Microsoft Corp. is appealing the sanctions the European Commission imposed today on Microsoft for anti-competitive behavior, giving the company 90 days to offer a version of the Windows operating system without Media Player and 120 days to disclose greater interface information so rival servers can interoperate with Microsoft products.
As pledged at the collapse of settlement negotiations with the commission last week, Microsoft will appeal the decision to the European Court of First Instance in Luxembourg. The company will ask the court to suspend parts of the ruling, including the order to produce a version of Windows without Media Player, Brad Smith, Microsoft general counsel, said today.
After a five-year investigation, the commission ruled that Microsoft uses its “near monopoly” in the desktop operating system market to create an illegal advantage in related software markets. By playing on the interoperability of Windows and its servers, Microsoft was able to override other factors of server performance offered by rivals, the commission found. Microsoft is required to disclose interface information that allows other servers to comparably interoperate with Microsoft products.
The order also prohibits Microsoft from using “any commercial, technological or contractual terms” that would make the unbundled version of Windows less attractive. “In particular, [Microsoft] must not give PC manufacturers a discount conditional on their buying Windows together with [Windows Media Player],” the commission said.
“Dominant companies have a special responsibility to ensure that the way they do business doesnt prevent competition on the merits and does not harm consumers and innovation,” said European Competition Commissioner Mario Monti. “Todays decision restores the conditions for fair competition in the markets concerned and establish clear principles for the future conduct of a company with such a strong dominant position.”
Microsoft will seek a suspension of the remedies because removing Media Player code from Windows will break not only the Media Player but other features in Windows as well, Smith said. Web sites, including those of the Italian parliament and Swedish broadcasting organization, and numerous applications will not function properly. Among the applications that wont work are voice narration that explains to new users how to use the computer and the operating system, and close captioning for the hearing impaired, he added.
The settlement concessions Microsoft offered last week would have brought more immediate benefits to the marketplace and users, Smith said. Under the companys proposal, competitors would have been given unprecedented access to Microsoft technology, and every Windows PC would have included three competing media players.
“Instead of getting immediate action in 2004, we are now on a path to get a decision in 2009,” he said.
In addition, Smith said, the settlement proposals would have applied worldwide, but the commissions ruling appears to apply only to the European market, which could lead to consumer confusion.
Smith predicted that ultimately, Microsoft will arrive at a settlement with Europe, much like it did with the United States following a court review. “The European courts have the final word, and the final word carries the day,” he said. “I would anticipate that this litigation has another four or five years ahead of it.”
Microsoft will appeal in part on grounds that the commissions order to remove code from Windows is tantamount to broad compulsory licensing, Smith said. Smith sounded confident that the companys planned request to suspend the provision would be granted because “you cannot ask someone to license something out and pull it back later if the company wins on appeal.” In addition, he said, the order violates the European Unions international treaty obligations under the World Trade Organization.
In its decision, the commission noted today that the disclosure order relates to interface information only, and if any of it is protected by intellectual property in Europe, Microsoft would be entitled to “reasonable remuneration.”
Sun Microsystems Inc., which initiated this European investigation with a complaint in 1998, lauded the commissions decision. Calling it a precedent-setting decision, Suns Lee Patch, vice president of legal affairs, said users can be confident that rival server suppliers will be able to meet their needs in the future.
“For the first time in many years, IT managers will be able to choose from a variety of workgroup servers, confident that they will interoperate with Microsoft desktops,” Patch said.
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