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When Brad Smith took over as Microsoft’s second general counsel a little more than two years ago, he said he wanted to steer the legal department into a less confrontational era. By most measures he’s done that. He has resolved dozens of disputes including some, like the company’s long-standing feud with Sun Microsystems Inc., that appeared intractable. The company has settled 21 cases during the past year at a combined cost of about $7 billion, according to Corporate Counsel (a sister publication of the NLJ). Yet the most important case, which he very much wanted to settle, and tried very hard to — and thought he had — got away. And, irony upon irony, it was in his old backyard — in Europe, where he practiced early in his career and where he first worked for Microsoft Corp. Since March, when Microsoft was fined more than $600 million by the European Commission (EC) for improperly leveraging its Windows monopoly onto the markets for network server and media playback software, the commission has agreed not to enforce the conduct remedies while Microsoft seeks to suspend them pending its appeal on the merits. On Thursday, the president of the appeals court, the Court of First Instance in Luxembourg, will hear arguments. What makes the stay so important is that the case could be tied up for three years or longer, pending a decision by the court and an expected appeal to the Court of Justice. As a lawyer who represents a Microsoft adversary pointed out, three years in the world of computers can be a lifetime. If the remedies are suspended, they might be moot before the appeals are decided. ‘WORLD CUP OF ANTITRUST’ “This is the World Cup of antitrust for Europe,” said Spencer Waller, a professor at the Loyola University Chicago School of Law, speaking of the EC case. The fine, he said, is the largest ever levied in an antitrust action. For Microsoft, Waller said, its importance is second only to the U.S. Justice Department lawsuit that almost led to a split of the company. “It involved a governmental challenge by an equally sophisticated government enforcement agency,” he noted, “and the other serious challenge to the way the company does business.” For the EC, he said, “it’s the most important case involving the abuse of a dominant position that the commission has done in recent memory. It’s important because of the critical nature of the industry that’s involved and the nature of the relief that they ordered.” The remedies would force the company to disclose and license interface information that the commission said would allow competitors’ network servers to connect with Microsoft products. They would also require the software giant to offer to PC manufacturers a version of Windows without Windows Media Player. It would be the first time the company has been forced to remove completely a feature from Windows. The U.S. court case once threatened to require Microsoft to detach its Internet Explorer Web browser from the operating system, but this was not part of the settlement, which did require the firm to share some server interface information. Though the ruling applies only to Europe, Waller and others suggested that Microsoft might be pressed to offer the information and the unbundling option elsewhere, if consumers and competitors insist. John Frank, a Microsoft deputy general counsel, countered that the companies and trade groups that intervened in the EC case sought and failed to win similar remedies in U.S. courts. Statistics compiled by the Court of First Instance do not favor Microsoft’s application for suspension. In 2002, the most recent year available, a quarter of the applications were approved. Even that number may be high. The previous two years, it was about 10 percent. But Waller gives them a better chance than that. Given the case’s significance, he said, “Microsoft has a better chance than most.” “If interim measures are granted, we can expect the court to push this case through as quickly as possible,” said Maurits Dolmans, a lawyer in the Brussels office of New York’s Cleary, Gottlieb, Steen & Hamilton who represents RealNetworks Inc., an intervener that sells a media player competing with Microsoft’s. If the stay is not granted, however, Microsoft will not be able to speed the appeal, according to one of its lead lawyers in Europe, Jean-Fran�ois Bellis of Brussels’ Van Bael & Bellis. The fast-track option must be chosen immediately and Microsoft did not do so, he explained, so that it could submit two lengthy briefs rather than the one short one that the fast track allows. Still, given the importance, the court could seek to speed the case on its own, he said. But Bellis is far from conceding defeat. To win the stay, first his client must show it has an arguable case, he said. Then it must show that the immediate implementation of the decision will cause the company “irreparable harm.” And, conversely, delaying implementation will not inflict similar harm on other parties. Bellis thinks the judge may be influenced by arguments about the advantages of alignment between European and U.S. regulators, and by criticism of the EC decision by the Justice Department. Public statements “can have an impact on how the case is perceived,” he said. “Perceptions in a case like this one are very important.” He expects a decision a month after the hearing — two at most, he said. The stay will be decided on the facts and the law, but the appeal will be decided on the law, assuming that the EC ruling contains no gross factual errors, said Eleanor Fox, a professor at New York University School of Law. She predicts an uphill battle there, too: “The commission’s decision is consistent with the spirit of the EU law. I think it’s more likely than not that the court will find the legal principles correct than find them not correct. But some of them are close questions.” Waller sees hope: “The commission has not been that successful in having its appeals upheld in recent years. There is not as much case law in the abuse of dominant position as there is in cartel or merger law. It will be akin to the Standard Oil case in the United States in 1911.” Microsoft’s GC is focused on the long view. “The case is far from over,” Smith said. “The rejection of a settlement ultimately may emerge as only a temporary setback. And the day may come when we’ll have the opportunity to sit down at the negotiation table again.”

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