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.

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