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Commission: solid legal ground?

We look at whether the court case underpinning the European Commission's anti-Microsoft case is really as solid as was thought, and we look at how front-running landed Network Solutions in hot water.17 Jan 2008

A text transcription follows.

This transcript is for anyone with a hearing impairment or who for any other reason cannot listen to the MP3 audio file.

The following is the text spoken by OUT-LAW journalist Matthew Magee.

Hello and welcome to OUT-LAW Radio, the weekly podcast that keeps you up to date on all the twists and turns in the world of technology law.

Every week we bring you the latest news and in depth features that help you to make sense of the ever-changing laws that govern technology today.

My name is Matthew Magee, and this week we wonder is the European Commission's second massive monopoly case against Microsoft on quite as solid legal ground as everyone thinks? And we talk to domain giant Network Solutions about the controversial measures it took to beat the web's latest scam.

But first, the news:

  • US ISP will block pirated material; and
  • Intel faces new competition probe

One of the largest telecoms firms in the US is contemplating the introduction of a filter to block copyright-infringing traffic in its internet service. AT&T said that the network-level filtering was the "optimal" way to deal with piracy.

ISPs in the US and the UK have to date relied on their status as carriers of information to avoid legal responsibility for traffic they carry whose content they are unaware of.

But James Cicconi, one of the company's lawyers, said: "we are very interested in a technology based solution and we think a network-based solution is the optimal way to approach this. The proposal involves an ISP examining all information transmitted on its network to identify and block material it thinks is copyrighted and being used improperly.

Free speech and privacy activists oppose the examination of all of a user's ISP communications, while digital rights activists claim that filters do not take account of the exceptions from copyright legislation for fair use, including those for news reporting, criticism and review and educational use.

The state of New York will probe Intel to determine whether the world's biggest microchip maker has behaved anti-competitively. The company is already the subject of a European Commission case following a six-year investigation.

New York attorney general Andrew Cuomo's office has issued a subpoena intended to help it gather evidence into Intel's practices. It will investigate whether or not Intel forced its customers to exclude competitor Advanced Micro Devices (AMD).

Cuomo's office said that it would investigate whether Intel penalised computer manufacturer customers when they chose to build some machines using competing chips; whether it improperly paid customers to use only Intel chips; and whether it illegally blocked distribution channels for competitors.

It said that the investigation would focus on state and national laws. The grounds for investigation are very similar to charges laid at Intel's door by the European Commission.

That was this week's out-law news

Maybe it's the power of OUT-LAW Radio or maybe it's just coincidence, but just days after Opera Chief Executive Jon von Tetchzner told OUT-LAW Radio of his crusade against a monopolistic Microsoft, the European Commission took up his cause.

It stunned the world of competition law this week when the Commission announced that it would take another massive competition case against the software giant. The news came just weeks after a court ruling settled a competition dispute between the two that had lasted almost a decade.

Based on Opera's complaint, the case is clearly the result of a surge of confidence in the Commission following the Court of First Instance, or CFI, ruling in September which backed their 2004 anti-Microsoft decision.

But how well founded is that confidence? We talk to one competition lawyer who says that the CFI ruling may not be the solid litigation foundation many have taken it to be.

But first I talked to von Tetchzner about how he feels now that the commission has taken up his company's cause.

von Tetchzner Obviously very happy that they have moved so swiftly. We obviously sent a complaint to get action and we have been getting very swift action so we are very happy with that. I mean we did not really know what to expect.

Last year's anti-Microsoft verdict has had big companies reconsidering their practices looking over their shoulder at an emboldened Commission. Competition lawyer Giles Warrington of Pinsent Masons behind Out-law explains.

Warrington: There is an element that the Commission is becoming more confident in this area. Over the long term this will have a significant impact on technology companies and their perception of competition law but whilst the court's judgment is not necessarily a restatement of the law it is certainly a high profile case in which the Commission has been supported and so could well make technology companies, particularly those who have access to technology which has established a strong market position, or as a gateway or seen as a gateway to the provision of other services, it could make them stand up and worry more about competition law.

