Microsoft has asked an EC judge to suspend the anti-trust ruling against it on the grounds that it would unfairly disadvantage it in the future.
The software giant was making its case on the first of a two-day public hearing at the Court of First Instance (CFI) in Luxembourg - the EU's second-highest court.
The hearing is deciding only whether to suspend the two anti-trust remedies set against it in March pending an appeal. A decision, to come from CFI president Bo Vesterdorf, is not expected for around two months. Vesterdorf has the power to suspend or retain each remedy.
After a five-year investigation, the Commission ruled in March that Microsoft had abused its dominance in the PC operating system market to gain an edge in related markets, such as media players and server software, giving it an unfair advantage over rivals like RealNetworks and Novell.
It ordered the company to pay a €497 million fine and offer a version of Windows in Europe without its media player. It also ordered Microsoft to reveal enough Windows code to allow rivals to build competing server software that works with Windows.
Microsoft lawyers argued that there is significant competition in the market, in an attempt to douse claims by opponents that the company has used its desktop dominance to shut them out of the market.
The Commission's representative, Walter Moells, stated that by insisting that Microsoft make available the specifications for its workgroup server software, the Commission aimed to prevent the company from extending its monopoly in the operating system market into the client server market.
Moells added that Microsoft failed to demonstrate serious and irreparable damage, a key requirement if the firm is to win a stay of execution. Instead, it "simply claims that its intellectual property and patent rights are being infringed. It does not even claim that the market would evolve against its favour."
But Microsoft sees things differently. Giving protocols to rivals indefinitely would reduce the incentive to innovate, it claimed. Microsoft lead counsel Ian Forrester compared Microsoft's market lead to the advantages of an architectural firm that builds 100-story buildings while its competition can only manage buildings half as high. Forcing Microsoft to abide by the Commission's decision would be akin to forcing the architectural firm to hand over its secrets and allow the competition to build equally high buildings, Forrester said.
Novell lawyer Christopher Thomas rebutted that argument. "Microsoft is not technically ahead in directory services or workgroup operating systems in general," he said. "Novell was first, and the remedy will give Novell the ability to interoperate with Windows. It's not a free or generous ride. It's competition on its merits."
A second lawyer for the rival software company added that those who want to benefit from interoperability want nothing more than that: "It's not about getting the recipe for Coca-Cola."
Judge Vesterdorf asked if it would be possible to impose a time limit so competitors are not given a free ride, and pondered whether an open-door approach was not contrary to the principal that the remedy should be proportional to the offense.
He then focused on the point of irreparable harm, asking Microsoft if there is any way it could make technical changes at a later date to the specifications it shares with competitors, in order to protect its intellectual property. "It's possible in principal to create all new protocols but impossible in practice," said Microsoft representative Roy Hirst.
While the court weighs the arguments, Microsoft said that it has already "spent millions" to be able to comply with the Commission's demands to change Windows, should it lose its appeal.
Microsoft claimed that it set up a special group within the company to prepare inter-operability specifications for its server software. Those specifications would be ready three to four weeks after the court makes its ruling, the company said.
Microsoft is putting all of its legal firepower behind appealing the Commission's decision, which is far stiffer than the settlement it reached with US anti-trust authorities because it affects the way in which Microsoft packages its products together.
Both sides, naturally, claimed they had won.
"The exchanges revealed some fundamental weaknesses in the Commission's case on interoperability," said Microsoft head lawyer Brad Smith. "Today was a very constructive start to this process, and it is clear that the court has identified the key issues at the heart of this case."
Meanwhile, Ed Black, president of the anti-Microsoft lobbying group Computer and Communications Industry Association, said the testimony favoured the Commission's side. "This morning's testimony ... made crystal clear what we already know: Microsoft has no case at all for why the immediate disclosure of interoperability information to other workgroup server system vendors would cause it irreparable harm," he said.
Today's hearing will focus on the section of the remedy that calls for an unbundling of its media player software from Windows. The request for a suspension of the remedies is just the beginning of an appeal process that legal experts have estimated could take anywhere from two to five years.
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