Microsoft Fears Irreparable Harm, Changes Licensing Tune - Page 2

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Thursday was devoted to the question of the licenses, while on Friday the judge considered the media player issue.

On Friday morning Microsoft presented its case to the judge, followed by its interveners, the commission and the commissions interveners. In the afternoon the judge was to question the participants for several hours, followed by short closing statements from Microsoft and the commission.

Microsoft said the commissions remedies strike at the heart of its business model by forcing it to create a new version of Windows labeled with the companys trademark. The stripped-down version would prevent many Web sites and software products from working properly and would confuse consumers, the company said.

The commission argued that the media player market is at a "tipping point," and that Microsoft would gain control over the digital media formats used in computers, mobile phones and handheld computers unless the commissions remedies took effect immediately.

RealNetworks argued that Microsofts growing power in the media player market is repeating the events of the 1990s, when Microsofts Internet Explorer shut Netscape Navigator out of the browser market. Once competition has been eliminated, it cannot be restored by government action, the commission said.

Countering Microsofts arguments that removing Windows media player would break other operating system functions, RealNetworks demonstrated a version of Windows XP Embedded, designed to allow system builders to add and remove components as needed. There was no technical reason an unbundled Windows XP couldnt be distributed, said Antoine Winckler, arguing for RealNetworks. Microsoft responded that in such a configuration, certain functions wouldnt be broken, but simply unavailable.

Microsoft argued that the remedy wouldnt be effective because there would be no demand for an unbundled Windows. Winckler countered that in that case, there would be no harm to Microsoft. "If indeed there is any market for or takeup of [unbundled Windows], the only reason is because there is consumer demand for it," said Vinje, summarizing Wincklers argument. Since competition law is designed to protect consumer choice, this argument could weaken Microsofts case.

Industry observers have said it might be difficult for Microsoft to argue a stripped-down Windows would harm the company when it is distributing Windows XP Starter Edition in a number of countries. Starter Edition, a cheaper version of Windows with limited functionality, is sold in Thailand, Malaysia and Indonesia as a way of countering the appeal of Linux-based machines. Microsoft announced this week it would offer Starter Edition in Russia and India beginning next year.

The Court of First Instance is expected to deliver its ruling in November or December. This is likely to be followed by an appeal to the European Court of Justice, the EUs highest court. Once the issue of remedies is settled, a panel of judges will begin considering the broader case, expected to take three to seven years.


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