The European Commission conducted a long investigation into Microsoft, culminating in a 2004 ruling, fining it €497 million for abusing its market dominance. It took until last September 2007 for a court, the CFI, to back that decision and for Microsoft to decide not to appeal.

The Commission is now taking on Intel, Qualcomm and Microsoft again in the aftermath of that ruling and is seen as riding high on competition issues. But should it?

Adrian Wood, another Pinsent Masons competition lawyer, said that the CFI ruling was very far from an era-defining, big-picture recalibration of competition law.

Wood: There is still no real consensus on what Microsoft tells us for the future. In a sense that is partly because of the way the judgment is written. It is disjointed in places, the little bits of relevant material tucked away in one area that ought to be brought back to earlier discussion. The ability to have some form of overarching broad set of principles was lost a little bit and so in that sense there is a disappointment there. In many ways we did not get crisp, clear, practical pointers of generic use.

The case centres on Microsoft's inclusion of internet explorer in its Windows operating system and that system's interoperability with other people's software.

Competition cases may be the order of the day but it should not follow that a victory in September makes victory in the next case any more likely.

Wood: In terms of the tying story, the bundling of Media Player to the Windows environment the CFI took on board all of the Commission's arguments without question. I think there are certain elements of the judgment where the Commission is going to hesitate somewhat before relying fully on Microsoft as a way for the going forward.

Opera's von Tetchzner disagrees. He says that the new case is very similar to the old, and that a similar result is likely.

von Tetchzner: This is in some way it is a very similar case to the recent Windows Media case and I think if anything the browser case is even clearer. I do believe there are similarities. We are expecting good results out of this.

What all parties do agree on is that more guidance is needed on how the European Commission is actually going to enforce competition law. Even Europe's National Competition Authorities, such as the UK's Office of Fair Trading, are pressing for a clue from Brussels.

Wood: The Commission has produced draft guidance on Article 82 and has had a wealth of comments on its draft guidance but as yet we have not been given any serious indication that following Microsoft that the Commission will publish final guidance. Even within the UK, John Fingleton of the Office of Fair Trading, has gone on record and publicly to encourage the Commission to produce more guidance in this area.

There are hopes out there for a speedy resolution to this case, but with no Commission guidance and the waters as muddy as ever over the meaning of the CFI's ruling, don't hold your breath, the last case took almost ten years.

A scam long-rumoured in the world of domain names has broken into the open recently. Front running is when you check with a registrar to see if a domain name is available and then have a think about whether you want it or not. In the meantime someone has found out what you searched for and registered the name. They can then hold you to ransom for it.

One huge domain name registration company, Network Solutions, decided to try to do something about it, but soon found itself in very hot water and was even itself accused of front running.

Network Solutions had decided to block searched-for domains so that they could only be bought from it. Though the company said that this was designed to stop unscrupulous registrars engaging in front running, the internet exploded with the indignation of users who were furious that they were now tied to one company for a domain they wanted.

We talked to Susan Wade of Network Solutions about the controversy. She maintained that the company thought it was acting in the best interests of users.

Wade: By implementing this we are not front running, we are just merely holding it for four days. We are not monetising it, we have no intention of keeping it or selling it in the secondary market, we are just holding it for if you want to come back to our store front and buy it you can, after that we are letting it go.

Critics said that the system didn't stop front running because once the domain name was held by Network Solutions anyone – and not just the original enquirer – could register the name. Users felt their addresses were being held hostage.

But Wade revealed to OUT-LAW that the company is going to release a modification to the system that will hold the domain just for the person who enquired about it.

Wade: So we have been looking into possibly implementing something where we could register it and hold it for whomever initially searched on it. We're looking at those options but we have not implemented anything like that yet. I think it is possible, it's just the development time, how do we capture the information, that type of thing so you know it's definitely something we are looking into.

The company has already retreated on some of its plans, but it still holds on to names searched for from some parts of its website. The situation just underlines how controversial front running is and it is unlikely to be the last time it provokes outrage in the tech world.

Magee: That's all we have time for this week, thanks for listening.

Why not get in touch with OUT-LAW Radio? Do you know of a technology law story? We'd love to hear from you on Be sure to tune in next week, for now goodbye.