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Oh, By All Means, Stick to US Courts Only, Microsoft

Tuesday, March 23 2004 @ 12:17 AM EST

The EU Commission decision is being leaked right and left. The word is that it's going to be a fine of approximately $610-614 million. Here is the story in Spanish. It points out that this is a record fine. But here's the real sting:

"As well as the fine, Microsoft is to be ordered to offer a version of its Windows operating system without Windows Media Player and to encourage computer makers to provide other audiovisual software.
"It must also license information to make the servers of rivals more compatible with Windows desktop machines."

This is historic. Unbundling. Microsoft told the Commission that they absolutely could not remove Media Player without breaking the operating system, and the Commission calmly said, in effect, "That's not true. Do it." (Real Networks' clever demo no doubt helped.) Naturally, Microsoft will appeal.

The Wall Street Journal [sub req'd] says Microsoft itself is leaking the news, along with their PR response:

"The commission decision, for example, would require Microsoft to make available to computer manufacturers a version of Windows without its Windows Media Player software. . . . The commission's jurisdiction for such an order is limited to Europe, Microsoft argues in the document being circulated to EU officials, while the company offered an alternative solution that would have applied world-wide. The document suggested Microsoft could ensure that three alternative media players could be preinstalled on some 300 million new PCs a year in Europe and 'in many other parts of the world,' thus 'ensuring that European and other consumers have ready access to a broad variety of media players without having to download them from the Internet.'"

Here is the statement from their associate general counsel for Europe Horacio Gutierrez:

"'We believe it's unprecedented and inappropriate for the Commission to impose a fine on a company's U.S. operations when those operations are already regulated by the U.S. government and the conduct at issue has been permitted by both the Department of Justice and the U.S. courts,' he said."

The Washington Post [reg. req'd] has Microsoft's reaction to the fine, which could have been much higher:

"Microsoft General Counsel Brad Smith told The Washington Post that, based on the company's understanding of how the representatives arrived at the fine amount, it is 'stunned by the manner in which it was calculated.' He said the representatives apparently determined the amount by taking into account Microsoft's sales and the length of the case, and then doubling the total because Microsoft operates worldwide.
"Smith said that such an approach is 'unprecedented,' given that some of the conduct ruled unlawful in Europe is allowed in the United States under the terms of a 2001 antitrust settlement with the Justice Department. Europe accounts for about 30 percent of the company's business."

Over the weekend, Microsoft was predicting there'd be no fine. Now they say it is too high.

Well, let's by all means go by US courts. I'm sure Lindows would love to do that. After Lindows prevailed against Microsoft here in the US in the early jockeying in the trademark court case ( the court denied Microsoft's request for a preliminary injunction in the case and ruled in Lindows' favor [pdf] on two key points, now being appealed by Microsoft), Microsoft in December began forum shopping in Europe, eventually finding a court, in the Netherlands, willing to give them what the US court would not. Lindows stopped selling in that country last week.

The US judge said this:

"'Although Lindows.com certainly made a conscious decision to play with fire by choosing a product and company name that differs by only one letter from the world's leading computer software program,' Coughenour wrote, 'one could just as easily conclude that in 1983 Microsoft made an equally risky decision to name its product after a term commonly used in the trade to indicate the windowing capability of a graphical user interface.'
"The judge also said Microsoft has not stopped literally hundreds of other trademarks and products from using all or a portion of 'windows' in their names."

But in the Netherlands, the judge granted a preliminary injunction:

"The court then specified that Lindows could not be sold; Lindows.com's resellers would have eight days to return Lindows software they had on hand to Lindows.com and to remove Lindows from any machines they might have installed on it. . . .
"In a separate, prepared statement, Robertson said, 'It's clear that Microsoft is using their army of hundreds of attorneys and billions of dollars as a battering ram to destroy any company that promotes desktop Linux. They were unsuccessful in the U.S. with this tactic, so now they're resorting to picking countries where they will find a sympathetic court.'"

