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Saturday, April 22, 2006 - Page updated at 12:00 AM

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Microsoft says EU case targets right to innovate

The Associated Press

BRUSSELS, Belgium — Microsoft will fight next week for the way it conducts future business as it urges the European Union's second-highest court to overturn an antitrust ruling that ordered it to pay a record $613 million fine.

Both Microsoft and its rivals argue the right to innovate is at the heart of the case. Microsoft says it must be allowed to enhance its programs and guard its intellectual property. Critics argue it cannot be allowed to use its dominance to strangle competitors.

"At issue is whether companies can improve their products by developing new features, and whether a successful company must hand over its valuable intellectual property to competitors," the maker of the Windows operating system said in a statement.

In March 2004, the European Commission levied its largest fine ever — 497 million euros ($613 million) after it found Microsoft guilty of breaking the antitrust rules that govern fair play in business.

Its five-year investigation concluded Microsoft had taken advantage of its position as the leading supplier of operating systems to damage rivals who offered server software and media-player programs.

The commission ordered Microsoft to share information and code with competitors to help them make software that worked smoothly with Windows and to market a version of Windows without the built-in media player to give consumers a free choice of media software.

Microsoft challenged the penalties in court but lost. It finally made a media-player-free version of Windows available in the summer of 2005.

But in December, the EU said the company had not done enough to help rivals develop compatible software and threatened Microsoft with daily fines of up to 2 million euros ($2.4 million), backdated to Dec. 15. It has not yet decided whether it will levy these extra fines.

Luxembourg hearing

The five-day court hearing in Luxembourg next week will thrash out Microsoft's behavior in the late 1990s with EU regulators using evidence from RealNetworks on the media-player case and IBM, Novell, Oracle and Sun Microsystems on systems compatibility.

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None of those companies is currently involved in the legal battle although they are members of two broad industry coalitions — the European Committee for Interoperable Systems (ECIS) and the Software & Information Industry Association — that will back the commission.

History speaks for itself, Microsoft officials claim. RealNetworks has survived despite Microsoft's alleged antitrust abuse, it says. Apple has gained ground in Microsoft's core desktop market with its media-friendly iMacs.

The company also says its actions have not stopped the server market's adoption of Linux — an increasingly popular operating system that is developed by a global community of programmers.

In a new complaint filed in February, the European Committee for Interoperable Systems said times have changed, but Microsoft's behavior has not. It claimed Microsoft is up to the same tricks — but on a wider scale.

ECIS lawyer and spokesman Thomas Vinje says the latest version of Microsoft's desktop operating system, Windows Vista — which is due in stores early next year — will try to squeeze out rivals by giving away security, search engine and office functions.

New technologies

Microsoft said it's merely doing its job and doing it well — introducing new products with breakthrough technologies that benefit consumers.

For Vinje, Microsoft v. the European Commission has the potential to set the "rules of the road" for Microsoft before it launches Vista.

"The bottom line in this case is about the future, whether consumers will have the choice of that innovation in future or whether Microsoft will be allowed to contain competition and innovation," he said.

"Vista takes the exact same behavior condemned in the commission decision [of March 2004] and takes it to a new level," he said.

Windows Vista is Microsoft's first major update to the company's flagship operating system since Windows XP was released in late 2001.

The EU has said it has also received other complaints about Microsoft but had not yet decided to proceed with in-depth investigations.

EU officials and lawyers say any further action depends on the outcome of Microsoft's challenge to the 2004 ruling.

The commission cannot take any action against Vista before the product hits the market, but the prospect of another long, drawn-out antitrust dispute has already prompted Microsoft to ask EU regulators about any possible concerns they had about the software.

EU Competition Commissioner Neelie Kroes wrote to Microsoft CEO Steve Ballmer last month to express competition concerns about Vista's integrated Internet search, digital-rights management tools used to protect copyrights and software that would create documents comparable to Adobe Systems' Portable Document Format, or PDF.

Copyright © 2006 The Seattle Times Company

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