Comment from Microsoft Following Second Day of Hearing by European Court of First Instance

LUXEMBOURG, Oct. 1, 2004 — The following is a transcript of comments made by Microsoft Senior Vice President and General Counsel Brad Smith following the end of the two-day hearing at the European Court of First Instance on Microsoft’s request for a suspension of the interim measures recommended by the European Commission:

” Thanks to all of you for coming here. From our perspective it was a very illuminating couple of days, and it was very productive and constructive. I certainly thought that the hearing did an excellent job of really crystallizing the issues so that we all really had the opportunity to consider them more.

” I thought that today was particularly helpful in terms of everyone’s ability to understand all of the nuances in the Media Player issue and think critically about all of those aspects. I thought it was certainly noteworthy that it was so clear that the remedy imposed by the Commission will impose literally billions of euros of cost upon European consumers and European software developers, and the European Commission didn’t seem to contest that fact. It simply thought that that cost was an appropriate price to impose as part of this remedy. And yet at the same time the Commission also acknowledged readily that it couldn’t predict what the impact of its remedy would be.

“I thought the European interveners put it very well. There’s one thing that’s crystal-clear, and that’s that the costs of this remedy will be borne by Europeans and the benefit, if there is any at all, will be reaped only by a single American company [Real Networks]. In that sense I definitely agree that if this is indeed the” Battle from Seattle, ” * we’d be better off waging it in Seattle and not imposing these kinds of problems on people in our industry and on our customers in Europe.

” I also thought that yesterday was very helpful. It certainly brought to light a lot of what we regard as the most important issues with respect to compulsory licensing. It underscored some of the points that we’ve been making literally for a number of years on the merits of the case. That under the court’s jurisprudence, as affirmed and reaffirmed most recently this year in IMS Health, compulsory licensing is appropriate only when taking IP rights from a primary market and licensing into a secondary market. That’s not what this case is about. And compulsory licensing is appropriate only when intellectual property rights are indispensable for companies to enter a marketplace. Clearly, that’s not what this case is about, either. Linux, as we saw yesterday, has been doing quite well, and we have no reason to think that that’s going change. Certainly, our view on the interoperability side of the case is that there would be serious and irreparable harm imposed by virtue of the fact that such valuable technology would have to be distributed and people could not be expected to forget everything they had learned.

“So, from our perspective, it was a very productive couple of days. I’m not in the business of predicting outcomes. Like everyone else, we’ll know precisely what the court thinks when the judgment is issued, and not before. So we’ll look forward to that decision. We go forward with all the confidence that we had when we arrived and we go forward with all the conviction that we brought with us in terms of thinking that there must be a better way to address these issues. With that, thank you very much.”

*Battle from Seattle: ” A reference to comments made by European interveners in the Courtroom

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