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The landmark antitrust ruling against Microsoft Corp. by Europe’s second-highest court opens a real gulf between U.S. and European approaches to regulating monopolies and will likely lead to forum shopping by firms seeking redress against competitors, according to legal observers. Many observers predict more antitrust complainants going to Europe for enforcement help, while dominant firms may turn to U.S. patent and trademark law to fend off European decisions that require revealing corporate secrets. “This certainly widens the gap in law between the European Union and the U.S.,” said David Hull, antitrust attorney with Covington & Burling in Brussels who advises Microsoft on a separate, pending competition issue. But turning to U.S. patent or intellectual property law for protection may backfire on American competition, warned Herbert Hovenkamp, law professor at the University of Iowa College of Law. “One outcome is the strong copyright and patent law here suppress competitors. But competition in other places may leap ahead,” he said. “The legacy of this decision will be a lot more litigation in other countries asserting access claims,” said Hovenkamp, coauthor of an authoritative treatise, Antitrust Law. A warning shot The Court of First Instance, based in Luxembourg, endorsed the enforcement work of the European Commission on two significant antitrust issues against Microsoft. The ruling upholds the 2004 finding that Microsoft abused its dominant market position by improperly bundling its digital media player to Windows, and by withholding proprietary information that would allow competitors to make computer servers operate easily with Microsoft products. As a remedy, the company must pay a $689 million fine and share its confidential computer code for server interoperability with competitors. It also serves as a warning for companies such as Apple Corp., Intel Inc., Google Inc., and Rambus that dominate the markets in mobile phones, music downloads and other areas currently under scrutiny by the European Commission. “If you have conflicting remedies across major jurisdictions it leads to greater business uncertainty because of the differing analytical approaches and remedies,” said Daniel Sokol, antitrust law professor at the University of Missouri — Columbia School of Law. “This has the potential of different outcomes when counseling of business clients,” he said. “The decision is very concerning for those who rely heavily on intellectual property rights,” Hull said. Granting a patent is a reward for innovation, but the ruling undermines the very incentive for granting those rights, he said. Hovenkamp said that “It may be impossible to put the genie back in the bottle.” He warned that it might be impossible to limit use of proprietary information to European products. “If Sun [Microsystems] gets it they will use it everywhere,” he said. The Microsoft ruling “is the kind of [court] decree that purports to apply to Europe will apply everywhere,” he said. Not an assault Tom McQuail, London-based antitrust attorney with Howrey, said that opening up access to the operating system will be critical to developing new products, and the confidentiality concerns can be dealt with through licensing rights and confidentiality agreements. Although EU rules are somewhat tougher, he predicted that both the commission and U.S. antitrust enforcers would want to stress the areas of international cooperation. The commission will not want this viewed as an assault on a U.S. company, but as applying EU rules to a company doing business in Europe, McQuail said. The court’s affirmation of the commission’s approach will be a significant boost for the commission’s approach in pending cases and for investigations going forward, he indicated. The U.S. Department of Justice has issued its own warning of the dangers of the EU court ruling. The Justice Department’s antitrust division expressed concern that the decision, “rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition,” said Thomas O. Barnett, assistant attorney general for antitrust. The antitrust division brought a complaint against Microsoft in 1998 alleging restraint on competition that threatened Netscape Navigator Internet browser and Sun Microsystem’s Java platform. The government won at trial, but ultimately settled the case after a mixed court of appeal decision.

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