Lindows, in turn, has appealed to the original US court, asking the court to stop Microsoft from country shopping to try to get rulings in its favor behind the back of the US judge who already told them they were not entitled to the relief they are getting from European courts. The parties are set to tell it to the judge on Wednesday at an expedited hearing, and Lindows will ask the judge to declare an Amsterdam judge's preliminary injunction against it as unenforceable and non-recognizable.:

"In its motion, Lindows claimed that 'U.S. courts have the power to enjoin persons subject to their jurisdiction from prosecuting a foreign lawsuit.' Lindows said that the U.S.court has jurisdiction over Microsoft and may stop the company from 'filing and maintaining parallel foreign lawsuits.'"

So Microsoft finds itself schizophrenically arguing against itself that the EU Commission should stay out of its affairs, because MS is already being regulated by courts in the good old U S of A, while at the same time having to explain to a US judge on Wednesday why it went to other countries for relief the US judge had told them they were not entitled to.

You can read the Lindows court documents on their website. I recommend particularly their Opposition to Microsoft's PI Motion, near the bottom of the page, under the heading of Pre-Trial Motions, because it's the one that made it clear to me why Lindows, at least in the US, has more than a fighting chance to prevail. If you wish to brush up on your understanding of US trademark law, Bitlaw has some material. You'll notice that they are basing their use of the name Lindows on their belief that the term windows was already in use to describe graphical interfaces before Microsoft began using the term. It could be that some of you out there will be able to recall more examples of such generic use. You never know what piece of evidence will turn out to be the one that tips the scales.

Why is this worth watching? Aside from the obvious, because this is essentially what I believe Microsoft will try with patents and what SCO's underlying calculation is, that if you can win anywhere, in any venue in the world, you can shut down or slow down a company that you'd rather not be in fair-and-square competition with. IP laws as the weapon of choice. Here's a story about SCO's next steps in Australia. What they forgot is, GNU/Linux is an international community, and the whole world is watching.

Harvard's Berkman Center's Case in Point is still the SCO case. They are now asking participants in countries outside the US to answer some questions about the laws in their countries. This from their newsletter:

CASE IN POINT
The Case in Point is Caldera (SCO) v. IBM, also called the case against open-source.
See Groklaw's collection of case materials at http://www.groklaw.net/
Lest you think this case has nothing to do with you, note that SCO has now begun suing Linux users directly. Last week, SCO announced that it had filed complaints against auto parts retailer AutoZone and automaker DaimlerChrysler. CEO McBride is mimicking the Recording Industry Association of America's lawsuits against music file swappers, claiming, "It wasn't until the RIAA launched a series of lawsuits against end-users that the end users became fully educated."
Shankland, CNet News, "SCO suits target two big Linux users" at http://news.com.com/2100-1014-5168921.html?tag=nl
This month's discussion question is pitched to our non-US readers. Does your country recognize any "fair use" rights of end-users to make copies of software for the purpose of running applications? Will Linux users in your jurisdiction be influenced by SCO's litigation strategy in other nations? How easy will it be for SCO to bring such an action in your country?
If you want to join in, and we hope that you will, please go to http://blogs.law.harvard.edu/suelinux/ where we are trying a new blog-style discussion application.
Case in Point is an ongoing series of discussions targeting particular legal issues raised as an actual case proceeds. For current summaries of the case and an archive of documents, see Groklaw, Legal Docs, SCO v. IBM, at http://www.groklaw.net/staticpages/index.php?page=legal-docs and TwikiWeThey, SCO v. IBM, at http://sco.iwethey.org/

I'm not necessarily suggesting participation in the Berkman Case in Point, as that is up to you, but I do see that it's a good idea for LUGs and other FOSS organizations to be alert and prepared and to have legal counsel look at the local laws with regards to the GPL, copyright law, and consumer protection statutes. Microsoft, according to Lindows, blindsided them in the Netherlands. SCO has told us that they intend to file in countries around the world. Spain in particular appears to be in their sights. Forewarned is forearmed. If anyone wishes to contribute legal information about their country after they collect it from local attorneys, we can keep the collection on Groklaw, for everyone to use as handy reference material. Translation is not required, but it would be useful.

Oh, By All Means, Stick to US Courts Only, Microsoft | 407 comments | Create New Account

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Corrections Here Please

Authored by: PJ on Tuesday, March 23 2004 @ 01:02 AM EST

Please record my mistakes for posterity here, so I can find them easily.
Thanks.