Microsoft to Europe: Don't Be Cruel

Microsoft Corp. isn't quite begging, but the company is hoping a European appeals court will cut it some major slack in its fight against the European Union's antitrust ruling, citing concerns that PC users will get the short end of the stick and that the mandate will hurt the marketplace.

The Redmond, Wash.-based software giant is defending its flagship Windows operating system and business practices and was back in court today in Luxembourg to delay punishment while it battles the EU decision requiring substantial changes in Windows to appease anti-competitive concerns. The EU ruled against Microsoft in March.

The company today "began round two of its fight to have the European Union's sweeping antitrust ruling lifted, arguing it would ultimately hurt consumers and cause confusion in the market," the AP reported early today. "Under grilling from Bo Vesterdorf, the Danish president of the European Court of First Instance, the U.S. software giant insisted it would face irreparable harm if forced to comply with the EU orders, which would force Microsoft to share some information with competitors and to make major changes in its business strategy." BBC News Online noted that "Microsoft is seeking to get the ruling temporarily suspended in the final day of a two-day court hearing" and wants a suspension of the $613 million fine levied against it.

The AP and other wire services had a jump on newspapers today with the latest developments in the case from the courtroom today. Reuters summarized Microsoft's main argument: that the company "will suffer serious harm if it is forced to provide a version of Windows without Windows Media Player audio-visual software," Reuters reported. More from Microsoft's legal team: "Microsoft is forced to create an adaptation of Windows that it would never consider creating otherwise and it must label it with its valuable Windows trademark," argued Microsoft lawyer Jean-Francois Bellis, as quoted by Reuters. "It strikes at the very heart of Microsoft's business model and design of Windows."

The bottom line of Microsoft's argument: Microsoft wants European officials to quake in their boots over concerns that "unbundling" would interfere with other computer tasks and hurt consumers overall. "Linda Averett of Microsoft said that many Web sites and software products will not work without Windows Media Player. Consumers who buy computers with Windows 'are very likely to feel deceived when they find that Web sites don't work,'" Reuters reported. "Rival RealNetworks Inc. is expected to give a demonstration aimed at showing the judge that computers with alternative audio-visual players operate well with Windows."

"The commission is attempting to redesign the structure of the company," said lawyer Ian S. Forrester, whose Brussels firm White & Case represents Microsoft, the New York Times reported. "This is the first time in history a company would be compelled to draw up a description of its secret technology and deliver it to competitors."
• Associated Press via The Washington Post: Microsoft Says Ruling Will Hurt Consumers (Registration required)
• BBC News Online: Microsoft Defending Media Player
• Reuters via washingtonpost.com: Microsoft Fears Changing Windows (Registration required)
• The New York Times: Microsoft Asks Appeals Court In Europe To Delay Punishment (Registration required)

The AP gave a good primer of what's at stake in Luxembourg: "Vesterdorf must decide whether to grant Microsoft's application for a stay pending a decision on the appeal, which is years away, or to allow the order to take effect immediately as the EU and Microsoft critics want. Negotiations for a settlement stalled largely over one of the European Commission's orders, which demands that Microsoft offer a version of its Windows operating system minus its digital media software, Media Player, to allow rivals like RealNetworks a better shot at reaching consumers. That order -- the subject of Friday's hearing -- cuts at the heart of Microsoft's core strategy of adding new features to existing products to maintain its lead and expand its business."

The AP said that if Microsoft is able to get a delay, it could mean trouble for EU regulators: "Having warned that urgent measures were needed to protect consumers and competition in the industry, the EU could come under increased pressure to come back to the table should Microsoft win a suspension. EU officials expressed confidence their order would be upheld."

