Bo Vesterdorf, the president of the Court of First Instance in Luxembourg, this morning rejected Microsoft's request to stay the European Commission's March 2004 antitrust remedies requiring it to offer European OEMs a version of Windows XP without the Windows Media Player in it and to license certain protocols to its competitors that would let non-Microsoft workgroup servers interoperate with Windows PCs.
In his 91-page ruling, Vesterdorf rejected Microsoft's argument that it would suffer irreparable harm by complying with the EC's decision.
Vesterdorf's ruling may foreshadow Microsoft's chances of getting the EC decision quashed on appeal, a process that is expected to take four or five years. Vesterdorf, who will also hear the appeal, found little or nothing of merit in the arguments Microsoft advanced on behalf of a stay and said it did not make a prima facie case.
Vesterdorf's decision also appears to shoot down any possibility of Microsoft settling with the EC without going through the appeals process, an ambition the company appeared to be harboring. The EC said this morning that there was no reason to renegotiate.
On a first conference call after Vesterdorf's ruling, Microsoft general counsel Brad Smith said the company would immediately start to comply with the order. He said it was too early to say whether Microsoft would appeal Vesterdorf's decision. "Compliance is our first order of business," he said.
Microsoft has two months to appeal today's decision to the president of the European Court of Justice.
Microsoft was careful to claim that Vesterdorf's decision on untying the Windows Media Player - the most crucial part of the case and a direct challenge to Microsoft's time-honored business model - did not in itself create a precedent that will affect future versions of Windows or existing features in Windows.
"The reality is that we won't know and no one will know what precedent is set by the court until the courts make the determination on the merits of the case," Smith told reporters.
Microsoft said it will make the stripped-out version of Windows available to European OEMs in January and put it through the channel by February.
The company said it would also set up a web site by this afternoon to provide its competitors with information on getting access to the communications protocols. Microsoft's protocols fall in two categories - those in the Windows client and those in Windows servers.
Under its agreement with the US Justice Department, Microsoft is already licensing some of its client protocols to 20 companies so far.
Under the EC decision, Microsoft will also have to license the server protocols.
Jeremy Allison, the head of the Samba team who testified before Vesterdorf, said the new batch of protocols will have little impact on the market if Microsoft is allowed to charge a per-copy royalty for them as it does with the protocols covered by the American antitrust settlement.
Allison is under the impression the terms under which competitors can license the new set of protocols will be a matter of future negotiation between Microsoft and the EC.
Allison of course is hoping that Microsoft will open the protocols up, but he is not totally averse to having to pay a one-time licensing fee for them. Samba, the open source implementation of the CIFS file-sharing protocol that allows a Unix server to act as a file server to Windows clients, is distributed by companies with deep pockets like IBM, HP and Novell who can afford the fee, he said.
In a second conference call at noon New York time today, Smith declined to talk about the cost of the licenses and indicated that "process" had already been worked out with the EC that the EC would "continue to want to review." He called it a "very matter-of-fact process" that applies "the best practices from the US program."
Not to prick Allison's balloon or anything but the EC is allowing Microsoft to charge both a royalty and a licensing fee. Microsoft cooperated with Samba 10 years ago so maybe a friendly new arrangement can be negotiated.
In the multifaceted case it made to Vesterdorf, Microsoft maintained that it was being forced to provide a "degraded version" of Windows that would shortchange consumers and ISVs. "It'll work less well than the version of Windows that they receive from Microsoft and computer manufacturers today," Smith said.
Among other things, it is not clear what will happen to the many software applications that rely on the code that Microsoft is taking out from Windows.
In reacting to the ruling, the EC claimed that "Implementation of the Commission's March decision will not only benefit consumers of computer products in terms of choice of media players on computers and choice of work group servers, but also stimulate innovation."
The commission believes that by unbundling the Media Player competing player vendors like RealNetworks will have a better chance of persuading PC OEMs to install their widgetry in place of Microsoft's. "As a result Windows Media Player will no longer be guaranteed ubiquity - unless it succeeds on the merits," the EC said.
Microsoft, which claims there will be little demand for the unbundled XP, said the cost of the stripped-down Windows would be the same as the version with the player. The stripped-out version will not be offered outside of Europe, Microsoft said.
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