decoration decoration

When you want to know more...
For layout only
Site Map
About Groklaw
Legal Research
ApplevSamsung p.2
Cast: Lawyers
Comes v. MS
Gordon v MS
IV v. Google
Legal Docs
MS Litigations
News Picks
Novell v. MS
Novell-MS Deal
OOXML Appeals
Quote Database
Red Hat v SCO
Salus Book
SCEA v Hotz
SCO Appeals
SCO Bankruptcy
SCO Financials
SCO Overview
SCO v Novell
Sean Daly
Software Patents
Switch to Linux
Unix Books


Groklaw Gear

Click here to send an email to the editor of this weblog.

You won't find me on Facebook


Donate Paypal

No Legal Advice

The information on Groklaw is not intended to constitute legal advice. While Mark is a lawyer and he has asked other lawyers and law students to contribute articles, all of these articles are offered to help educate, not to provide specific legal advice. They are not your lawyers.

Here's Groklaw's comments policy.

What's New

No new stories

COMMENTS last 48 hrs
No new comments


hosted by ibiblio

On servers donated to ibiblio by AMD.

European Commission vs. Microsoft – The On-going Saga - Updated
Tuesday, May 31 2011 @ 08:30 AM EDT

Last week the Competition Directorate of the European Commission and Microsoft again did battle in the European courts. This time it was a hearing in the European Court of Justice to argue the propriety of the fine levied on Microsoft by the Commission stemming from the 2004 determination that Microsoft was violating EU competition laws. Microsoft was appealing the $1.3 billion fine on the grounds that it was excessive and had not been arrived at through proper due process.


In 1998 Sun Microsystems lodged a complaint with the European Commission asserting, among other things, that Microsoft was abusing its dominant position (what those of us from the U.S. would think of as using illegal means to maintain a monopoly) by refusing to disclose necessary interoperability information pertaining to Microsoft's desktop and related workgroup server technology. After extensive investigation, in 2004 the Commission issued a decision in the case and found Microsoft to have violated competition law. Among other remedies, Microsoft was ordered to make its workgroup server protocols available to competitors on a reasonable and non-discriminatory (RAND) basis and was fined approximately $800 million. Microsoft sought annulment of the Commission decision and fine, but the Commission was upheld by the Court of First Instance in 2007.

Almost immediately following the 2004 decision the Commission and Microsoft began arguing over what constituted adequate compliance with the protocol disclosure requirements of the decision, and in November 2005 the Commission levied a further periodic penalty of $2.5 million per day on Microsoft for its continued non-compliance. When the fine was first levied in July 2007 it totaled approximately $350 million. Much of the dispute had to do with the licensing practices Microsoft was employing with respect to the protocols under its Workgroup Server Protocol Program (WSPP). [If you would like to know more about the WSPP, here is an article on the history of the program and another on the WSPP agreement itself, both written by Andrew Tridgell of the Samba Project.] The parties continued to argue over compliance, and in February 2008 the Commission fixed the final amount of the penalty at $1.3 billion for continuing non-compliance. It is this fine that Microsoft appealed to the European Court of Justice and which was the basis of last week's hearing.

May 24, 2011 Hearing Before the European Court of Justice

The European Court of Justice met on Tuesday, May 24, 2011, to hear the arguments of Microsoft and the Commission over the propriety of the substantial fine levied against Microsoft. The President of the Chamber (Court) was the distinguished justice James Forwood of Britain. The other two members of the panel were Franklin Dehousse of Belgium and Juraj Schwarcz of Slovakia. Arguing the case on behalf of the Commission was Nicholas Kahn of the Legal Services Directorate. Jean Francois Bellis of the Brussels office of Van Bael & Bellis argued on behalf of Microsoft.

Providing key testimony on behalf of the Commission was Andrew Tridgell of the Samba project, represented by well-known FOSS attorney Carlo Piana. Mr. Piana also represented the Free Software Foundation Europe in the proceeding, and Karsten Gerloff, president of the FSFE was present. Groklaw caught up with Messrs. Tridgell, Piana and Gerloff, and interviewed them about the proceeding. Following is a summary of what I learned from them:

What were the critical arguments addressed in the hearing, and how did they come across?

There were two different arguments addressed in the oral arguments. The first was that the Commission did not apply due process in imposing the fine. Microsoft argued that it was never clear exactly what the Commission wanted, that Microsoft was trying to hit a moving target and the Commission did not provide enough cooperation. Further, from Microsoft's perspective the Commission sat on its hands without responding promptly to proposals from Microsoft. In the end Microsoft espoused that the Commission had effectively tried to extort unjustifiably low royalty rates for the protocol licenses. The sense of our observers was that the Commission response to this argument was very effective.

