EUROPEAN COURT DENIES MICROSOFT APPEAL

From the International Herald Tribune:

The second-highest court in Europe on Monday rejected Microsoft's attempt to overturn a landmark European Commission antitrust ruling and record fine, bolstering smaller software makers and putting market leaders on notice that they cannot leverage dominance in one technology niche to squelch broader innovation, industry and legal experts said.

The European Court of First Instance, in a starkly worded summary, ordered Microsoft to obey a 2004 commission order to share confidential computer code with competitors. The court also upheld the record fine of €497.2 million, or $690 million, against the world's largest software maker.

Software and legal experts said the court's decision may signal problems for companies like Apple, Intel and Qualcomm, whose market dominance in online music downloads, computer chips and mobile phone technology is also being scrutinized by the commission. The ruling also could make it harder for Microsoft to continue "bundling" new features into its Windows software.

Microsoft's allies said the court's decision, which expressly forbids the company's policy of bundling new extras into its Windows operating system, will have a chilling effect on the strategies of many global software makers.

"This ruling is certainly going to introduce a lot of uncertainty," said Jonathan Zuck, president of the Association for Competitive Technology, a Washington-based group that supported Microsoft in its legal case in Europe. "What the court is basically saying is that if you develop a successful product and get too big, the European Commission is going to force you to give away your intellectual property."

When Microsoft wants to put handwriting and speech recognition features or stronger anti-virus and other security software into the Windows operating system, competitors can complain to European authorities, even though the European unbundling order in the media player case - compelling Microsoft to offer a version of Windows in Europe without the media player but with no difference in price - was a failure.

Microsoft has already been forced to pay nearly €1 billion in fines in the long-running legal case, which has pitted the software maker against the commission and a host of competitors, including International Business Machines and Novell.

After Sun filed the initial complaint in 1998, the commission later expanded its inquiry to include Microsoft's practice of bundling its Windows Media Player into the Windows operating system. After Microsoft began bundling its media player into Windows, it overtook the market leader, RealNetworks.

Microsoft has been repeatedly fined by the commission since the 2004 antitrust ruling for failing to adequately disclose server software coding.

During the course of the litigation, Kroes said in Brussels that Microsoft's share of the market in workgroup servers had risen to 80 percent from 40 percent and that Windows Media Player had come to dominate the market.

She highlighted the fact that Microsoft had 95 percent of the world market for desktop operating systems and said she would like to see that share decline.

"You can't draw a line and say exactly 50 percent is correct, but a significant drop in market share is what we would like to see," she said. "Microsoft cannot regulate the market by imposing its products and its services on people."