February 20, 2004 3:52 PM PST

Microsoft rebuts RealNetworks charges

Microsoft on Friday denied that it illegally used its desktop computer operating system monopoly to hurt digital media rivals, responding to civil antitrust charges brought by archrival RealNetworks.

In a 31-page legal filing, the Redmond, Wash.-based software giant argued that RealNetworks has suffered no injury as a result of its conduct, which it defended as "permissible competitive activity." Microsoft added that there is little evidence of slackening competition in the digital media market, noting that products from RealNetworks and others continue to share widesapread usage with its own Windows Media Player

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What's new:
In response to a lawsuit filed against it last year, Microsoft argues that RealNetworks has suffered no injury as a result of Microsoft's conduct, which it defended as "permissible competitive activity."

Bottom line:
The charges by RealNetworks, which is seeking more than $1 billion in damages, are being closely watched because they echo similar complaints alleged by the government in its antitrust battle with the software giant, as well as charges made by browser pioneer Netscape Communications.

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The "more than 300 million unique users of RealPlayer that RealNetworks claims to have undermine any allegation of distribution foreclosure," the document states.

According to Internet researcher Nielsen/NetRatings, Microsoft's Windows Media Player was used by 34.57 percent of U.S. Web surfers at home and at work in December, compared with 20.2 percent for RealNetwork's RealOne player and 9.61 percent for Apple Computer's QuickTime player.

RealNetworks is seeking more than $1 billion in damages from Microsoft on charges that it muscled competitors by dint of its dominance in PC operating systems. The charges echo similar complaints alleged by the government in its antitrust battle with the software giant, as well as charges made by browser pioneer Netscape Communications, which settled a civil antitrust suit with Microsoft last summer for $750 million.

Microsoft's rebuttal comes as European antitrust regulators are poised to issue their own decision on the same issue. The European Commission is considering whether Microsoft should be required to unbundle its media software from Windows, a move that would set an important precedent for the software industry. U.S. regulators had also considered the unbundling issue in regard to other Microsoft features, but ultimately backed off.

Among other things, RealNetworks claims Microsoft forced Windows customers to take its Windows Media Player while restricting how PC makers installed competing media players on their systems. It also claims that Microsoft has kept secret from competitors key application programming instructions (APIs) that allow programs to run seamlessly on Windows.

"It is to be expected that Microsoft would deny our claims," RealNetworks' Greg Chiemingo wrote in an e-mail. "As we stated when we filed our lawsuit, we have a strong case and we intend to vigorously pursue it to trial."

Gerry Kaufhold, principal analyst at In-Stat/MDR, a research firm in Scottsdale, Ariz., said RealNetworks has its work cut out in proving its allegations.

"You've got Apple's QuickTime, MPEG-4, DivX. The streaming media


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industry is not completely dominated by Microsoft, so I think it's going to be difficult to show that it has done anything untoward," Kaufhold said.

In a statement, Microsoft said its reply did more than simply deny RealNetworks charges; it also provided new facts for the court's consideration.

For example, the filing claims that Microsoft has long offered PC makers and Windows users the ability to hide access to the Windows Media Player, contradicting a key allegation in RealNetworks' suit.

"Both OEMs (original equipment manufacturers) and end users are free to use the Set Program Access and Defaults feature of Windows 2000 Professional and Windows XP to remove all visible means of end-user access to the media playback functionality in those operating systems and to set non-Microsoft digital media playback software, such as RealPlayer, as the default handler of various digital media file types," the document states.

Friday's motion comes as Microsoft is seeking to transfer the case from federal court in San Jose, Calif., to the Seattle area. A hearing on Microsoft's motion for transfer will take place March 1.

 

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