Judges Hear Microsoft's Appeal on Antitrust Rulings

Published: April 26, 2006

by Alex Woodie

After months of legal wrangling and tongue wagging, Microsoft is getting its time in court this week, as a panel of judges hears Microsoft's appeal of the European Commission's (EC) decision on the software giant's anti-competitive practices for PCs and servers. The first two days focused on Windows Media Player bundling issues, while server issues are expected to be heard starting today.

The 13-judge panel convened in Europe's second-highest court, the Court of First Instance, in Luxembourg to hear Microsoft's lawyers appeal a $613 million fine that resulted from the European Commission's (EC) landmark 2004 ruling.. Microsoft had already appealed the decision once, lost that appeal, and issued the version of Windows that didn't include Windows Media Player in the European market. Microsoft is now appealing that decision once again, on the grounds that competition is alive and well. As evidence that the overall media player market is healthy, Microsoft has pointed out that Real Networks has survived, and that Apple is thriving with its iPod and iTunes products.

This week's legal showdown is related to, but separate from, the EC's December 2005 ruling that Microsoft has not abided with the remedies it set forth in its March 2004 ruling. Those remedies included a requirement that Microsoft make available a version of Windows that doesn't include the Windows Media Player--which it has although nobody has bought it, a company lawyer said this week--and on the server side, that it provide more details and technical assistance on how to implement the "communication protocols" in its Windows Server operating system, which would benefit IBM, Novell, Oracle, and Sun Microsystems, among others.

While media players and terminal servers are completely different animals, they're sharing time and space in the European courtroom this week, and most likely, for the year to come. It is expected to take many months, or possibly a year, before the judges come decide on Microsoft's appeal.

In the meantime, the EC has yet to decide whether to levy fines of as much as $2.4 million per day against the software giant, retroactive to December 15, as part of its December 2005 decision that Microsoft is not abiding with the remedies set forth in the landmark March 2004 ruling.

Microsoft and the EC are at odds over the steps the software giant has taken to comply with the 2004 decision. On the server side, Microsoft came up with a 12,000-page report in response to that finding, and claims that document adequately describes the use of the communications protocols in the operating system. It has also offered thousands of hours of technical services to help its competitors implement those protocols so they adapt their own products to Microsoft's server operating system. Microsoft even offered to provide the source code to Windows Server to settle the matter--an offer that Microsoft's competitors have scorned as a "poison honeypot," and which, if accepted, could further complicate the already complex legal relationship between Microsoft and its competitors, who are also business partners.

If Microsoft wins a favorable ruling from the 13-judge panel currently meeting in Luxembourg, it could affect the December ruling by the EC. However, if the panel upholds the original 2004 ruling, it could put a damper on new bundling attempts by Microsoft, in particular the upcoming releases of Windows Vista and Windows Server "Longhorn."

In February, the European Committee for Interoperable Systems filed a complaint with the EC regulators concerning "a range of Microsoft business practices that threaten to deny enterprises and individual consumers real choice among competing software products." The ECIS, which was formed in 1989 and counts IBM, Sun, and Oracle as members, has taken an active voice in the current battle the EU and Microsoft are waging against each other. Another group, the OpenDocument Format Alliance, is also taking issue with Microsoft's plans to make the new OpenXML spec the standard document format for Office 2007. The group favors the OpenDocument Format (ODF), a competing XML-based file format specification, but one that isn't controlled by Microsoft. The Software & Information Industry Association (SIIA) is another industry group opposed to Microsoft.

Microsoft isn't relishing the prospect of another long drawn-out antitrust battle over Windows Vista, which hasn't even shipped yet. Microsoft officials have reportedly contacted EC regulators about any concerns they might have over the potential antitrust implications of Vista. In response, the EC commissioner, Neelie Kroes, wrote to Microsoft CEO Steve Ballmer in March to express concern over Vista, in particular new technologies Microsoft is expected to add to it, including the integrated search engine, the XML Paper Specification (XPS) "PDF-killer," integrated digital-rights management technology, and other security and Office-related functions.