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Tuesday, April 25, 2006 - Page updated at 12:00 AM

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Windows without media player is sales bust, Microsoft says

The Associated Press

LUXEMBOURG — The European Commission forced the world's largest software maker to offer a product no one wanted and virtually no one bought, Microsoft told the European Union's second-highest court Monday as it began trying to overturn a landmark antitrust ruling against it.

Microsoft lawyer Jean-Francois Bellis said in his opening statement on the first day of the five-day hearing that the commission made "fundamental errors of fact and reasoning" in its decision two years ago that the company abused its dominant market position to muscle into media software.

The order that Microsoft offer customers a version of its Windows desktop operating system without the Media Player — intended to give people a free choice of media software — has been a spectacular failure, Bellis said.

No computer maker has shipped a PC or laptop with the media player-free Windows XP N version, which is available only in Europe. "Not a single one," Bellis told the 13 judges. Some 90 percent of Windows sales come from being pre-installed on computers when they are sold.

XP N sales represent 0.005 percent of overall XP sales in Europe, Microsoft told the court, and many of the copies produced may remain unsold.

French retailer FNAC, the single largest retailer to order XP N with 46 percent of the orders, has said it sees no consumer demand for the product, Microsoft said.

But others argued it is not a lack of consumer interest but Microsoft's power over the market that is keeping people from embracing XP N.

Thomas Vinje, a lawyer for the European Committee for Interoperable Systems (ECIS) — a group representing some Microsoft rivals backing the commission — said the lack of sales was a clear sign Microsoft had held the market in check.

"It's a missile that comes back squarely into the heart of Microsoft," he said, adding that PC makers in 1999 had a choice of bundling different media players, but with Media Player tied to the Windows OS, it quickly became the first pick for new computers.

Commission lawyer Per Hellstrom said Microsoft's arguments were irrelevant because consumers did not have real choice over the media software they are offered.

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"This is the world according to Microsoft, where it decides what is best for consumers."

Bellis said the commission was wrong to predict Microsoft's media player would quash rival software. Economist David Evans told the court the success of Apple Computer's iTunes and Macromedia's Flash player — now owned by Adobe Systems — did not bear out EU forecasts.

More than 87 percent of computer users now play media on non-Windows software, Evans said, and PC manufacturers have doubled the number of media players pre-installed on computers in Europe over the last two years.

"If the commission was correct, we should see a steep downward trend," he said.

The ECIS said this was false reasoning, because iTunes and others are not fully functioning media software that compete directly with Media Player.

The EU fined Microsoft $613 million in 2004 after deciding the company had taken advantage of its position as the leading supplier of software for PC operating systems to elbow in on makers of rival server operating systems and media players.

In December 2005, the EU said Microsoft had not done enough to help its rivals develop compatible software. It threatened to impose daily fines of up to $2.4 million. The EU has yet to decide whether to levy the fines.

AP reporter Matt Moore contributed to this report.

Supreme Court

asks for help

The U.S. Supreme Court asked the Bush administration for help in deciding whether to review a patent dispute between Microsoft and AT&T over technology used to improve Internet voice transmissions.

The request, directed to U.S. Solicitor General Paul Clement, signaled the justices may have questions about a lower court ruling that applied AT&T's patent to copies of Microsoft's Windows installed on computers in foreign countries. The court generally heeds the administration's advice on whether to take up pending appeals.

Microsoft's appeal seeks to limit the vulnerability of software makers to patent lawsuits for sales outside the country. The company argues that software code doesn't fit within the federal law that bars exports of patented inventions without permission.

AT&T urged the justices not to hear the case.

Bloomberg News

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