European Court of First Instance Denies Microsoft's Application for Interim Measures

December 22, 2004. The Court of First Instance of the European Communities issued an order that dismisses in its entirety Microsoft's application for interim measures.

That is, Microsoft has appealed the European Commission's (EC) March 24, 2004 decision that orders its to pay money, redesign its operating system, and give proprietary information to its competitors. Microsoft also requested that the Court of First Instance (CFI) stay the enforcement of the decision pending resolution of the merits of the appeal. The CFI just denied this request, basically, on the basis the Microsoft will not suffer irreparable injury by enforcement of the decision at this time. The just released order concedes that Microsoft may yet prevail before the CFI on the merits of the appeal.

See also, press release [3 pages in PDF] issued by the CFI.

On March 24, 2004 the European Commission (EC) announced a decision that ordered Microsoft to give it 497.2 Million Euros, ordered Microsoft to make changes to its software sold in Europe, and ordered Microsoft to disclose certain information to its competitors. The EC released the text of its decision on April 22, 2004. See, Commission Decision [302 pages in PDF]

Specifically, the EC ordered that "Microsoft Corporation shall, within 90 days of the date of notification of this Decision, offer a full-functioning version of the Windows Client PC Operating System which does not incorporate Windows Media Player".

The EC also ordered that Microsoft shall, within 120 days, "make the Interoperability Information available to any undertaking having an interest in developing and distributing work group server operating system products and shall, on reasonable and non-discriminatory terms, allow the use of the Interoperability Information by such undertakings for the purpose of developing and distributing work group server operating system products".

See, stories titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004; and "European Commission Releases Microsoft Decision in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

Microsoft gave the EC the 497.2 Million Euros that it demanded.

However, on June 6, 2004, Microsoft filed an appeal with the European Union's Court of First Instance (CFI) of the March 24 decision of the EC. This is case number T-201/04. See, Microsoft release. That is, Microsoft requested the Court of First Instance to annul the March 24 decision.

Microsoft also filed an application for interim relief. That is, it requested the CFI to stay the enforcement of the March 24 decision pending resolution of appeal.

The December 22 order of the CFI rules on the application for interim relief. It denies it. The just released order does not grant or deny annulment of the March 24 order.

The just released order offers the reasoning that Microsoft will not suffer irreparable harm if the terms of the March 24 decision are enforced.

The EC did not previously enforce its decision while the application for interim relief was pending. Now, it will. Moreover, Microsoft representatives stated that it will comply.

The EC also asserted in its March 24 decision that the basis for these actions was enforcement of competition law. The just released order of the CFI reiterates these assertions.

Hewitt Pate, the Assistant Attorney General in charge of the U.S. Department of Justice's Antitrust Division, has frequently and harshly criticized the EC for its actions against Microsoft.

For example, on April 2, 2004, Pate gave a speech in Washington DC in which he expressed "deep concern about the apparent basis of this decision and the serious potential divergence it represents." Pate said that the EC decision lacks comity, that it will lead to antitrust forum shopping by parties seeking to benefit from regulation, that it may protect competitors rather than competition, and that it may chill lawful product improvement. See, story titled "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004.

See also, Pate's statement of March 24, 2004, and story titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" in TLJ Daily E-Mail Alert No. 863, March 25, 2004. See also, story titled "Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR" in TLJ Daily E-Mail Alert No. 913, June 8, 2004.

Microsoft issued a release on December 22 in which it states that "While we had hoped that the Court would suspend some or all of the remedies in the case, we are encouraged that the Court has recognized that Microsoft has a number of powerful arguments that must be considered in the full appeal."

Microsoft added that "We continue to believe that the Commission's remedies will bring very few benefits to competitors and consumers in Europe, and will in fact harm many users of the Windows operating system and the thousands of companies across Europe who have built their businesses on the Windows platform."

"We believe that the code removal remedy, obliging Microsoft to release a degraded version of the Windows operating system, will be harmful to consumers and competition and undermines the technology integration that has been the backbone of the IT revolution over the past 3 decades."

Microsoft concluded that "We will take a close look at the order before deciding on our next steps but we will, as we have always said, comply fully with the Court order when it comes into force, pursuant to contingency plans that have been discussed with the European Commission."

See also, transcript of telephone news conference conducted by Brad Smith, Microsoft's General Counsel on December 22.

Brad SmithSmith (at right) said that "we obviously need to go forward as a first order of business and comply with today's decision. The court obviously ruled against our request for interim measures, and instead it decided that we must go forward and comply with the European Commission's decision."

Second, he said that "We do find substantial cause for optimism in a number of aspects of the court's reasoning today. For example, the court discusses the Windows Media Player side of the case and it recognizes that we have important arguments that will need to be assessed by the five-judge panel that will decide the merits of the case. These include the benefits created by our design philosophy in Windows. It includes the fact that, as the court observed today, our design philosophy and our integration of new features into Windows is not the kind of conduct that by its nature is likely to restrict competition. It also reflects the court's recognition that competitors and content providers continue to have a variety of media formats from which to choose, a fact the decision notes that has not been rebutted by the European Commission."

"Similarly, in discussing the compulsory-licensing side of the case, the court's decision today recognizes that there is valuable technology at issue here, something that differentiates this case from other cases in which the court has permitted compulsory licensing by the European Commission, the decision acknowledges that the court will have to assess the substantial intellectual property rights that we have in this technology and the decision recognizes the important argument we have made that competitors do not need access to this technology in order to bring their products to market", said Smith.

One of the questions for Smith was "have any OEMs expressed an interest in licensing Windows with the Media Player removed?" Smith responded that "I have not heard of any OEMs expressing any interest in this to date."

Another question was whether Microsoft will offer the degraded version its operating system (without Media Player) in markets outside of Europe. Smith responded that "we have no plans to offer this version of Windows outside of the European Economic Area at this time, and I don't expect we'll have any such plans in the future." He added that Microsoft is skeptical that consumers will be interested in this version.