- Title: BELGIUM: Future of innovation at stake in Microsoft case
- Date: 21st April 2006
- Summary: CLOSE OF BOXES OF MICROSOFT SOFTWARE 'MONEY' FOLLOWED BY DISCOVERY/LX
- Embargoed: 6th May 2006 13:00
- Location: Belgium
- Country: Belgium
- Topics: Science / Technology
- Reuters ID: LVA7YS4YX80PANTU6BEM0VI0T3ZY
- Story Text: Microsoft and the European Commission will to clash in court, in a few days time, over innovation and intellectual property rights when the software giant appeals against a 2004 anti-trust decision.
Brussels is challenging the entire basis of the group's business strategy and model and is determined to change them.
Microsoft is using all means available to turn around the Commission's decision that it abused the dominance of its Windows system to muscle out rivals who did not have enough detail of the operating system to create efficient software that could run with it.
Both sides are to appear before the European Court of First Instance in Luxembourg on Monday (April 24) as part of a 6 year war between Microsoft and the Commission.
The court has to decide whether to overturn the European Commission's finding that Microsoft abused its near-monopoly of its Windows operating system to muscle out rivals. That prompted a record fine and an order to change its business practices.
Microsoft will argue that rivals were always able to make interoperable software.
But outside the courts and in the wider public, they disagree. Some people argue the group's dominance of the market translates into less choice for them and ultimately less opportunity for innovation and creative development.
For Medi, who has a strong interest in computer technology and is an apple computer user, the bottom line is that Microsoft's control of the market means less flexibility in the market.
"We see a return and a switch to Apple because they are disappointed, really disappointed and you see more and more people who leave. So, is it fair, its not for me to say, but, I honestly think that people should have the right to choose. Look around you, all you find are Windows software, its not fair. I am a Mac operator and I am struggling," Medi said.
The Free Software Foundation Europe, one of the strongest of the Commission's backers, has accused Microsoft of putting money, control and power before innovation through competition in order to leverage their monopoly on the desktop into new markets.
The "open source" community is built around the Linux operating system, which, according to Free Software Foundation is increasingly popular with companies such as Sun, Hewlett-packard, Intel and IBM.
Linux offers software which it promotes as equivalent to Microsoft's version. The foundation says when companies have desktops running on Windows they have no choice but to use Microsoft servers. But if they choose to buy a new Linux server they can help clients choose different desktop systems.
Those who like Microsoft and agree with its approach argue that the real reason it dominates the market is not because it has destroyed the competition but because the company has better products.
Lorenzo, a data processor, says Linux is cheaper but also more complex to use and praised Microsoft for bringing the technology to the uninitiated and taking software out of the geek market and into our offices, kitchens and schools
"Too dominant? Somehow it deserves it since in 95-98 when Windows first came out they were the first to offer, to the wide public, an easy internet solution for the computer. They were the first to do it. Linux already existed but it was really reserved for people from the world of data processing, not for Mr everybody," Lorenzo said.
The Commission will continue to argue in Luxembourg that a four-year investigation found abundant evidence that Microsoft cut off information and used other tactics to grab market share from successful software rivals and drive them out of business.
Last year, Microsoft Chief Executive Steve Ballmer told Germany's Manager Magazine: "We needed the first years to conquer the PC and those following to be ahead in the server business. In the upcoming years we'll conquer the Internet." The quote was later picked up by Forbes magazine.
Lawyer Thomas Vinje represents a group of competitors that will speak at the hearing. He sees Ballmer's words as a clear plan to destroy the competition and, more importantly to take over a new area: the internet.
The forthcoming case, Vinje says, will set an important precedent in so far as the court will determine the competition rules that determine the way Microsoft behaves in the future.
"A really important question which will be decided in this case in terms of establishing a precedent that will govern Microsoft behaviour is whether Microsoft is allowed to essentially eliminate the openness of the internet and to turn it into a sort of walled garden that's controlled by Microsoft. Indeed Steve Ballmer gave a quote to Forbes magazine I believe it was fairly recently where he said, if remember correctly, the late 80s we conquered the desktop, in the early 90s we conquered the server and now we're going to conquer the internet. Those are not the exact words but that is the effect what he said and that is really perhaps the most important issue at stake in Luxembourg to be made at the European Court of First Instance," Vinje said.
He added the groundwork will be laid in Microsoft's forthcoming new operating system, Vista.
Microsoft's senior counsel Brad Smith in January announced it had made its previously secret source code available to rivals to prove to the Commission it was open and compliant.
"I should hasten to add here that we are opening the door to a new step to the licensing of the source code -- we are not seeking to close any door to any other steps," Smith said.
It has presented the Commission with voluminous documentation as well as a 75-page assertion of its complete compliance to former EU competition Commissioner Mario Monti who first levied the record fine of 497 million euros on Microsoft for abusing its dominant position in the PC operating systems market.
But at the heart of its defence Microsoft says it should not to have to give away its intellectual property having spent effort and money inventing it.
The group's communication protocols are technologically innovative and covered by intellectual property rights, Microsoft says.
But without fair competition, Vinje argues, innovation is out of the reach for the smaller fish.
"When Microsoft says freedom to innovate Microsoft means Microsoft's freedom to innovate. But what is at stake in this case IS the freedom to innovate and the problem is that the conduct which Microsoft has engaged in and which the Commission has condemned eliminates the ability of competitors of Microsoft to compete viably in these markets and thereby eliminates their incentive and indeed their ability to innovate," Vinje said
More than 90 percent of the world's personal computers are running Windows. Every piece of software -- from word processors to virus checkers -- must be compatible with the operating system created by Microsoft founder Bill Gates.
The company has a history of running into trouble for abusing its dominance. A U.S. court found in 2001 that Microsoft violated antitrust laws there, the company is appealing against similar charges in South Korea and it has had trouble in Japan.
The Commission found Microsoft tied its own Windows Media Player so it would appear on every computer running Windows, unfairly competing against RealNetworks' Real Player and others.
It ordered Microsoft to make available a version of Windows without the application.
Microsoft eventually complied, but computer makers were not interested in selling PCs with rival audiovisual software strapped on to Windows in place of Windows Media Player.
In the main case, the Court of First Instance will determine whether to overturn or modify the Commission's ruling and fine. It will take months and possibly a year to reach a decision.
Its ruling on facts is final, but legal issues may be appealed to the European Court of Justice, the highest EU court.
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