London's Guardian newspaper, in advance of today's proceedings, said Vesterdorf "must decide whether to delay the enforcement of the order pending Microsoft's appeal, a process which could take several years, or allow it to be implemented at once. Microsoft ... has consistently argued that the EU decision would cause it 'irreparable harm' by allowing rivals such as Linux and Novell to effectively copy its unique server technology."
• The Guardian: Microsoft Fights EU Windows Curbs

The Financial Times gave this synopsis of yesterday's proceedings: "The five-year legal battle between Microsoft and the European Commission entered a new phase on Thursday, as the company sought to persuade a European judge to freeze the antitrust sanctions imposed by Brussels in March. Microsoft told ... the second-highest court in the European Union that the ... decision infringed its intellectual property rights, hurt its business model and created new law. It said the court should suspend the sanctions until an appeal against the decision was decided probably in four or five years. But the commission's legal team as well as lawyers from rival software companies argued that Microsoft had been unable to show that the immediate implementation of the sanctions would cause severe and irreparable harm."
• The Financial Times: Microsoft Plea to Freeze Sanctions

The Washington Post had one of the more interesting nuggets in its coverage of the court case. "European regulators testified ... that before settlement talks with Microsoft Corp. broke down last spring, the company had agreed to antitrust sanctions that the software giant now claims would cause irreparable harm to its business and is fighting to stave off," the newspaper reported. "A similar case in the United States was settled by a deal between the company and the Justice Department in late 2001. Microsoft also attempted to reach agreement with European regulators to resolve their antitrust concerns. At one point, the company indicated it was willing to license technical data to rivals to help ensure that their network software would work with Microsoft's, according to testimony by Cecilio Madero, a staff director with the European Commission's competition bureau. The agreement fell through and European authorities ultimately ordered such disclosure in April, after finding that Microsoft was using its overwhelming Windows dominance to muscle into the market for server software, which is used to run computer networks," the Post said.
• The Washington Post: E.U. Regulators Say Microsoft Had Agreed to Sanctions (Registration required)

More Rumblings for Microsoft

There's more trouble for Microsoft brewing on this side of the pond (other than the chance of a nearby volcano eruption). The company might lose a U.S. patent "that critics fear could be used to hinder open-source, or communally developed, software," the Wall Street Journal reported today. "In a preliminary ruling, the [U.S. Patent and Trademark Office] said Microsoft shouldn't have been granted a patent in 1996 for its File Allocation Table, or FAT. The table is a way of storing data that is crucial for connecting a Windows personal computer with electronic gadgets such as digital cameras and music players. But the patent office said the table technology wasn't patentable because it would have been obvious to programmers with 'ordinary skill.'"
• The Wall Street Journal: Microsoft Could Lose 1996 Patent That May Hinder Linux Software (Subscription required)

On a lighter note, Microsoft co-founder Paul Allen is throwing some serious cash to kick start a microcomputer museum in New Mexico. The Seattle Post-Intelligencer has the story.
• The Seattle Post-Intelligencer: Paul Allen to Open Microcomputer Museum

PeopleSoft CEO Gets the Boot

Here's news that is going to make the day of Oracle's Larry Ellison. The board of PeopleSoft has canned Craig Conway, the company's president and chief executive. Conway has been an outspoken critic of Oracle's hostile takeover bid for his company, but the timing of the termination could bolster Oracle's case that PeopleSoft is ripe for takeover. The board of directors did not try and sugarcoat Conway's ouster, noting it was effective immediately. The decision "resulted from a loss of confidence in Mr. Conway's ability to continue to lead the company. All of these decisions received the unanimous vote of the independent directors. The board would like to thank Mr. Conway for his contributions to PeopleSoft," the company said in a statement released this morning. The board appointed PeopleSoft chairman and founder, Dave Duffield, as chief executive and also named co-presidents.

The company planned a conference call this morning to talk about the news. CNET's News.com picked up the announcement and was out with a story on its site early today. An excerpt: "PeopleSoft, which last month hosted its annual customer convention, has been trying to hang onto its customers despite the merger effort. Some licensees have expressed reluctance to continue buying and upgrading their products until the fight is over. At the customer event, Conway gave an upbeat presentation and voiced optimism that PeopleSoft would endure, despite the travails of the takeover effort. But he also acknowledged that the 15-month battle against Oracle had taken a toll. 'Have you ever had a bad dream that just didn't end?' he asked conference attendees. Conway had been CEO since September 1999."
• CNET's News.com: PeopleSoft Fires CEO Conway

Conway's bad dream is certainly continuing. Meanwhile, rival Ellison is having fun. CNBC's "Squawk Box" noted in its broadcast today that the Oracle chief is reportedly sailing off the coast of Spain.

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