The second argument addressed was that Microsoft, in good faith, should have known that information for which they were seeking royalties was not innovative, at least under patent law. Microsoft asserted certain patents would be necessarily infringed by implementation of the protocols, and the Commission did not challenge the right of Microsoft to charge royalties for licensing the patents. But a significant portion of the protocols were not covered by patents, and a number of the protocols contained nothing innovative that could even be protected by trade secret. Microsoft's initial licensing approach was all or nothing. In other words, you had to license all of the protocols, both those covered by patents and those not covered by patents, under a single license and royalty rate.

The Commission insisted that Microsoft unbundle the protocols into those covered by patents and those not, permitting a licensee to avoid the patents altogether if they should so choose. Microsoft argued that some of the patents could not be avoided. When Microsoft finally unbundled, they still required a patent license as a prerequisite to obtaining licenses for those protocols not covered by patents. These repeated instances of incremental concessions by Microsoft caused the whole process to be prolonged (recall that this all stemmed from a 2004 decision). Eventually, Microsoft was forced to offer a trade secret-only license for those protocols not covered by patents, but this did not happen until 2007. Even then it was not clear that a license to any patents was necessary to make an implementation that would comply with the protocols allegedly covered by patents because most of the Microsoft patents only pertained to their implementation, not to the standard (the architecture) itself.

One of the Commission’s strongest arguments was that Microsoft could not extract value (charge a royalty) for strategic value, only for innovative value. In other words, to the extent Microsoft designed or controlled protocols to achieve some strategic goal, they could not charge for those protocols unless they actually embodied some degree of innovation even if this innovation was only a trade secret. Further, if the protocol contained no trade secret and did not infringe any Microsoft patent, Microsoft could not charge for the protocol at all.

Ultimately, the definition of innovation is central to this case. Whether Microsoft is to be permitted to charge running royalties depends a great deal on whether the information in the protocol documentation is innovative. The key to the definition is to ask "innovative for whom and when?" Microsoft asked the court to take the view that what matters is whether the information would have been innovative in 1998. However, when you are assessing the value for potential licensees in 2007 under the Microsoft Workgroup Server Protocol Program (WSPP), the key is whether it is innovative for the recipients of the licensing information at that time in late 2007, when the license was offered. By 2007 any pieces of Active Directory which could have been seen as novel had been published (by Microsoft and others) a long time ago. The only information that wasn't yet public was the low level encoding information of how the messages were formatted on the wire. The comments from Judge Forwood showed that the court understood the significance of this.

Another key point in the hearing had to do with comparable licensing arrangements. Microsoft argued that no one releases the sort of protocol information they were being asked to release at such a low cost. As an example they pointed to ISO and IEEE RAND licenses. FSFE/Samba refuted this, arguing that releasing interoperability information at low or no cost is, in fact, the norm, not the exception.

Also on the topic of licenses is the interpretation of what the term “reasonable and non-discriminatory” means. Often RAND is seen by the free and open source community as being something that is bad, as RAND is usually interpreted as meaning that per-copy royalties will be charged. One of the most significant outcomes of this hearing is that the Commission and the court took the 'non-discriminatory' part of RAND as meaning that it must allow for use by FOSS projects released under the GNU GPL. This result came about because Samba based solutions are really the only significant remaining competitor for Microsoft in the work group server market. So it would have been fairly meaningless for 'non-discriminatory' to mean a license that excluded Samba.

Interestingly, in its closing remarks Microsoft never mentioned the value of its technology.

The sole intervenor for Microsoft was ACT, and their testimony went to the issue of comparables. But as was pointed out in rebuttal, all of the instances ACT cited were tied to patents which was not true in the instant case. The final remarks for the intervenors supporting the Commission were delivered by ECIS's Lawyer, Thomas Vinje, and he pointed out that all the comparables cited by ACT also only charge a nominal royalty.

What was the proceeding itself like?

Formal. Chamber President (Judge) Forwood (Britain) ran the session and did almost all of the speaking from the bench. He is a very experienced presiding judge and was well read into the case. Forwood is to be complimented for his understanding of both the technical issues and the due process issues of this case. The other two judges were Dehousse (Belgium) and Schwarcz (Slovakia). Forwood's term ends this year, and some have speculated that he wanted to wrap up this case while he was still sitting.

It was the sense of our contributors that Microsoft had more trouble responding to the judge's questions in this proceeding than in past proceedings. Also, they observed that most of the decision had likely already been reached by the panel of judges before the hearing. The primary purpose of the hearing was to test the strength of arguments that had already been presented. Given that so much of the process occurs before the oral argument, it is impressive that the Commission lawyers have taught themselves so much about the technical side of this case, which gets pretty complex at times.

