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EU Judges Asked to Toss Out Microsoft Fine

Microsoft lawyers contend that EU fines don't fit the infraction; seek reduction or outright end to EU suit.

(Luxembourg) -- The record antitrust fine levied against Microsoft Corp. by the European Commission should be tossed out, or at least greatly reduced, because the punishment outweighed the infraction, company lawyers said Friday.

Commission lawyers said that to throw out the fine, or even reduce it, would impede regulators' ability to keep a level playing field in the world of business.

"What is left to provide deterrents?" commission lawyer Fernando Castillo de la Torre said, adding the amount of the fine was "proportionate to the gravity of the infringement."

In 2004, the commission ruled that Microsoft had to pay a 497 million euro ($613 million) fine, share information with rivals and produce a version of its Windows operating system without Media Player software.

Speaking before the 13-judge panel of the Court of First Instance on Friday, Microsoft lawyer Ian Forrester said the amount was far too much because the company did not knowingly take advantage of its dominance.

"No fine should have been imposed because Microsoft committed no wrong," he told the judges in what was likely the last day of a five-day hearing about the ruling that the company had abused its position in the operating systems market.

Instead, he said the commission decided to levy the fine to draw media interest.

"The largest fine in history would make for large headlines," he said, adding that the court should annul it completely or, at the very least, "significantly reduce it."

While a court decision is not due for months, a ruling backing the commission could force Microsoft to change the way it does business in the future and endorse the EU's ability to hold back aggressive corporate behavior.

Earlier in the hearing, Forrester told the judges that the 2004 ruling effectively meant that the company was "being told to give a worldwide license in perpetuity" to its rivals that included its trade secrets and copyrights.

Doing that, he added in his summation Friday, would let the company's rivals create a similar product and take away from its competitiveness.

But Anthony Whelan, a lawyer for the commission, said the case was about enabling companies to compete in a fluctuating market where innovation drives changes.

"It is not an ordinary case. It is exceptional in many ways," he said, adding that Microsoft entered the server market later than its rivals, such as Novell Inc. and Sun Microsystems Inc., and became dominant by denying "repeated requests" for information to keep rivals' products compatible with its own.

"Competitors are denied interoperability who have concrete innovation to offer their customers," Whelan said.

The hearing began Monday centering on Microsoft's bundled Media Player. Later in the week, it focused on a challenge to the order Microsoft give information to rivals to make its server software work more smoothly with the ubiquitous Windows operating system.

Judge John D. Cooke, in a terse exchange with Whelan on Thursday, asked whether Microsoft's proprietary information should be given away to its rivals, including patent information.

"The information which forms interoperability is hugely valuable commercial information ... that's why it's difficult to understand the attitude of the commission that these are mere trade secrets," the judge said -- a reflection of Microsoft's assertion that to give over the code would be forfeiting the hundreds of years in manpower that went into devising it.

Cooke, who will write the draft ruling, wanted to know if "competition rules require that be taken away from Microsoft, conveying a huge commercial advantage."

Whelan said the value Microsoft placed on the code was merely a reflection of the amount of time and effort it had put into creating it, nothing more.

The commission has never asked Microsoft to open up its source code, but Microsoft offered earlier this year to grant some access to rivals under certain conditions if it would appease both EU and U.S. regulators.

AP Business Writer Aoife White contributed to this report.

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