Samba case hearing: How Microsoft’s gamble backfired

Karsten Gerloff, President of the Free Software Foundation Europe, publishes a blog post on the hearing in the Microsoft v Commission case (T-167/08) dealing with the 899 million euro fine for failing to offer reasonable and non discriminatory condition for revealing secret interoperability information, AKA the “no patent” agreement that the Protocol Freedom Information Foundation has subsequently negotiated to provide same information to Samba Team and others. The article is offered under the condition “Creative Commons Attribution” (CC-BY)

Samba case hearing: How Microsoft’s gamble backfired

Tuesday saw has been involved for ten years now, after Microsoft had finally released interoperability information after years of dragging its feet, and the Commission had fined the company the record amount of EUR 899 million.

But yesterday saw the parties back in Luxembourg, in a hearing room on the eight floor of the European Court of Justice’s yellow towers. The atmosphere had something of a family event. As one visitor remarked, seating arrangements were similar to those at a wedding, with the European Commission on one side of the room along with the FSFE and the Samba Team, both represented by Carlo Piana, and others intervening in support of the EC; and Microsoft and its supporting intervener ACT on the other side. Neither peanuts nor popcorn were thrown across the aisle.

After the hearing, Carlo Piana said:

“The hearing established that Free Software is central to restoring competition in the workgroup server market,” said FSFE’s legal counsel Carlo Piana. “Everyone agreed to this, including the judges. This case matters because it highlights that interoperability is more important than a company’s interest in keeping its dominant position.”

From Microsoft’s arguments it became clear that the company’s instincts have not changed one bit, despite repeated claims to the contrary. It is still bent on locking down any market it enters, and blocking the path of competitors wherever possible. This is another reason that this case is so important: It has shown that Free Software is important for competition, and that a free market is more important than the interests of a single company in reaping monopoly profits.

 

“Can we get a discount?”

The hearing took place because Microsoft had appealed the fine. That’s understandable: Even if just a few percent were lopped off those EUR 899 million, that would still be a substantial amount in savings, even after subtracting the lawyers’ costs. So, no harm in trying. The company argued that the Commission in its 2004 decision (confused yet? This timeline might be helpful) asked Microsoft to provide competitors like the Samba team with the information that they need to hook up their software to computers running Microsoft Windows, and to make the information available under “reasonable” conditions.

But, Microsoft complained, the EC didn’t say what “reasonable” was supposed to mean. The idea “reasonable” meaning “in a way that competitors can actually use it, including in Free Software under the GNU GPL” proved remarkably difficult for Microsoft to comprehend. Microsoft also argued that the interoperability information which it was forced to provide was “innovative”, and that it was unreasonable for the EC, FSFE and the Samba team to ask for this information. More on this below.

It’s worth remembering that this hearing was about the “no patents” agreement that the Samba team has signed up to. This agreement gives the Free Software group access to Microsoft’s protocol specifications, but does not give them a license to the patents that Microsoft holds in this area. Microsoft only makes patent licenses available under conditions that are fundamentally incompatible with the GPL.

The Samba team only has a license to use Microsoft’s protocol specifications, not to Microsoft’s patented technologies. But at least those patents are identified, and the Samba team can work around them. This requires considerable effort, but it’s possible.

So, is Microsoft a small enterprise, or a medium one?

The Association for Competitive Technology (ACT, intervening in support of Microsoft, came across as somewhat left-field. ACT’s main argument was that Microsoft’s interoperability information was somehow innovative (it isn’t); that the EC has basically nationalised Microsoft’s valuable “intellectual property” (it hasn’t; this sort of argumentative quagmire is where usage of the term tends to lead); and that this meant that companies in the EU have no more incentive to innovate.

Not only was all of this rather wide of the mark. The ACT representative also failed to explain why his organisation, which claims to represent small and medium enterprises, is so concerned about the fate of a globocorp like Microsoft in this particular case.

Microsoft raised the stakes, and lost

The European Commission’s lawyer Nicholas Kahn opened his argument with a clear statement: “Microsoft is acting like a gambler who doubled up on a losing bet, and now wants his money back.” He argued that the Commission had made clear enough what Microsoft was supposed to do; and that Microsoft indeed magically managed to do what it was supposed to only weeks after losing an appeal in 2007.

In the intervening time, the company had dragged its feet, using every possible option to avoid releasing the information that the Samba team needed to compete with Microsoft’s workgroup server and restore a bit of competition to the market. The Commission had already tired of this game in late 2005, and had imposed a daily fine of two million Euro for every day that Microsoft wasn’t complying with the Commission’s decision. The Commission later found that there were grounds to increase the fine to 3 million EUR per day, but gave Microsoft a discount and decided to keep it at 2 and later at 1.5 million EUR per day.

Even with such an expensive clock ticking, Microsoft still didn’t make the required information and documentation available in such a way that the Samba team could make use of it. The company didn’t even use any of the several options that it had to let a court decide whether it complied. In other words, Microsoft was playing for time. This gave the company three more years to extract monopoly profits from a market on which it had a stranglehold.

The phone book isn’t innovative either

In FSFE’s view, the European Commission’s effort to bring Microsoft into compliance has been very helpful. Samba, which is part of most GNU/Linux distributions, makes it possible to use GNU/Linux servers in a network that has both GNU/Linux and Windows clients. This makes Samba not only a valuable Free Software replacement to Microsoft’s proprietary workgroup server. It also allows organisations to use GNU/Linux in a mixed environment.

Speaking as a technical expert, Samba founder Andrew Tridgell easily put to rest any claims that the information which Microsoft was forced to release was in any way innovative:

“In order to compete, the Samba team only needed the mundane information about how Microsoft computers talk to each other,” said Tridgell. “There is nothing innovative here. All the innovative bits are either already published by Microsoft’s own researchers, or are contained in the Microsoft program source code – and we have no interest in seeing that. The innovation certainly isn’t in the protocol specifications.”

Microsoft is also required to reveal how the technology works because this is part of the knowledge that all the system administrators need to correctly set up and configure their networks. As on previous occasions, Tridge did an excellent job of explaining intricate technical issues to the judges in a very simple fashion, and showing Microsoft’s claims to innovation to be nonsense.

This is where you get to say “patently absurd”

Microsoft was forced to release the information to put an end to an unprecedented abuse of the market. In proposing the conditions, it could not take in consideration the value that stems from the strategic role of keeping the interoperability information secret. That’s why it must prove that the secret part of the technology that it had to reveal is innovative, in that it brings value that the party which obtains such information would not have, and this value must not lie in the ability to interoperate, because that would be contradictory with the scope of eliminating the anticompetitive behaviour.

One of the most outrageous claims is that because the documentation contains patented material; and since a patent allegedly means something is innovative, it follows that the protocols are innovative. But Microsoft could only legitimately ask for licensing fees if its valid claims read on the actual product that the alleged infringer markets. With this claim Microsoft wants to have its cake and eat it too. It wants to keep the protocols secret, and at the same time extend the patent “protection” to an entire sector of technology well beyond the patents’ claims, even if implementations like Samba invent around Microsoft’s patents.

Microsoft’s additional claim that it was itself the party who can decide whether these patents would be “necessarily infringed” was characterized as “rather paternalistic” by the Commission’s lawyer.

So what’s next?

With a lot of detailed questions from the main judge to both parties, the hearing went on until about a quarter to seven in the evening. A ruling on Microsoft’s appeal is expected for the second half of the year.

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