Microsoft files appeal in EU case

As had been widely anticipated, Microsoft has filed its official appeal to the European Union's Court of First Instance (CFI), defending itself against the European Commission's competition decision earlier this year.

"Yes, we have filed the appeal with the Court in Luxembourg and the request for a temporary injunction, which is a separate issue, will come within the next few days or weeks," a Microsoft's spokesperson, Tom Brookes, said.

That request to stay the measures imposed by the Commission will be also be filed with the CFI.

"The Commission's decision undermines the innovative efforts of successful companies, imposing significant new obligations on successful companies to license their proprietary technology to competitors, and restrict companies' ability to add innovative improvements to their products," associate general counsel forMicrosoft Europe Middle East and Africa (EMEA), Horacio Gutierrez, said in a statement.

"The legal standards set by the Commission's Decision significantly alter incentives for research and development that are important to global economic growth."

On March 24, the Commission fined Microsoft $US612 million for violating European Union (EU) competition law through the use of its dominance in the PC operating system market to gain advantage in the markets for work group server operating systems and media players. The Commission -- the EU's executive branch -- followed up the fine with a 302-page ruling in April that laid out its measures for increasing competition.

The Commission ruled that Microsoft had 90 days to begin selling a version of it Windows operating system in Europe without Media Player, the company's audio and video playing software. Additionally, the software maker must in 120 days after the ruling reveal enough Windows code to allow rivals to build competing server software that can work properly with Windows.

In its 100-page appeal brief filed to the CFI, Microsoft requested that it annul the Commission's decision as well as nullify or substantially reduce the fine imposed.

The company said it could not make public the appeal brief since to do so would violate EU procedures.

An appeal to the CFI will take at least three years to conclude and the resulting decision could then be taken to the Court of Justice on a further appeal by either the Commission or Microsoft.

A partner in the Brussels office of law firm Clifford Chance, Thomas Vinje,said the Commission was unlikely to succeed on appeal as its Microsoft decision has been one of the most carefully formulated decisions in the Commission's history.

"The Commission's decision is supported by lots of solid evidence of harm in the market, and it follows well-established precedent. The decision was also unanimously supported without any expressions of doubt by all member states," said Vinje, who represented Microsoft rivals during the Commission's investigation, including the Washington-based lobbying group, the Computer and Communications Industry Association (CCIA). Vinje also said that Microsoft probably would not be granted a temporary stay, Vinje said.

"Microsoft will not be able to show that it will suffer irreparable harm from the imposition of the Commission's decision," he said.

"Among other things, it has now agreed to provide to its arch-competitor Sun Microsystems the same interface information demanded by the Commission's decision, so how can it be irreparably harmed by being required to treat other companies equally?" Vinje said.

"And how can Microsoft be irreparably harmed by being required to sell an unbundled version of Windows when it is allowed to continue selling a bundled version?"

CCIA's president and chief executive officer, Ed Black, said that, based on the law, Microsoft's case for appeal wasn't strong. "They are basically throwing a Hail Mary pass [with the document]," Black said.

"They are desperately trying to somehow bring pressure on the Commission, and I think in a very silly, fruitless way."

But both Vinje and Black are concerned that should Microsoft be able to delay the Commission's enforcement of its ruling long enough, Microsoft will win by default.

"There is perhaps a tipping point, a critical point, if delayed for two to three years, because it would basically nullify the ability of the Commission to have an impact," Black said.

The balance of interests clearly favours rapid implementation of the Commission's decision, Vinje said.

"Competition in the relevant markets will be totally eliminated by the time the appeals are exhausted," he said.

"Any speculative damage Microsoft might claim from implementation of the decision pales into insignificance in comparison with the harm to competition and consumers from a five-year suspension of the decision."

Stacy Cowley in New York contributed to this report.

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