RealTime IT News

Microsoft Pressures EU Court on Price

A European judge must sort through competing ideas on the balance between intellectual property and fairness to decide whether antitrust penalties against Microsoft should be suspended.

But Microsoft warned the court that if the penalties stand during what could be a lengthy appeal, Europeans will bear the brunt, having to pay more for a modified Windows operating system.

On Friday, the European Court of First Instance (CFI) concluded hearings on whether it should let Microsoft off from the judgment imposed by the European Commission in March: a $613 million fine, production of a version of the desktop operating system that does not include Windows Media Player and the opening its server APIs to rivals. Microsoft already paid the fine, but is asking for the money back.

In the second day of hearings, Microsoft attorneys evidently threatened to raise the price of a playerless version of Windows produced for the EU. In remarks to reporters after the hearing, Microsoft General Counsel Brad Smith said, "I thought it was certainly noteworthy that it was so clear that the remedy imposed by the Commission will impose literally billions of euros of cost upon European consumers and European software developers, and the European Commission didn't seem to contest that fact. It simply thought that that cost was an appropriate price to impose as part of this remedy."

Microsoft officials were unavailable for comment to confirm that the company would to charge extra for an EU-centric version of Windows that doesn't include the media player. A spokesperson did not know how much Microsoft planned to charge.

Judge Bo Versterdorf of the CFI has the sole authority to stay the judgment while Microsoft's appeal plays out before a three-judge panel of the CFI, a process expected to take as long as five years. Vesterdorf is expected to rule in two or three months.

In the two-day hearing on the suspension of penalties, Microsoft argued that licensing the server APIs to competing server software vendors would irrevocably damage its intellectual property. The company also maintains that the media player is an integral part of the operating system; and therefore it should not be required to remove it.

Redmond executives have confirmed, however, that they are prepared to comply with all aspects of the judgment. If the penalties aren't suspended, Microsoft would have to produce a player-less Windows.

Regarding the Commission's demand that Microsoft license its intellectual property in the form of its server APIs, Microsoft continued to claim that such a ruling would stifle innovation.

Microsoft General Counsel Brad Smith told reporters at a news conference, "Compulsory licensing is appropriate only when taking IP rights from a primary market and licensing into a secondary market. That's not what this case is about. And compulsory licensing is appropriate only when intellectual property rights are indispensable for companies to enter a marketplace. Clearly, that's not what this case is about, either."

Smith referenced the European Court of Justice's (ECJ) April upholding of a demand by the European Commission that IMS, a provider of market research to the pharmaceuticals industry, license its data format to rival NDCHealth. While the ECJ ruled to enforce the penalty in that case, it at the same time narrowed the circumstances in which compulsory licensing is warranted.

Real Networks appeared at the hearing to ask the CFI to deny Microsoft's request for a stay on the requirement to produce a version of Windows with Media Player stripped out. Dave Stewart, RealNetworks deputy general counsel, testified during the hearing that Microsoft's practice of bundling Windows Media Player with Windows effectively locked it out of the market.

"There are two differing perspectives before the Court," Stewart said in a written statement. "Real is about innovation and competition, and Microsoft is about extending its Windows monopoly."

Stewart pointed out that, despite what it characterized as Microsofts predatory behavior, RealNetworks has successfully diversified its business to include the Helix player for mobile devices. "We continue to compete and grow our business in exciting new directions, from music to games to mobile services," he said. He said that RealNetworks' deals with mobile phone manufacturers and Linux OS providers showed the effects of open competition.