EU Upholds Microsoft Anti-trust Ruling

Microsoft yesterday failed to suspend anti-trust sanctions ordered by the European commission and must now disclose secret protocols of its Windows software to rivals and market a version of Windows without its Media Player.

The EU's second highest court dismissed Microsoft's application - part of a six-year battle between the software group and the European authorities - in its entirety.

Bo Vesterdorf, president of the court of first instance, said the group - founded by Bill Gates - had failed to prove it would suffer "serious and irreparable damage" if the sanctions or "remedies" were implemented at once.

His decision means PC manufacturers will be offered stripped-down or "degraded" versions of Windows without the Media Player music and video software next month and these should be available in European shops from February, according to Horacio Gutierrez, a senior Microsoft lawyer.

Mr Gutierrez said the technical protocols - not the secret source codes - required by rival operators wanting to provide work group servers that are interoperable with Windows would be posted on a special company website for licences immediately.

The commission found Microsoft guilty of abusing its dominant position on March 24, imposing a record fine of €497m (£347.3m) - or 1% of the group's cashpile - which was paid on June 29.

Four days previously, the software company had appealed to the court to suspend the EU's remedies pending the outcome of the full case, which could take place in 2006 or later.

Senior commission officials, industry groups supporting rival operators and lawyers acting for Microsoft's competitors hailed yesterday's decision as a stunning victory for consumers and for innovation.

Thomas Vinje, a partner at Clifford Chance - which advised the Computer and Communications Industry Association - said Mr Vesterdorf had "sent a clear signal that Microsoft is not above the law and cannot continue abusing its monopoly power to the detriment of consumers and competitors".

Dave Stewart, deputy general counsel of RealNetworks, Microsoft's last substantial legal opponent following a spate of settlements, said: "Anything that helps create a level playing field is good for us."

But others favourable to the Microsoft case, such as the Association for Competitive Technology, argued that the court ruling would have "dangerous repercussions" for small software developers, consumers and innovators.

It represents a substantial success for the commission, which suffered three stinging defeats at the hands of the Luxembourg-based court in 2002 and 2003 when it reversed rulings by the then competition commissioner Mario Monti against agreed company mergers.

Michael Reynolds, a former legal adviser to Sun Microsystems, which settled with Microsoft, said the precedent would strengthen the commission's arm in acting against dominant companies and provide a fillip to Neelie Kroes, Mr Monti's controversial successor who has signalled a drive to stamp out cartels and block anti-competitive mergers.

Mr Gutierrez told the Guardian: "We will not come out of today feeling that we won but we don't feel the commission, conversely, can come out claiming it won ... We are quite optimistic we might win the main case as the president has framed the substantive questions in exactly the way we would like."

Microsoft has two months to appeal.