Spinning Microsoft's EU Troubles - Page 2

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Microsoft, nonetheless, remained upbeat. During a telephone conference Dec. 22nd, the company's chief legal counsel, Brad Smith, spoke of optimism gleaned from the CFI's decision.

Although the court was not convinced the company would suffer irreparable harm from complying with the penalties if it ultimately wins its appeal, the court recognized a number of arguments, Smith said.

For one, the decision appeared to agree with Microsoft's point that "the practice at issue here, the integration of new technology into a consumer product, is not a practice that by its nature is likely to restrict competition."

This point goes to Microsoft's claim that the commission "should have given greater weight to the positive effects of the Windows operating system design concept," Smith said. "I'm not suggesting that victory is guaranteed for anyone, but there's clearly cause for optimism as we see the litigation path moving forward," he added.

But Glenn Manishin, an antitrust attorney with Kelley, Drye & Warren, which represented the Computer and Communications Industry Association and The Software and Information industry Association in appealing Microsoft's antitrust settlement with the United States, said the unbundling ruling was precisely the result Microsoft wanted to avoid.

"What happened in the CFI's ruling is that patently absurd arguments, which it managed to persuade the U.S. courts as to the potential harms to its intellectual property and Windows ecosystem, were rejected as unfounded almost on their face by the CFI," he said. "So [the court has] drawn a sharp distinction because the court in Europe actually looked at the evidence and found it lacking, while courts in the U.S. never examined the evidence and accepted almost all of Microsoft's arguments about harm," he said.

If Microsoft wants to add other new products to its operating system, such as anti-spyware software, or improved Digital Rights Management systems, "it will be very difficult to draw the line [between] when are you bundling and when are you responding to demand," added Brophy, who has represented Apple Computer but none of the companies involved in the EC's antitrust case involving Microsoft.

The European Commission on mergers recently asked Microsoft to provide more information regarding its planned stake in Content Guard, a provider of DRM technology that holds 16 patents and has more applications in process.

As internetnews.com has reported, ContentGuard's XrML standard is the basis of the recently approved International Standards Organization (ISO) MPEG Rights Expression Language , which assigns rights and usage to digital objects, a key feature of DRM.

The EC's "phase II merger inquiry" signals it has concerns about Microsoft using its dominant position to bundle Content Guard technology, even though it would be a part-owner in the company with Time Warner and France-based Thomson.

The developments may help explain any extra lobbying amid plenty of chatter over antitrust law in legal circles. After all, the debate over the CFI's ruling practically picks up where the European Commission's rejection of the $42 billion General Electric/Honeywell merger in 2001 left off.

The decision helped draw distinctions between EU and U.S. antitrust approaches, as David Evans argued in the Jan./Feb, 2002 issue of Foreign Affairs:

"European antitrust regulation could become an unexpected stumbling block on the road toward a more integrated global economy. U.S. antitrust authorities presume that markets work; hence government intervenes only when there is clear evidence that business practices are harming consumers. In contrast, EU competition officials seem to seek the 'right' market structure, sometimes placing the interests of competitors over those of consumers."

Gordon Haff, technology analyst for research firm Illuminata, said the reality for competitors and open source projects is that once Microsoft integrates a function in its operating system, it creates a very high bar for anybody that wants to compete with that function.

On the other hand, competitors pursue the same approaches. "If you look at Solaris for example, that's pretty integrated," Haff said of the proprietary operating system from Sun Microsystems (which helped spur the antitrust case against Microsoft). "The enterprise open source Linux distributions are pretty well integrated. Is there a lot of choice of what you can configure [with the distributions]? Yes, but they choose for you, such as which browser to use," he said.

Integrating components into the operating system creates a streamlined experience, he said. "To the average person using windows, it's there, it works, and it's a very different experience than what's the case with RealPlayer. But balancing against that argument, it clearly makes for an uneven playing field for third parties. I don't think there is a right answer in some absolute, unbeatable sense about integration and a level playing field."

Added Manishin: "I think these issues are going to continue until there's some fundamental shift in technology so that the PC is not as dominant as it was."