RealTime IT News

Case Closed: Microsoft Appeal Goes to Judges

Thomas Vinje, lead counsel for the European Committee for Interoperable Systems (ECIS), argued that the future of the IT industry is hanging in the balance.

"It is no exaggeration to say that the IT industry's future development depends on the outcome of this case," he said.

Its outcome, he told the 14 judges of the European Court of First Instance today in Luxembourg, "will determine whether the IT industry develops according to the Microsoft model or to a competitive model."

Today's arguments, distilling four days of testimony from both sides, boiled down to whether Microsoft has engaged in unfair business practices by impeding interoperability between competing server technologies, and whether it unfairly dominates the market as a result.

The two sides closed the week-long hearings by arguing over the penalty imposed by the commission. Microsoft has already paid the record $613 million (497 million euro) fine and will be reimbursed if it wins this appeal.

But Joe Wilcox, an analyst with JupiterResearch, said that more than money is at stake here.

"This is a hot issue because Microsoft is growing in that [server] market, and it's a market that Microsoft doesn't dominate yet, to the extent that it does on the desktop," he told internetnews.com.

"The server market is where Microsoft's future growth lies," he added.

According to the ECIS, Microsoft has added undisclosed code to public standards for each of the five core interoperability protocols used in workgroup servers.

The group claims that Microsoft has been able to leverage its dominance of the desktop server market, where it has more than 90 percent, to grab a stranglehold on the workgroup server market, simply because customers won't risk seeing their non-Windows servers unable to communicate effectively with Microsoft servers.

"Microsoft has expropriated these public standards," Vinje told the judges.

That, he said, "leaves rivals in the dark."

As a result, argued the ECIS, Microsoft has been able to carve out a 70 percent share of the workgroup server market.

Microsoft disputed that it dominates the server market and claimed that interoperability already exists.

David Evans, an antitrust and property rights expert testifying on behalf of Microsoft, argued that the workgroup server market was an artificial distinction created by the European Commission.

In his testimony today, said observers, he listed 18 different tasks that servers do; identifying three of those tasks and calling that a market, he argued, is arbitrary.

Lars Liebeler, an antitrust lawyer for CompTIA, an industry trade group supporting Microsoft, echoed that testimony.

"There is no such thing as the workgroup server market. There is just the server market," he told internetnews.com.

But Wilcox believes that such a distinction exists.

"You can call them 'workgroup' or 'mid-range,' but the fact is there are 8-processor, 12-processor or 16-processor servers, as opposed to the big-iron 32-processor mainframes."

Liebeler, who was in court today, also said that Microsoft was able to effectively demonstrate that there is effective interoperability in the marketplace.

"There is no interoperability issue in the way this term is commonly understood," he said.

He said that Microsoft's rivals want Microsoft to pass along valuable technology it developed to improve server-to-server communications.

"No company in any industry should be ordered to share its valuable intellectual property with its competitors," he said.

But the ECIS contended that Microsoft has been disingenuous in claiming that it had not harmed interoperability.

After the conclusion of this morning's proceedings, Ken Wasch, president of the Software & Information Industry Association, said that Microsoft is co-opting interoperability protocols in the manner as it has done in other areas.

"[Microsoft has] a proven track record of stifling key technologies like Java," said Wasch. "The value of the information Microsoft is being asked to disclose stems from its capacity to preclude competition, not from its innovative content."

The proceedings in this Court are very different from what occurs in a U.S. court of appeals. Here judges do not interrupt lawyers; questions are asked during designated times; and there is no cross examination.

This leaves the parties to engage in an extended game of tennis, with one side rebutting the other and leaving observers to decide which side made the best arguments.

"No one flopped in trying to present their arguments," he said.

The outcome is unlikely to be known before the end of this year or early next.