As indicated by the European Commission on 23 December, Microsoft has to date failed to meet its obligations to provide information essential for developers wishing to develop complementary or competing products which interoperate with Microsoft’s dominant server and client PC operating systems. ECIS has taken note of Microsoft’s offer today to provide limited access to sections of its source code, and has the following initial comments.
Microsoft’s announcement does not make the Microsoft remedy any more effective. ECIS welcomes any steps towards full implementation of the 2004 Decision, but is surprised and concerned by Microsoft’s announcement for several reasons: Microsoft has until today consistently argued that its source code reveals its core IP and that disclosure is entirely unacceptable. Neither the Commission nor the industry want or need Microsoft source code: industry needs proper documentation of specifications and protocols, with appropriate test suites. In fact, use of source code as a substitute would create significant added risks and costs including, for instance, procedures to avoid the so-called “contamination” problem (that is, inadvertent copying by users), the time it would take to understand the code, and timing and identification of continuing code changes. Microsoft has today made no move to modify the license terms and conditions, which are entirely unworkable. Moreover, source code disclosure, without open source compatible license terms, does not solve the concerns of the open source community, which Microsoft specifically excludes.
ECIS will analyse today’s announcement to determine whether or not we believe this is a step in making available essential information on licensing terms and conditions acceptable to major industry players. Further details are needed before the industry can assess whether this announcement will have any meaningful impact.
ECIS has noted the settlement between RealNetworks and Microsoft. This settlement must not result in the closure of the EU case. The Commission must, and we expect it will, proceed vigorously with its case against MSFT.
Precedent-setting cases such as the EU investigation take time. Since 1999 the market has moved on, and Microsoft has been able to continue its tying for more than a year after the 2004 Decision. It is therefore understandable that RealNetworks might have decided to settle and use the opportunity to invest in its subscriber and games business.
The role of the antitrust authorities in the EU, US, Korea, and elsewhere, on the other hand, is to protect the structure of competition in the interest of consumers.
Microsoft has not given up its exclusionary policies. If the rumour is correct, it shows the importance of ensuring that effective remedies are implemented on an expedited basis, to ensure that customers continue to benefit from effective competition. Indeed any settlement in fact validates the Commission’s case.
Since the Commission is not bound by any private settlement, ECIS therefore urges the Commission to vigorously defend its 2004 Decision. Confirmation of the precedent will allow it and the courts, as the issue will arise again, to take a decision in time to protect effective competition when it is threatened by Microsoft’s continuing unlawful bundling strategies.
This is yet another example of MSFT paying substantial sums to firms to settle specific lawsuits while the courts are still reviewing the matter without fundamentally changing its market behaviour which has been deemed to be anti-competitive by competition authorities in numerous jurisdictions. Pursuing the EU and Korean case is therefore more important than ever.
Thomas Vinje
Partner, Clifford Chance
Legal Counsel to ECIS
Interoperability is of crucial importance to preserve choice for European consumers between competing offerings, and to preserve the equality of opportunity that the European IT sector needs to flourish. CII patents are desirable to foster innovation in Europe, but if patents could be used to prevent software vendors from developing new programs that can communicate with other programs used by the customers, users may find themselves locked into buying programs from one vendor. To avoid stifling innovation and reducing user freedom of choice, the members of ECIS believe that an interoperability exception is needed.
The European Parliament in first reading adopted an Article 6a which took this concern into account. However, some have considered the Parliament’s text to be overly broad, potentially effectively eviscerating the rights of the patent right holder.
ECIS’ compromise proposal for Article 6a addresses the interoperability concern by providing a narrow exception permitting the use of patented technology to the extent indispensable for the development and sale of products that interoperate with the product protected by the patented technology or with other products. It is a limited, well-defined and clear exception to the exclusive rights of patent owners, striking a proper balance between the legitimate interests of patent rights owners and third parties, including both third-party software developers and end-users. ECIS is presenting its proposal to the European institutions for considerations.
The European Commission has released a working document which reviews existing EU copyright legislation and in which the Commission makes suggestion for amendments to the existing rules. As regards the 1991 Software Directive’s provisions on decompilation, the Commission suggests that these do not require amendment:
“(2.2.1.3. Decompilation) The objective of Article 6 on decompilation is to ensure the ability of two or more computer hardware devices or software components to connect, exchange information and work together, including those of different manufacturers. This is of key importance for competition, innovation and market entry in the software market. The implementation and effects of this provision were reviewed by the Commission in its above-mentioned Report on the implementation of the Software Directive. The Report concludes that “the Directive and in particular the decompilation provisions were the result of intensive debate among all interested circles and the balance found then appears to be still valid today”.
However, more recently it has been argued that the scope for decompilation is in practice too limited and does not sufficiently meet the objectives of the provision and, in particular, the current market demands. On the other hand, as yet there is no jurisprudence to support these claims; nor is there any other evidence to suggest that there would be a need for revision.”
The European Commission has issued a Decision finding that Microsoft Corporation infringed European Union competition law by leveraging its near monopoly in the market for PC operating systems (OS) onto the markets for work group server operating systems by refusing to make available interface information and on the market for media players by tying Windows Media Player with the Windows PC OS. ECIS welcomes the Commission’s Decision, which restores competition on the merits and furthers true consumer choice.