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Decision Time For Microsoft's EU Appeal

For Microsoft CEO Steve Ballmer, the clock must be ticking agonizingly slowly down towards half past midnight Redmond time this coming Monday morning.

That is when the European Court of First Instance, or CFI, in Luxembourg plans to hand down its long-anticipated ruling on Microsoft's appeal of its European Commission (EC) antitrust case. (That will be 9:30 a.m. local time in Luxembourg or 3:30 a.m. Eastern time.)

Microsoft had appealed the EC's March 2004 decision that the company was "in breach of European competition law through the abuse of a dominant market position," according to a Microsoft timeline of the case.

The case began in 1998 after a complaint to the commission filed by Sun Microsystems. Those complaints centered on Microsoft's failure to provide technical information on its client and server communications protocols to competitors.

The case expanded to include complaints from RealNetworks that it couldn't get a place for its Real media player on the desktop of new PCs due to Microsoft's monopoly tying of Windows Media Player to Windows.

Among other things, the March 2004 decision required Microsoft to offer a version of Windows in Europe that did not have Windows Media Player. It also was ordered to provide technical documentation on the protocols and other technical information -- the adequacy or inadequacy of which has been a continuing point of contention between Microsoft and the commission.

The company was also fined a total of $970 million -- an initial $613 million in March 2004 and then, two years later, an additional $357 million as penalty for its slow response in complying with part of the commission's ruling.

Microsoft presented its appeal to the CFI in April 2006.

There is a lot at stake, although no one wanted to speculate as to what all is at risk in advance of the court's ruling.

"Microsoft has to find a way out from the hole they're in with the EU," Rob Enderle, principal analyst at research firm the Enderle Group, told InternetNews.com.

Part of the problem has been the company's reputation for thumbing its nose at competitors and regulators over the years. "I'm not convinced that the court can look at this with an unbiased eye … and I'm not convinced that Microsoft is playing the politics well," he added.

One possible outcome, if Microsoft loses the appeal, is that a ruling in favor of the EC could give the green light for the EC to go after other major tech firms, including Apple and Intel, Enderle added.

That helps to underline the importance of Monday's ruling.

"What's going on is the EU seems to be a bigger threat to Microsoft than the domestic threat" from the U.S. federal antitrust case, Dwight Davis, vice president at analysis firm Ovum Summit, recently told InternetNews.com.

There are few hints as to how the CFI might rule on the appeal. The court earlier declined to suspend Microsoft's penalties pending the appeal process.

A number of things in the realm of laws and standards have just not been going quite the way Microsoft officials would like lately. While the U.S. Department of Justice (DoJ) wants to wind down its oversight of Microsoft in the U.S. antitrust case, a renegade group of states who were earlier part of the settlement agreement along with the DoJ this week requested a five-year extension in several areas.

And last week, Microsoft's Office Open XML file formats did not garner enough votes to make it an International Organization for Standardization (ISO) standard on a "fast track" basis.

Meanwhile, Microsoft has been doing what it can to demonstrate that it is not anti-competitive, including promising to make changes in Windows Vista so that third-party search engines like Google can be easily chosen as the default for desktop search.

And it may just be coincidental that Sun, the originator of the EC case, this week announced it will become a Windows Server 2003 OEM, and will open a new collaboration lab to work on interoperability and virtualization between the two companies' products.

Officials for both the EC and Microsoft declined to be interviewed due to the proximity of the CFI's decision. However, once the decision is made public, the scramble begins.

"Currently, we're planning to make an initial statement within an hour of the judgment and expect to hold a press conference in Brussels a bit later in the day after we've had time to review the full text," Microsoft spokesperson Jack Evans told InternetNews.com in an e-mail.

Should the CFI ruling go against Microsoft, the European Union's (EU) court system allows appeals of CFI's decisions to the European Court of Justice -- the EU's highest court -- but only on questions of law.