What is the secret to Tridge's effectiveness in the courtroom? [Asked of Carlo and Karsten]

It's a gift. First, he has a deep understanding of the technology. More importantly, he has the ability to explain it in simple terms. This likely doesn't happen by chance but from preparation, preparation, preparation. And it is not just Tridge preparing. Carlo, Jeremy Allison and Volker Lendecke all made significant contributions to drafting the testimony that Tridge provided. When presenting, Tridge does so with confidence, but also with a sense of humor. This time, compared to previous testimony before the Court of First Instance and/or the European Commission, Tridge's testimony was much lower key.

What now?

The decision in this hearing, no matter what it is, does not relieve Microsoft of its obligations under the 2004 decision. That decision will remain in effect until the Commission decides that competition has been fully restored.

It is worth noting that competition suits such as this are a powerful tool in changing behavior, but they grind incredibly slowly.

Additional Information

Here are some links to the FSFE website where they provide additional information about the hearing:


European Commission vs. Microsoft – The On-going Saga - Updated | 124 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections here
Authored by: The Cornishman on Tuesday, May 31 2011 @ 08:36 AM EDT
Please put The_error -> The_correction in the title.


(c) assigned to PJ

[ Reply to This | # ]

Off-topic topics here
Authored by: The Cornishman on Tuesday, May 31 2011 @ 08:39 AM EDT
Please stay off-topic, or you'll be required to search for Mr Ballmer's next
employment gig.

(c) assigned to PJ

[ Reply to This | # ]

COMES goeth here
Authored by: The Cornishman on Tuesday, May 31 2011 @ 08:41 AM EDT
Please put transcriptions of COMES documents here. Markup in HTML but posted in
plain text is preferred, please.

(c) assigned to PJ

[ Reply to This | # ]

Authored by: The Cornishman on Tuesday, May 31 2011 @ 08:43 AM EDT
Comments on newspicks go here; please put a link to the newspick in your post,
as they scroll off the bottom all too soon.

(c) assigned to PJ

[ Reply to This | # ]

Hon. Nicholas James Forwood
Authored by: The Cornishman on Tuesday, May 31 2011 @ 08:56 AM EDT

Nicholas James Forwood
Born 1948; Cambridge University BA 1969, MA 1973 Mechanical Sciences and Law); called to the English Bar in 1970, thereafter practising in London (1971-99)and also in Brussels (1979-99); called to the Irish Bar in 1981; appointed Queen's Counsel 1987; Bencher of the Middle Temple 1998; representative of the Bar of England and Wales at the Council of the Bars and Law Societies of the EU (CCBE) and Chairman of the CCBE's Permanent Delegation to the European Court of Justice (1995-99); Governing Board member of the World Trade Law Association and European Maritime Law Organisation (1993-2002); Judge at the General Court of the European Union (formerly Court of First Instance) since 15 December 1999. Vice President UKAEL 2007.

Source: http://fordhamipconference.c om/speaker-bios/

(c) assigned to PJ

[ Reply to This | # ]

Justice delayed is justice denied
Authored by: Superbowl H5N1 on Tuesday, May 31 2011 @ 09:40 AM EDT

These remedies have been allowed to drag on since 2004, which is now approaching 7 years ago. Clearly the court has not come up with something that will effect a change in the illegal behavior, the abuse of a monopoly. The behavior has not changed, so it remains that remedies that reduce or eliminate the monopoly itself be tried. It is time to call for a blanket ban on Microsoft products across the entire EU public sector while this case is played out.

Justice delayed is justice denied.

Here's where you can get the computer RMS uses:

[ Reply to This | # ]

Association for Competitive Technology (ACT)
Authored by: Anonymous on Tuesday, May 31 2011 @ 10:36 AM EDT
"The sole intervenor for Microsoft was ACT, and their testimony went to the issue of comparables

The Latest Attacks on GPLv3

'After hiring DCI in the late 1990s, Mic rosoft created two new trade groups, the Association for Competitive Technology (ACT), and the Americans for Technology Leadership (ALT)'

"Thanks to the indispensable Wikileaks, we have the opportunity to see how an organization close to Microsoft is attempting to re-write — and hijack — an important European Union open source strategy paper, currently being drawn up. Analyzing before and after versions visible in the document demonstrates how the Associatio for Competitive Technology, a lobbying group partially funded by Microsoft, is trying to widen the scope of open source to include 'mixed solutions blending open and proprietary code.'"

