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Court to rule on Microsoft EU sanctions

Judgment tomorrow could end case or lead to more wrangling

A decision on whether to suspend the European Commission's anti-competition sanctions against Microsoft pending appeal will be announced on Wednesday.

While Microsoft wants to win the suspension, the decision and the legal findings supporting it are seen more as an opportunity to approach the Commission for further negotiations on the case.

"Microsoft is hopeful that the court order will provide an opening for further discussion on how to address the Commission’s concerns," Horacio Gutierrez, Microsoft’s general counsel for Europe, said last Friday.

The decision by the Luxembourg-based CFI (Court of First Instance) had been expected this week. CFI president Bo Vesterdorf is considering whether to delay two sanctions imposed on the software maker when the Commission ruled last March that Microsoft abused its dominance in the desktop software market to gain advantages in related markets, such as media players.

Microsoft was ordered to release a version of its Windows operating system in Europe without WMP (Windows Media Player) and reveal enough server software code to allow rivals to build competing products that work well with Windows.

It also levied a fine of €497m (£344m), which Microsoft has already paid; the sum is being held in a special account pending the appeal’s outcome.

If Vesterdorf denies a stay on either count, Microsoft would be expected to comply quickly, probably within a couple of weeks, according to the source close to the company. However, both the software maker and the Commission are allowed to appeal Vesterdorf’s decision, which could delay the outcome further.

Vesterdorf is attempting to stave off a further appeal by supplying a lengthy and thorough judgment that addresses the various legal matters involved, according to the source. It is difficult to get approval for this appeal and, to do so, parties must make a convincing case that there are legal matters that have not been adequately addressed.

If Vesterdorf denies the request for suspension of both sanctions, and a further appeal is not requested or approved, the ruling could lead to a significant change in how the software maker supplies products, analysts said.

If Microsoft is told to supply a version of Windows without WMP, the ruling will raise questions about how the Commission will look at other bundled products, such as the next version of Windows, set for release in 2006.

However, if the sanctions are suspended and there is no further appeal of Vesterdorf’s decision, Microsoft could do business as usual until its appeal of the case is decided – a process that is expected to take from two to five years.

The company appears to be shooting for a middle ground where it can negotiate lighter sanctions with the Commission and step away from what looks like years of legal wrangling.

"We continue to believe that these complex issues are best resolved through discussions between the parties," a spokesman for the company said on Friday.

Since June, when it filed the request for a stay of the sanctions, Microsoft has reached settlements with two of its main opponents in the case, Novell and the CCIA (Computer and Communications Industry Association). When the settlements were announced last month, Microsoft senior vice-president and general counsel Brad Smith said the agreement with the CCIA "removes the most substantial obstacle" to its settlement of the European anticompetition case.

The last remaining company with broad-based complaints in the case is RealNetworks, which argued that Microsoft unfairly wielded its dominance on the desktop to proliferate WMP, to the detriment of Real’s player software. Representatives for the media software company weren’t available to comment in time for this story on the possible impact of the court decision.


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