Europe to Get Retooled Windows

Times Staff Writer

Microsoft Corp. today said it will alter its flagship Windows operating system sold in Europe and release more information about how its programs work after it lost a legal bid to postpone sanctions imposed by European regulators for allegedly violating antitrust laws.

The software giant had tried to postpone the changes until it completed its legal challenge of the regulators' orders — a process that could take years.

Revealing the inner workings of Microsoft programs could expose many of the world's computers to new attacks, lawyers for Microsoft had argued before the Court of First Instance in Luxembourg.

But the court today let stand a March order by the European Commission after it determined that Microsoft had failed to, among other things, prove that abiding by the order "would be likely to cause it serious and irreparable damage" to its reputation.

Microsoft said in a statement that it will "take a close look at the order before deciding on our next steps" but will "comply fully" with it.

While it lost its attempt to postpone the sanctions, the Redmond, Wash.-based company noted that the court ruling also recognized that some of its arguments are "well-founded and may ultimately carry the day" when the appeal is finally heard.

Microsoft once again pressed for negotiations to resolve the dispute outside of court. "We are hopeful that the issues highlighted by the court will create an opportunity for the parties to discuss settlement," the company said.

The European case is the largest remaining legal problem for Microsoft, which has spent much of the last decade battling antitrust claims.

The punishments imposed by the commission go beyond the restrictions imposed in a 2001 settlement between Microsoft and the U.S. Justice Department, which sued over antitrust laws.

Under that settlement, Microsoft must grant access to some of its programming techniques and allow computer makers to hide access to -- but not remove -- its media player and Web browser.

European regulators went a step further when they ruled that Microsoft used its market power to unfairly muscle rivals.

In addition to fining Microsoft more than $600 million -- less than an average week's sales -- the European Commission ordered the removal of Media Player from Windows. The company now plans to offer a stripped-down version of Windows without Media Player and a mainstream version that would both be priced the same.

Potentially more damaging for Microsoft, the commission also ordered it to reveal vast amounts about how personal computers running Windows connect with Microsoft software powering larger machines and networks.

The point is to give competing makers of server software, including original complainant Sun Microsystems Inc. and companies that sell Linux, a fair shot, notwithstanding Microsoft's monopoly on PC operating systems.

In confidential filings, Microsoft has argued that the European Commission wants so much information disclosed to the company's rivals about how personal computers connect to networks that hackers would be likely to mount new attacks. Microsoft programs already are the favorite target of hackers because they power the vast majority of computers.

Times staff writer Joseph Menn contributed to the report.

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