[ Reply to This | # ]

Pre-loading of Windows is a MUCH bigger issue
Authored by: TiddlyPom on Tuesday, May 31 2011 @ 10:57 AM EDT
I have just sent a letter to my MP and associated MEPs over two issues:
  • (Just to MP) Microsoft donating $20 million to the BBC (which is supposed to be publicly funded so that it is impartial)
  • (To both) that pre-loading of personal computers with Microsoft Windows is a grossly anti-competitive which forces consumers to purchase copies of Microsoft operating systems/software even if they do not want to. This is aggravated by strongly discouraging 'bare bones' PCs from being sold on the grounds that it encourages piracy of Microsoft intellectual properly. Together - these practices effectively prevent any Microsoft competitors from gaining any foothold as alternatives to Microsoft software. (Apple is no better as they will not sell their hardware without their own operating system being pre-loaded)
In summary - I cannot go into a high street seller of PCs (in the UK) and purchase a personal computer without purchasing a copy of Windows (unless it is an Apple Mac - in which case I have to purchase a copy of OS/X).

In my opinion - pre-loading is just as important (if not MORE important) than Microsoft's non-disclosure of their own networking protocols. It gives Windows a vastly unfair advantage over other competing systems and removes any choice that a consumer might have of choosing something other than Windows.

Microsoft Software is expensive, bloated, bug-ridden and unnecessary.
Use Open Source Software instead.

[ Reply to This | # ]

strategic v. innovative value
Authored by: Ian Al on Tuesday, May 31 2011 @ 12:12 PM EDT
One of the Commission’s strongest arguments was that Microsoft could not extract value (charge a royalty) for strategic value, only for innovative value.
My take on this is slightly different to that in the article. The article noted that most of the protocols were not covered by valuable invention patents. Many of the trade secrets that may have been in the protocols in 1998 have been revealed by Microsoft by the 2007 date.
Microsoft asked the court to take the view that what matters is whether the information would have been innovative in 1998. However, when you are assessing the value for potential licensees in 2007 under the Microsoft Workgroup Server Protocol Program (WSPP), the key is whether it is innovative for the recipients of the licensing information at that time in late 2007, when the license was offered. By 2007 any pieces of Active Directory which could have been seen as novel had been published (by Microsoft and others) a long time ago. The only information that wasn't yet public was the low level encoding information of how the messages were formatted on the wire. The comments from Judge Forwood showed that the court understood the significance of this.
So the Commission is saying that Microsoft should only be rewarded for the value of the invention and not for the strategic financial value to Microsoft in not publishing the details in 1998. The low level protocols don't actually incorporate valuable innovation in themselves and their financial value is mainly strategic.

This seems to me to be related to the comments I have been making recently that damages in patent cases should be based on the actual value of the patented invention to the patentee and not on the strategic value to the mark.

Ian Al
OK, Just one more article and then I'll seek help.

[ Reply to This | # ]

A formating request:
Authored by: Just_Bri_Thanks on Tuesday, May 31 2011 @ 02:50 PM EDT
If an article is updated, can you please show where the update is in the manner
that PJ did? I read it, but I don't want to read the whole thing again and
guess what the change was.

Thanks for your understanding.

If the update is anotated and I am simply as blind as my glasses indicate,
please disregard.

Unrelated note, I wish I could use a browser in this location that checked
spelling automatically.

Bri. Just Bri. Thank you.
(With a long i sound.)
Without qualification, certification,
exception, or (hopefully) bias.

[ Reply to This | # ]

protocols: the deadly embrace
Authored by: rlhamil on Thursday, June 02 2011 @ 08:13 PM EDT
Don't know if the EU has even touched this (since it relates to Vista and
later), but I can think of a situation where Microsoft is effectively requiring

additional purchases of their products to take advantage of a protocol that
isn't even theirs!

At least Windows XP and later have supported SFU (Services For Unix), later
called SUA (Subsystem for Unix Applications), which includes NFS (Network
File System, widely used by Unix systems and others for file sharing) client
(and server, but that's not my issue) functionality. However, depending on
the authentication model in use, NFS uses Unix style numerical IDs, unique
only to a given set of interoperating sites, as user or group identifiers;
while Windows uses globally unique SIDs. To convert, SFU for XP also
included an identity mapping facility.

Problem is, although SUA for Vista and Windows 7 is free, the identity
mapping facility, without which the NFS client functionality may be nearly
useless, is no longer included; it only comes with Windows Server 2008,
etc (although one might be able to point clients to an old XP system?).

So, not being bad enough that Microsoft tries to lock you into their
products for server support of their protocols, they're now trying to do it
to force you to use their server OS to fully implement client-side use of
NFS, as well!

This isn't just embrace and extend, it's subvert and subjugate.

[ Reply to This | # ]

Groklaw © Copyright 2003-2013 Pamela Jones.
All trademarks and copyrights on this page are owned by their respective owners.
Comments are owned by the individual posters.

PJ's articles are licensed under a Creative Commons License. ( Details )