In its decision, published this morning, the CFI upheld the €497 million fine imposed on Microsoft by the Commission in 2004.
In a highly detailed, 1,373-paragraph, ruling, the CFI said the Commission had been justified in punishing Microsoft for abusing competition by refusing to provide “interoperability information” to competitors and by tying its Windows Media Player software to the purchase of Windows operating systems.
The 13-member Court also said that the record-breaking fine was not excessive.
It rejected Microsoft’s claim that the Commission’s penalty amounted to compulsory licensing of its IP rights (including patents, trade secrets and copyright) and would reduce the incentive to innovate.
In its only concession to Microsoft’s complaint, the Court said the appointment of a monitoring trustee, as proposed by the Commission, had no basis in Community law.
Microsoft will now almost certainly appeal the decision to the European Court of Justice within the next two months. That appeal, which has to be limited to points of law, is likely to take at least another two years.
The case arose after the Commission fined Microsoft €497,196,304 (which amounted to 1.62% of the company’s worldwide turnover in 2003) on March 24 2004, accusing it of abusing its dominant position in two respects.
First, said the Commission, Microsoft had refused to supply “interoperability information” and allow its use for developing and distributing work group server operating system products.
Second, it said Microsoft had made the availability of its Windows Client PC operating system conditional on customers acquiring Windows Media Player.
In its appeal, Microsoft claimed that it was not obliged to license its IP rights, and that the decision wrongly denied Microsoft the ability to rely on its IP rights as an objective justification for its alleged refusal to supply the technology.
It further claimed that the Commission did not take account of the EU’s commitment under the TRIPs Agreement, and finally argued that the fine was not warranted, and in any case excessive.
In its ruling, the CFI makes clear that refusal to license “cannot in itself constitute an abuse of a dominant position within the meaning of Article 82 EC”.
But it adds that it when the refusal to license is accompanied by “exceptional circumstances such as those hitherto envisaged in the case-law” then it can be characterized as abusive.
In these circumstances, it said: “It is permissible, in the public interest in maintaining effective competition on the market, to encroach upon the exclusive right of the holder of the intellectual property right by requiring him to grant licences to third parties seeking to enter or remain on that market.”
The CFI said three “exceptional circumstances” must be present for a refusal to license to infringe competition law: (1) the refusal must relate to a product or service which is indispensable to the exercise of a particular activity on a neighbouring market; (2) it must be of such a kind as to exclude any effective competition on that neighbouring market; and (3) it must prevent the appearance of a new product for which there is potential consumer demand.
The CFI found that such “exceptional circumstances” are present in the Microsoft case.
The Court added that Microsoft did not sufficiently establish before the Court that if it were required to disclose interoperability information that would have a “significant negative impact on its incentives to innovate”. The company had merely put forward “vague, general and theoretical arguments”.
The one ground on which Microsoft was successful was in its challenge to the appointment of a trustee to monitor its compliance with the Commission’s penalty. The CFI said this appointment “has no legal basis” and “exceeds the Commission’s powers of investigation and enforcement”.
In July 2006, Microsoft was fined €280.5 million by the European Commission for allegedly failing to comply with the 2004 decision. Microsoft claimed it had complied and also appealed that decision.
Microsoft was supported in the dispute by the Computing Technology Industry Association, DMDsecure.com, MPS Broadband, Pace Micro Technology, Quantel, Tandberg Television, the Association for Competitive Technology, TeamSystem, Mamut and Exor.
The Commission was supported by the Software & Information Industry Association, the Free Software Foundation, Audiobanner.com and the European Committee for Interoperable Systems.
Microsoft was represented at the Court by Jean-François Bellis, a partner of Van Bael & Bellis in Belgium and by Ian Forrester QC, a barrister with White & Case in Brussels.
Reaction to the decision will be available on www.managingip.com shortly.
Managing IP and the Stockholm Network are organizing a seminar entitled “The day after tomorrow: the legal, economic and technological implications of the ruling on Microsoft v the European Commission” on October 3 in Brussels. Speakers include Meir Perez Pugatch of the Stockholm Network, Aurélien Condomines of law firm Aramis, Federico Etro of the University of Milan and Martin Campbell-Kelly of Warwick University. The seminar is free and you can register here.
