Update: Microsoft broke antitrust law to seal monopoly, EU says

Company argues $617M fine should be scrapped or reduced

LUXEMBOURG -- Microsoft Corp. violated antitrust law to "double lock" a virtual monopoly it holds on PC operating systems, a European Commission lawyer told a court today.

But a lawyer for Microsoft said the European Union executive wanted to imperil the software company's legally protected ideas by carrying out sanctions contained in a landmark 2004 antitrust decision.

A 13-judge panel at the Court of First Instance is in the fifth day of arguments on Microsoft's challenge to the decision. The commission fined the company $617 million and required changes in its business model.

The hearing, expected to end today, also included Microsoft's arguments for reducing or scrapping that fine.

The commission found Microsoft leveraged the power of its 95% share of the PC operating system market to capture 60% of the market for work group servers, which let desktop users sign on to a network, access files and print documents.

Desktops send out requests to sign on and perform the other tasks using a precise language known as protocols, and Microsoft stopped sharing those once it entered the market, the commission said.

"It has used privileged interoperability information, and repeated requests for that information are denied," said commission lawyer Anthony Whelan.

He said that gave Microsoft "a double lock on the personal computer markets."

Whelan said any potential rivals would need to enter both the work group server market and the PC operating system market to compete with Microsoft.

The commission has imposed a sanction requiring Microsoft to license its interconnection information to rivals.

Microsoft lawyer Ian Forrester said the commission's solution itself raised problems for the legal protection of ideas.

Microsoft "is being told to give a worldwide license in perpetuity" that involves its patents, copyright and trade secrets, Forrester said at the hearing.

In addition, he said Microsoft had declined to provide a license to Samba, which makes an open-source server. A Samba license would generally require such information to be made public, which would reveal its trade secrets.

Judge John Cooke asked the commission lawyer under what conditions the protocols would be provided to rivals such as Samba, and whether Samba and others would be entitled to release them to the market on an open-source basis.

Whelan replied that "no such formal step has been taken for the moment."

The founder of open-source software firm Samba, Andrew Tridgell, said whatever the commission decided would be fine.

"We respect intellectual property rights," he said during a break. "If the decision requires us not to release files, we will not release them."

Microsoft also argued that the record fine imposed by the commission should be either scrapped or reduced significantly because it doesn't reflect the alleged abuse.

Forrester said the scale of the fine is usually reserved for offenses particularly "repugnant" to the court, such as cartel activities, and questioned the commission's motives behind its calculation.

"One suspects the decision to impose any fine was calculated by what people would think," he said. "The largest fine in history would make for the largest headline."

However, the fine was smaller than Microsoft's settlement last year of an antitrust suit brought by RealNetworks over many of the same issues in one prong of the case, which, with a marketing agreement, ran to $671 million.

This story, "Update: Microsoft broke antitrust law to seal monopoly, EU says" was originally published by Reuters.

Copyright © 2006 IDG Communications, Inc.

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