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Excerpts from Microsoft Opening Statement on Interoperability
As presented by counsel for Microsoft before the European Court of First Instance.

LUXEMBOURG, April 26, 2006 — The following excerpts are from the opening statement to the Court of First Instance by Ian Forrester, counsel for Microsoft, during the company’s appeal of the European Commission’s 2004 decision pertaining to interoperability in the market for work group server operating systems:

“Article 82 exists to sanction abuses and thereby enhance the process of competition, not to pursue a regulatory policy favoring one business model rather than another. This neutrality as to the outcome of the competitive process is all the more necessary in a fast moving high technology field.”

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“The principles applied to one dominant player in one case have got to be capable of application by other authorities and by other courts. If there are no limiting principles, enforcement becomes arbitrary and prone to abuse. Conduct should not suddenly become so illegal that it gets the heaviest fine in history.”

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“[The decision] condemns a company for not saying yes to a competitor who requests a huge amount of valuable, secret future technology. And the remedy is to help anyone with an interest build a replica, a functional equivalent.”

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“There has been a remarkable absence of consumer harm. Instead, the Commission’s case has largely been made by big competitors of Microsoft who seek a better outcome in Brussels than they obtained in their domestic courts. That is their right and they are free to try. But we submit that competition law should honor technical creativity and persistence no less than legal creativity and persistence.”

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“It is easy to say competition law should benefit competition rather than competitors. Applying that worthy principle may not be easy. Where there are vociferous complainants, it is wise to act on the basis of reality, not speculation. Yet the decision speaks of risks to competition which could happen imminently. But they haven’t happened. The commercial problems it envisages are based on competitors’ complaints and surveys of opinion, flawed surveys. Yet the ample contrary evidence of the real world is discarded.”

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“As to this half of the case, the goal of the Commission’s remedy has become clearer: it has nothing to do with interoperability as the computer world understands it. Interoperability already exists as customers and as computer scientists understands it. The word interoperability is being used as an attractive slogan, a motto with which no person of goodwill can disagree.”

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“Without very clear standards, no compulsory license can possibly be lawful. In this case, in light of the material at stake and the legal rights attached to that material, the criteria used were plainly lower than required by the jurisprudence of the European courts.”

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“In actual practice, [Microsoft’s] technology is not indispensable for competitors to enter the server market or to remain there. Indeed, the decision tries to downplay indispensability, yet every single compulsory dealing case has used that criterion.”

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“How many customers said to the Commission ‘I am being forced to buy Microsoft because of interoperability problems?’ Despite five years of enquiries, three-and-a-half Statements of Objections, and a variety of different theories, not one single customer.”

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“Other companies may disagree over whether Active Directory is superior. But we can agree on one thing: it used to be Microsoft’s. If this decision is upheld, it will be shared with the world. By receiving a license from Microsoft, they will be enabled to reduce the effort, the time, and the wrong turnings to make an engineering solution work.”

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“Companies have survived and grown in the servers business despite not having access to the secret details of communication protocols used by Windows servers; and have declined without asking for them. And Linux servers entered after the ‘abuse,’ survived and grew steadily in a short time.”

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“According to the Commission, if the technology is made available, this will change the process of innovation, so that some good things will flow. Of course, it will do that, but just in the same way opening the vaults of a bank will stimulate the prosperity of passersby and good things may flow from that.”

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“The Commission proposes a new test focusing on the quality of the competition. The shift of the test from ‘likely’ to eliminate competition to ‘risk’ is significant — risk and likelihood are not synonyms. If a say ‘there is a risk someone in this room will catch bird flu,’ it is not the same as saying ‘one of us is likely to catch bird flu.’ There is a risk of the occurrence of the hazard but it is not likely to occur. The defense uses the wrong standard, which is that risk equals possibility equals likelihood of elimination of competition. The do not have the very same meaning.”

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“Remember the old films where trackers put their ear to the ground and say that six men on horseback are approaching? According to the DG Competition trackers, a distant fear of a possible risk is the proper test. But isn’t the better test whether it was possible to enter the allegedly relevant market? That’s easy, and the answer is yes. Linux did it.”

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