Microsoft changes tack as appeal goes to court

In Luxembourg today the software group will appeal against a record fine of €497.2m (£344m), imposed in March 2004 when it was branded anti-competitive and ordered to make technical information available to competitors.

The world's largest software company and its rivals claim that their ability to innovate is at the heart of the case, which will be heard for the whole week.

But, in a sign of a new, conciliatory, stance, Microsoft said it is working with the European Commission to resolve disputes before the launch of new products such as its next generation of Windows, Vista.

Speaking ahead of today's hearing, Horacio Gutierrez, Microsoft's associate general counsel for Europe, said: "We told the Commission we are prepared to work with them. We are hoping we can create a new dynamic model in which issues can be resolved before products are released."

He said that given Microsoft's control of the PC operating software market, the company would always face "regulatory scrutiny" and so it had to find a way to engage "constructively". where it recognised areas of legitimate concern.

"The question is how to do that: the current pattern of eight years of litigation in a dynamic, rapidly changing industry, or a more constructive, collaborative approach that finds solutions ... proactively?" he added.

Mr Gutierrez said that new lines of communication with the Commission appeared to be producing better results. The US corporation is taking seriously objections raised by the European Commission over Vista which came about following a private visit by a team from the European Commission to Microsoft last year. The more emollient tone from Microsoft, run by Bill Gates, comes in contrast to acrimonious exchanges in the lengthy battle between the software giant and the European regulator.

The stakes will be high when today's hearing begins at the Court of First Instance in Luxembourg, Europe's second-highest court. The Commission will defend its 2004 ruling that Microsoft abused its global dominance, using its near monopoly in the market for PC operating systems to squeeze out rivals.

The court will review a ruling requiring Microsoft to sell a version of Windows without the Windows Media Player software used to watch films and listen to music. It will also examine the decision to force Microsoft to make available information to allow competitors to develop products that operate smoothly with Windows.

Johannes Laitenberger, chief spokesman for the European Commission, said that, because of Microsoft's size, if inter-operability information is "not available on a fair terms, the market is foreclosed".

Microsoft and its opponents both argue that a ruling against them will inhibit innovation. Critics say that Microsoft crushed the Netscape browser by building Internet Explorer into Windows, and is doing the same thing to Real Player.

Thomas Vinje, a partner at law firm Clifford Chance which represents a clutch of firms opposed to Microsoft, said the corporation has "a more powerful market position than probably any other company in the history of the world ... Their behaviour prevents anyone else in the industry from innovating."

But Microsoft contends it is being punished for being successful and that several key rivals are prospering.