is well founded and that there is no inconsistency between that degree of interoperability and the remedy imposed by the Commission."