What more is there to say about the Court of First Instance’s landmark, historic, unprecedented etc etc ruling in the Microsoft case? Quite a lot, I fear. But given the avalanche of commentary and analysis that Monday’s judgement has already attracted, I will restrict myself to just one issue.

How will - or how should - Microsoft react to its thumping defeat at the hands of the EU’s second-highest court?

The group itself will certainly take some days or weeks to study the ruling before drawing any firm conclusions, but I would not be surprised if Microsoft comes up with a rather more radical response than we are used from the slow-moving software behemoth. After Monday’s devastating defeat, "business as usual" is simply not an option.

For a start, Microsoft is staring at a truly eye-popping fine for non-compliance that could very well end up somewhere north of €1bn. That would take the cost of the group’s legal battle with the Commission to almost €2bn just in terms of antitrust fines, not to mention lawyers’ bills and the billions Microsoft has dished out to rivals in private antitrust settlements. I know money is never a problem for the group, but surely at some point Microsoft shareholder will ask whether the group has no better use for its vast profits than to ease the plight of European taxpayers.

Then there is the reputational damage to take into consideration. Microsoft will not escape its image as the corporate world’s evil empire if it continues to be branded as an abusive monopolist which, even more damaging, feels free to ignore the orders of a government agency for more than three years. The disastrous news bulletins and front page stories over the past few days is likely to weigh more heavily on consumers’ minds than all the advertising and sponsorship of recent years put together. We should also not forget that the group does an awful lot of business with governments themselves - who may in future want to take a closer look at just how good a corporate citizen Microsoft really is.

In my humble opinion, this means the group should abandon its traditional response to the actions of the EU regulator. That consisted of moving a little bit into the right direction every other month, complaining loudly about infringements of intellectual property rights and otherwise making full use of its legal powers to fight back against Brussels.

For a start, there seems little upside in appealing Monday’s decision. The chances of success are slight anyway, and launching a further legal challenge would just reinforce the impression that Microsoft will not meet the regulator’s demands until it is too late. I know the group has every right in the world to appeal - but a more pragmatic response would be to desist.

Secondly, the group may want to consider a big announcement declaring that it will license its server protocols for free. If you look at the Commission’s statement of objections from earlier this year, it is clear that this is what Brussels wants anyway. Moreover, according to the independent monitoring trustee the Commission is right to take that stance, since there is next-to-no innovative value in the protocols. Why wait for the inevitable to be imposed when you can get some mileage out of doing it yourself?

Finally, Microsoft should start now drawing up clear, complete and accurate interoperability information about its Office suite. This is very likely to be the next battleground with the Commission - and with Brussels now firmly on the offensive (and help from the court nowhere in sight) the group would be well advised to take preventive action.

Vista is probably less of an issue for the immediate future - but here too Microsoft should listen very carefully indeed to what its rivals are saying. Unfortunately for the group, Monday’s judgement may mean that its competitors’ demands will keep on getting loader and broader.

What I am talking about, in one word, is of course: capitulation. Is that what Microsoft is obliged to do under European law? Almost certainly not. Is it fair? I don’t know. Is it the group’s best chance of bringing its nine-year antitrust nightmare to an end? Yes.

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September 18, 2007 6:54pm in EU | Comment