Microsoft, EU Fire First Shots in Courtroom Showdown

Microsoft's lawyers on Monday told a special 13-judge court that the European Commission had made fundamental errors in deciding that the company illegally tied its Windows Media Player into the Windows operating system.

Instead, argued Microsoft lawyer Jean-Francois Bellis, consumers have benefited from an improved product and competition in the audiovisual software industry was healthy.

The EU Commission, executive arm of the European Union, found Microsoft had abused its virtual monopoly in its near ubiquitous operating system in a 2004 landmark ruling to muscle out its rivals.

Microsoft was fined a record 497 million euros ($613 million) and ordered to sell a version of Windows without the Window Media Player.

Microsoft has requested the trial at the European Court of First Instance, the 25-nation bloc's second highest tribunal, in the hopes of recouping all or least part of the fine, which it has already paid.

Technical evidence

Despite the huge stakes for both Microsoft and the European Union's competition watchdog, their respective legal teams appeared relaxed but serious as the five-day trial got underway in Luxembourg.

"We welcome the opportunity to present our evidence," Microsoft legal chief Brad Smith said just before the case opened. "The impact of this case goes far beyond Microsoft. The ability to innovate is important to the success of any company and the economic success of any country," he added.

Determined to see the ruling thrown out by the court, the group has enlisted a small army of lawyers which it hopes will convince the judges hearing the case that the EU competition watchdog ruling is ill founded.

But the EU commission team appeared equally resolute, despite having only about half the numbers of the 60-strong Microsoft force.

"The commission has a very strong case, I think the strongest it's ever had," said lawyer Thomas Vinje, who represents a trade body of big Microsoft rivals like Adobe, IBM, RealNetworks and Sun Microsystems.

After the presiding judge, Dane Bo Vesterdorf, opened the first session, Bellis attacked the commission's position regarding its Windows Media Player, charging that regulators had made "fundamental errors of fact and reasoning."

He and other experts argued that there was plenty of competition for the Windows audiovisual software and that in terms of numbers it was increasing. They cited the example of Apple's iTunes, which has grown in Europe.

But the hearing was short on drama or rhetoric, as lawyers got down to the technical haggling which will ultimately decide the case.

Biggest decision ever

After a five-year investigation, the European Commission made its biggest competition decision ever in March 2004 when it found that Microsoft had broke EU law by using a quasi monopoly in personal computer operating systems to thwart rivals.

In addition to fining Microsoft nearly half a billion euros, the EU ordered Microsoft to sell a version of Windows unbundled from its Media Player software and to divulge information on its operating system needed by makers of rival products.

Although Microsoft reluctantly paid its half-billion-euro fine and introduced versions of Windows without the player, it has failed to satisfy all of Brussels' demands to correct the situation and filed the appeal against the ruling to get it overturned.

Separately from the trial, the commission has threatened Microsoft with fines of up to 2 million euros per day if it finds in the coming months that the company is not doing enough to meet the demands laid out in the 2004 ruling.

The trial holds huge stakes for both sides because a defeat for Microsoft would leave it little choice but to bow to the commission's demands, while EU regulators could find their authority seriously compromised if they were to lose.

But it will not be until the end of this year, at the very earliest, that the judges will hand down their decision, which could then be appealed.