By next week, the software giant is expected to challenge the EU’s sweeping antitrust ruling. Here’s a look at its strategy
In recent months, a mellower Microsoft has settled a spate of pending legal cases. In April alone, it resolved the long-simmering antitrust lawsuit filed by Sun Microsystems, a complex patent suit filed by InterTrust Technologies, and a class-action case brought by consumers in Minnesota, also on antitrust grounds.
Try as it might, however, Redmond wasn’t able to settle the antitrust claims brought by the European Commission in Brussels. That failure led to the commission’s landmark Mar. 24 ruling, which requires Microsoft to share proprietary technical information to help rival products work better with the Windows operating system and to offer a version of Windows without Microsoft’s digital media technology. The EC also ordered the company to pay a $613 million fine.
Now, it’s Microsoft’s turn to take its legal gloves off. The company is putting the final touches on its appeal to the Court of First Instance, the Luxembourg court where EC decisions are challenged, and is expected to file by June 9. Pending a final decision, Microsoft will also request a stay of the remedies ordered by the EC, though that will be filed later in the month.
What’s Redmond’s strategy? While lawyers will refine its arguments up until the last minute, its core contentions will be variations of ones that the company has used since it first defended itself against antitrust claims nearly a decade ago in the U.S., albeit with a European twist.
Microsoft will argue that the commission is creating new European laws that will hamper innovation, not just for Microsoft, but for all companies doing business in the Old World. As spelled out in its 302-page March decision, the Commission says it’s justly applying long-standing antitrust principles and precedents — mostly developed in non-technology cases — to a situation involving software. And it will undoubtedly assert that its ruling against Microsoft encourages, not hampers, free-market innovation.
Microsoft’s first challenge will be to undermine the commission’s order that it must provide rivals with more information about the inner workings of Windows. In its ruling, the Commission found that Microsoft put undisclosed technology in Windows that aids software interactions between PCs and server computers. So it decided to compel Microsoft to disclose those “secret handshakes” in order to level the playing field for competitors that don’t have the advantage of leveraging a dominant PC operating system.
Microsoft’s arguments will lean heavily on an Apr. 29 decision by Europe’s highest court. In the case, IMS Health vs. NDC Health, the European Court of Justice ruled that a company with dominant market position may be compelled to license its intellectual property to rivals only if three conditions are met: the company requesting the license intends to offer new products or services that aren’t simply “me too” duplicates of those supplied by the copyright owner; the refusal is not objectively justified; and the refusal has the capability to eliminate all market competition.
The success of Microsoft’s appeal may ultimately revolve around whether the court sees media players as products separate from operating systems. If the court comes to that conclusion, it could uphold the commission’s ruling as a way to level the playing field in the distribution of media players. “Microsoft still has the ultimate home-court advantage,” says RealNetworks spokesman Greg Chiemingo. “Downloading will never beat pre-installation.”