Judge: Why Microsoft Lost

To win its appeal for a stay on the antitrust penalties imposed earlier this year by the European Competition Commission, Microsoft Corp. had to prove to the European Unions Court of First Instance that it had a prima facie case, that the Commissions remedies would cause irreparable harm and that the balance of interests favored Microsoft over the interests of competitors and the public. However, EU Judge Bo Vesterdorf said Microsoft had a prima facie case, but failed to prove most of its other points.

Vesterdorf said two elements of Microsofts argument for a prima facie case were unconvincing—that the remedies didnt take the TRIPS trademark agreement sufficiently into account and that the remedies were disproportionate. However, the decision allowed that Microsofts other arguments raised “complex issues” that had to be resolved during the full appeals process.

/zimages/5/28571.gifMicrosoft agrees to comply with the EU remedies.Read more here.

“Microsofts argument is likely to raise one or more important questions of principle which may affect the legality of the Commissions analysis,” Vesterdorf wrote.

He singled out Microsofts allegations that the Commission is “unlawfully applying a new theory on tying,” and that the Commission should have given greater weight to “the positive effects of the Windows operating system design concept.”

He also gave weight to Microsofts argument that the scope of the Commissions factual analysis was flawed, in particular, that “the Commissions analysis relating to the existence of indirect network effects is contradicted by the fact that content providers continue to have recourse to different formats.” Finally, Microsoft may be justified in arguing that Windows and its media functionality dont constitute separate products, Vesterdorf wrote.

/zimages/5/28571.gifUnbundling IE and Media Player could be a positive thing for Microsoft.Read why here.

The judge refuted Microsofts arguments related to irreparable harm, however. He said Microsoft had failed to demonstrate serious and irreparable damage due to interference with Windows “basic design concept” and Microsofts commercial freedom. It didnt prove that serious and irreparable harm would be caused to the companys reputation. Microsoft didnt demonstrate that alleged damage to its trademark would be irreparable, or that the remedies would constitute a breach of copyright, Vesterdorf wrote.

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